Difference tax liability between GSTR 1 & GSTR 3B

[BARUN MUKHERJEE]

A taxpayer has wrongly filed his GSTR 1 with excess liability...and the same has been rectified in GSTR 9 along with GSTR 9C..disbursed the actual liability as per books of accounts...bt department claim the liability as per GSTR 1 which was wrongly filed...now what is the proper solution??

[Ganeshan Kalyani]

Sir, department does not know the fact of your books of accounts. So you have to prepare a reconciliation of the data in GSTR-1 vs your books and enclose supporting of your Profit and loss account which has gross sales. This will enable the officer to satisfy himself that the data as per GSTR 9 is correct. On submission of proper explanation the dept accepts the same and may set aside the notice.

[KASTURI SETHI]

Has the department issued any letter/notice ? Or Is it all verbal ?

[Shilpi Jain]

Merely on difference between GSTR-1 and GSTR-3B a demand cannot be raised by the department. It is settled principle under the service tax law that the difference between income tax and the service tax revenue cannot be taxed unless the department can prove the service which has been provided, which should be liable to service tax for a demand to arise.

[KASTURI SETHI]

I concur with the views of both experts. Here is relevant case law pertaining to Service Tax. The querist take cue from this case law.

Demand cannot be confirmed on the basis of Form 26 AS Vs. ST-3 returns without proper basis---CESTAT Chandigarh reported as in the case of M/S. RAJ MOHAN VERSUS COMMISSIONER OF CGST, PANCHKULA - 2022 (8) TMI 832 - CESTAT CHANDIGARH

Date of Order : 08.8.2022

 

TMI ID= 426593

[BARUN MUKHERJEE]

Sir, When the Taxpayer has filed their GSTR 9 they had put up actual value of outward supply as per books by deleting the auto populated value which comes from GSTR 1 in column no. 4(A) and GSTR 9 is rectified accordingly. So no chance to reconcile GSTR 9C in column no. 9(R) as GSTR 9 was already rectified. Now my question is that at the time of audit whether Dept can demand tax after reconcilation/rectification of GSTR 9/GSTR 9C?

[Subramamya BL]

While scrutiny of difference b/w GSTR 3B & 1 is within the ambit of Sec 61 of the Act dealing with scrutiny of returns, an explanation to such discrepancy in ASMT 11 needs to be acknowledged and dealt with by the proper officer.

If a show case notice is issued, post scrutiny/otherwise, apart from reply on aspects mentioned by ld members, you can also reply on merits of your case giving the details of rectification of mistake done in GSTR 9/9C.

While option of amendment in Sec 37 has a time limit, a plea could be taken that GSTR 9 is your consolidated return for the period, which is to be considered. Moreover, GST cannot be levied for differences, but for supply not reported/short reported, which has to be substantially addressed in the Show Cause notice.

[KASTURI SETHI]

Q. My question is that at the time of audit whether Dept can demand tax after reconciliation/rectification of GSTR 9/GSTR 9C ?

Ans. No chance of demand notice on this issue at all. No revenue loss is there. You have detected and rectified your mistake on your own. No issue of interest and penalty.

If the Audit team raises any objection, you are to convince the Audit Officer with the documentary evidence (Books of Accounts) that you have paid tax correctly. Nothing untoward is going to happen. Nothing to worry about.

[Padmanathan KV]

Practical solution is as follows:

1. Prepare a month-wise reconciliation of GSTR-1, GSTR-3B and books of accounts.

2. Identify the reason for difference - is it due to failure to report credit note in GSTR-1, clerical mistake in B2B or B2C, duplication of invoices etc.

3. Give a detailed reply of the above along with documentary evidence ie sales register/ output tax collected register. Also emphasis that this difference has been rectified in GSTR-9 by Registered Person himself.

When there is a prima facie difference between statement of outward supply (GSTR-1) filed by registered person and the output tax paid by him (in GSTR-3B and DRC-03), the Department is right in calling for explanation regarding the same.

However once the difference is satisfactorily reconcilied along with documentary evidences such as sales register etc, the Department cannot impose tax merely on the values declared in GSTR-1. Basic principle here is that:-

1. Levy of tax and its demand fails in the absense of supply;

2. Onus is on department to prove that supply has taken place.

However, the above arguments should be given only at the later stage and initially, it is your responsibility to reconcile the difference between GSTR-1 and books along with proper reasoning and evidence.

[Praveen Kumar]

Credit Note not uploaded GSTR-1 but shown in GSTR-3B and rectified in GSTR-9 and GSTR-9C

AI Summary

Reconciliation of return discrepancies requires documentary proof; tax cannot rest solely on return mismatches.
Where periodic outward supply returns differ from tax paid but the taxpayer has rectified values in the annual consolidated return and audit reconciliation, the operative approach is to prepare a month wise reconciliation against books, identify reasons for differences, and submit documentary evidence. Departmental scrutiny under the statutory return scrutiny mechanism may generate queries or a show cause notice, but a demand cannot rest solely on return divergences; the department must prove that a taxable supply was unreported. Taxpayers should present reconciliations and proof of self rectification in assessment or audit proceedings.