GST authorities may now directly initiate recovery of interest accrued on non-payment of GST due to mismatch in invoices without sending any notice
Background:
Effective from 1st January, 2022 the term "self-assessed tax" as per explanation to sub-section (12) to section 75 of the CGST Act, 2017 shall include the tax payable on supplies in respect of which the details have been furnished by the taxpayer in GSTR 1 but the same has not been included in the GSTR 3B considered as not paid. This will allow the department to directly initate the recovery action as regards the said self-assessed liability under section 79.
Recent High Court Judgement:
The aforesaid provision is now backed by the recent judgement of Punjab & Haryana High Court in the matter of Bharti Airtel. In a recent matter of Bharti Airtel, the Punjab & Haryana High Court lifted a stay ordered earlier, to directly recover interest accrued to the tune of Rs 5.77 crore on late payment of tax due to a mismatch. Direct recovery means that the tax authorities are not required to send notices. The authorities may recover the amount by various means such as deducting the money owed to assesses, for instance, in input tax credit. Or, it could detain their goods and sell them.
The tax authorities had found a difference of Rs 29.88 crore in the liabilities declared in the sales return — GSTR-1 and summary input-output returns GSTR-3B — for the financial year 2017-18 by Bharti Digital Networks Private Ltd, (now merged with Bharti Airtel). Upon examination of online records, Bharti Digital paid the tax and mentioned it in the GSTR-3B for December 2018 filed in the month of January 2019. Since there was a delay of 392 days in the payment of tax, the tax authorities had sought to recover interest of Rs 5.77 crore. The department issued summons to the company. The proceedings were challenged by the company in the high court, and the court had ordered an interim stay on the proceedings. Post submission of replies and subsequent proceedings, the court has lifted the stay on the proceedings to recover interest through its order dated December 16. This decision now allows the GST authorities to directly recover interest if tax is not paid on time due to mismatches in invoices.
Even before the amendment in section 75, Hon'ble Madhya Pradesh High Court in the case of Kabeer Reality Pvt. Ltd. vs. UOI 2020 held that liability declared in GSTR1 will be self-assessed liability.
Conclusion:
The aforesaid provision will cause undue hardship on taxpayer in situations wherein errors have been committed in GSTR1 (that can be rectified only at the time of filling the next GSTR1) that results in undue reporting of excess liability are required to be excluded from the said definition as law permits rectifications of GSTR 1. It is very important to do monthly reconcilitation of tax liability declared in GSTR 1 and GSTR 3B so as to immediately rectify the same as soon as the same is detected.
Limitation: The views expressed in this article are personal views of the author. Legal & statutory authorities may or may not subscribe to the same.