Verification of Supplier’s GSTR-3B Filing When GSTR-1 is Filed but GSTR-3B Shows Nil Value

[Ganesh Shanmugam]

Dear Experts,

Our supplier has filed GSTR-1, and the details are reflected in our GSTR-2A/2B. Based on this, we have claimed Input Tax Credit (ITC) and have also paid the tax to the supplier. However, the supplier’s GSTR-3B was filed with nil value. As a result, the GST Department has issued us a notice to pay back the claimed ITC.

Currently, the supplier is not responding and appears to have no ongoing business transactions.

Questions

Since we have already paid the tax to the supplier, does this mean we are being forced to pay the tax twice — once to the supplier and again to the GST department?

How should we handle this situation to avoid double payment?

Is there any official way to protect the recipient’s interest and confirm the supplier’s tax filings?

[KASTURI SETHI]

You are not required to reverse ITC. The buyer cannot be held responsible for the suppliers default. Since the SCN has been issued, you will have to file reply to the SCN. Contest the allegation relying upon the following judgements:-

(i) Allahabad High Court judgement in the case of R.T. Infotech Vs. State Tax - 2025 (6) TMI 116 - ALLAHABAD HIGH COURT Authorities Order dated 30.05.25

(ii) Supreme Court judgement reported as 2023 (12) TMI 739 - SC Order/ Suncraft Energy Pvt. Ltd.- 2023 (8) TMI 174 - CALCUTTA HIGH COURT

(iii) Madras High Court Judgement reported as D.Y. BEATHEL ENTERPRISES Versus STATE TAX OFFICER (DATA CELL), - 2021 (3) TMI 1020 - MADRAS HIGH COURT.

[Ganesh Shanmugam]

Dear Sir,

Thank for the information

Regards,

Ganesh

[arbs sarma]

Some times credit note value more than the tax invoice value, due to not accept the negative value may be vendor filed GSTR 3B with nill amount.

Better to get exact fact from vendor

[Ganesh Shanmugam]

Dear Sir,

The supplier has manpower agency, in book of account on both parties there is no credit note records, Also the the GST authorities shared the information to us supplier filed nil return in GSTR-3B which mean there is no liability paid to GST.

 

[Sadanand Bulbule]

Despite the judgements cited by Sh. Kasturi Sethi Sir, most of the authorities are insisting for the compliance of Section 16[2][c], which is a herculean task for the recipient. ITC has become a mirage for the honest taxpayers.

[Alkesh Jani]

Shri

I am of the view that when tax collected by the supplier is not paid to the Government, the recovery action from the recipient can be undertaken. However, in your case, it is clear that supplier has not paid tax by showing Nil taxable value in their GSTR-3B.  As the matter is with regards to ITC, the burden of proof is casted upon the persona availing the ITC and view of the Hon’ble Supreme Court is very clear in this matter.

Further, Hon’ble High Court of Madras in case of M/s. Jai Balaji Paper Cones Versus The Assistant Commissioner, Sales Tax, Tiruchengode, Raghava Industries reported at 2023 (8) TMI 573 - MADRAS HIGH COURT has held as follows:-

“6. Thus, a registered person is not entitled to credit of input tax in respect of any supply of goods or services of both if tax is not paid to the Government. The registration of the second respondent has been cancelled on 31.10.2018 before three invoices dated 23.11.2018 were raised. Thus, it is clear that the second respondent could not have paid the tax to the ex-chequer. Therefore, there cannot be a mandamus to the first respondent contrary to the provisions of the respective GST Act of 2017 and the Rules made thereunder. Therefore, there is no merits in the present writ petition. The petitioner is however entitled to recover the amount from the suppliers in the manner known to law.”

Therefore, you are requested to proceed under the guidance of an expert near you.

Thanks

[Shilpi Jain]

Pls refer to rule 37A which requires to ensure only that GSTR-3B is filed. The recipient is not required to ensure that the 3B so filed is proper. That’s the department’s job.

1[Rule 37A. Reversal of input tax credit in the case of non-payment of tax by the supplier and re-availment thereof.-

Where  input  tax  credit  has  been  availed  by  a  registered  person  in  the  return  in FORM GSTR-3B for a tax period in respect of such invoice or debit note, the details of which have been  furnished  by  the  supplier  in  the  statement  of  outward  supplies  in FORM GSTR-1 1[, as amended in FORM GSTR-1A if any,] or  using  the invoice furnishing facility, but the return in FORM GSTR-3B for the tax period corresponding to the said  statement of outward supplies has not been furnished by such  supplier  till  the  30th day  of September following the end of financial year in which the input tax credit in respect of such invoice or debit note has been availed, the said amount of input tax credit shall be reversed by the said registered person, while furnishing  a return in FORM GSTR-3B on or before the 30th day of November following the end of such financial year:

Provided that where the said amount of input tax credit is not reversed by the registered person in a return in FORM GSTR-3B on or before the 30th day of November following the end of such financial year during which  such  input  tax  credit  has  been  availed, such amount shall be  payable by the said person along with interest thereon under section 50.

Provided further that where the said supplier subsequently furnishes the return in FORM GSTR-3B for the said tax period, the said registered person may re-avail the amount of such credit in the return in FORM GSTR-3B for a tax period thereafter.]

[Shilpi Jain]

Show this rule to the department, if he does not agree the only choice you have is to take the notice and fight until its logical end.

AI Summary

Taxpayer faces ITC reversal demand despite supplier filing GSTR-1 and appearing in GSTR-2A after supplier files nil GSTR-3B A GST taxpayer claimed Input Tax Credit after their supplier filed GSTR-1 and details appeared in GSTR-2A/2B, with tax paid to the supplier. However, the supplier filed GSTR-3B with nil value, prompting the GST Department to demand ITC reversal. The taxpayer faces potential double taxation concerns as the supplier is unresponsive. Legal experts cited various High Court judgments supporting the buyer's position, arguing recipients cannot be held responsible for supplier defaults. One expert referenced Rule 37A, stating recipients need only ensure GSTR-3B filing, not its accuracy. However, another expert noted authorities increasingly enforce Section 16(2)(c) compliance requirements, making ITC recovery challenging for honest taxpayers when suppliers fail to remit collected taxes.