Revision of Form GSTR-3B not allowed: Supreme Court in the Case of Bharti Airtel

Executive Summary

The Hon’ble Supreme Court on October 28, 2021 reversed the Delhi HC’s decision that allowed Bharti Airtel to rectify Form GSTR-3B in the same months in which tax of Rs. 923 crores was paid in cash.

The Apex Court held that the rectification in Form GSTR-3B could be allowed only in the month in which the errors are noticed and not in the month to which the error/omission pertains.

This article discusses the relevant facts, arguments, observations and conclusions drawn by the Supreme Court in detail.

Facts Involved in the Case

• • Bharti Airtel (‘the Company’) had obtained centralized registration under the Service Tax regime. At the time GST was introduced, the Company obtained GST registrations in all 29 States and 7 Union Territories

• • For the period July 2017 to September 2017, while filing its monthly GSTR 3B, the Company availed ITC on the basis of its estimates. Due to which, ITC amounting to Rs. 923 Crores could not be recorded. This was later on discovered in September 2018 when Form GSTR-2A was operationalized

• • Due to the reduction in tariff rates in the telecom sector, the output tax liability of the Company declined substantially. As a result, ITC which was accumulated on account of erroneous reporting could not be fully utilized in the later periods. Surplus ITC was further expected to grow for the later months as well, and therefore, would lead to further inflow of ITC

• • The Company filed Petition before the Delhi High Court seeking rectification of Form GSTR-3B of respective months so that ITC can be claimed in respective period and tax which was paid in cash could be claimed as refund

• • The Hon’ble Delhi Court allowed rectification in the given case and held that there is no provision under Act which would restrict rectification of Form GSTR-3B. Para 4 of Circular No. 26/26/2017-GST was held as arbitrary and contrary to the provisions of CGST Act, 2017

Relevant Provisions under the GST law

• • Section 39(9) of the CGST Act, 2017 provides that subject to Section 37 and 38, if any registered person discovers any omission or incorrect particulars furnished in the return he would be required to rectify such omission or incorrect particulars in the period in which such omissions, etc. are noticed, subject to the payment of interest

• • Section 41(1) of the Act provides that subject to such conditions and restrictions as may be prescribed, registered person would be entitled to take the credit of eligible input tax, as self-assessed, in his return and such amount shall be credited on a provisional basis to his electronic credit ledger

• • Section 49(2) provides that input tax credit as self-assessed in the return of the registered person would be credited to his electronic credit ledger in accordance with Section 41

• • Section 59 provides that the registered person would be required to self-assess the taxes payable under the Act and furnish a return for each tax period as specified under section 39

• • Circular No. 7/7/2017-GST, Dated 01-09-2017 provided that any differences in the details of outward supplies and input tax credit can be corrected reported in Form GSTR-3 of that very month. This circular was in line with the system based reconciliation of information furnished in Form GSTR 1, 2 & 3B

• • Since, Form GSTR-2 and 3 could not be operationalized, the above circular was kept in abeyance till such time these two returns are operationalized vide Circular No. 26/26/2017-GST, Dated 29-12-2017. It was further provided that Form GSTR-3B can be corrected only in month in which the errors were noticed

Important Arguments of the Company

• • Initially, new scheme of return filing system, given under Sections 37 to 43 of the CGST Act was to be followed. Filling necessary details such as outward supplies, inward supplies, etc. in returns is the statutory right of the assessee which cannot be prejudice due to inability to run IT system

• • Excess payment of tax in cash went unnoticed as Form GSTR-3B is a manual return having no checks in it. System related checks (e. Forms GSTR-2A, GSTR-2 & GSTR-3) could have forewarned the petitioner about the mistake and ITC could be availed

• • New return filing system under the GST provision is laid down in such a way that it facilitates the validation of the data filled by the registered person in the month itself. Not allowing rectification in the months for which return is filed is contrary to above provision as any unmatched details be rectified in the month in which it is noticed

• • Revision of Form GSTR-3B is revenue neutral since the Government has already realized the tax leviable under the law

• • Mechanism provided under Section 37 & Section 38 are not put in place, therefore, rectification under Section 39(9) would not be applicable where Form GSTR-3B is filed

Important Arguments of the Revenue

• • The registered person is required to maintain books of accounts and records to determine output tax liability (‘OTL’) and eligibility of input tax credit (‘ITC’). It is the obligation of registered person to self-assess all transactions & determine OTL

• • Common Portal is only enabler and facilitator to bring all the registered persons together. Its efficacy would not release the obligation of registered person to self-assess his OTL

• • Form GSTR-3B, although a stop gap arrangement, was always treated as return under Section 39. Till the time Form GSTR-3 gets operationalized, Form GSTR-3B is not in addition to GSTR-3, but in place of it

• • Section 39(9) provides that changes have to be incorporated in return for tax period in which the error is noticed and therefore, assessee cannot reflect changes in Form GSTR-3B of original tax period and Circular No. 26/26/2017 is in line with such provision

• • Option has been given to the registered person either to discharge OTL through cash or by utilizing ITC. Rectification of Form GSTR-3B would result in availment and utilization of ITC and excess cash which was paid earlier would be refunded to the registered person. The GST law does not allow for such swapping of entry in Electronic Cash ledger with Electronic Credit Ledger

• • Any changes made in original return of the supplier, would require modification in Form GSTR-3B furnished by recipient & therefore, enhance compliance burden for him

Observations and Conclusions of Supreme Court

• • The Apex Court agreed with the revenue and observed that registered person is under a legal obligation to maintain books of accounts and records as per the provisions of the GST law

• • It was further observed that the registered person is obliged to do self-assessment of ITC, compute its eligible ITC and OTL including the balance amount lying in cash or credit ledger on the basis of records and books of accounts. The Supreme Court compared the position of self-assessment under the GST regime with the pre-GST regime and observed that there is no difference in manner of determining OTL and ITC

• • It was noted that self-assessment can be done even without the common electronic portal. The common portal is only a facilitator to feed or retrieve such information and need not be the primary source for doing self-assessment

• • It was observed that paying OTL in cash is an option exercised by assessee which cannot be reversed unless law permit such reversal and swapping of entries. No provision exists under the GST law to permit swapping of entries effected in electronic cash ledger vis-a-vis electronic credit ledger or vice versa. It was noted that inability to access GSTN portal to submit TRAN-1 is different from swapping of entries of electronic credit ledger viz-a-viz electronic cash ledger

• • Filing of return in Form GSTR-3B, although a stop gap arrangement, is ascribable to Section 39 read with Rule 61. It was held that Form GSTR-3B would be considered as return for all purposes. It was specifically highlighted by the Apex Court that validity of retrospective amendment of Rule 61(5), however, has not been challenged before them

• • Section 39(9) allows rectification of omission and incorrect particulars in the period in which these omissions, etc. are noticed. Circular dated 29-12-2017 is in line with Section 39(9)

• • It was noted that the assessee has never been denied for the availment of ITC. The ITC amount remains intact in the electronic credit ledger, which can be availed in the subsequent returns including the next financial year

• • The Supreme Court agreed with the revenue that assessee cannot be permitted to unilaterally carry out the rectification of his returns submitted electronically in Form GSTR-3B. This would affect the obligations and liabilities of other stakeholders because of the cascading effect in their electronic records, which would lead to uncertainty and chaos

• • Basis the above, the Apex Court set aside the judgement of Hon’ble Delhi HC and held that the Circular dated 29-12-2017 would remain valid