New Delhi:
Tax officials will allow reasonable time to explain erroneous reasons for mismatch in sales reported in Sales Return GSTR-1 and Tax Payment Form 3B before initiating collection actions for short-payment or non-payment of taxes.
Apex indirect tax body, the Central Council of Indirect Taxation and Customs (CBIC) issued guidelines on recovery procedures and said tax officials would give companies “reasonable time” to explain the reasons for such a mismatch.
Under the amendments to the GST Act that came into effect on Jan. 1, GST officials were allowed to directly initiate redress actions against those errant companies that showed higher sales in monthly returns GSTR-1, but under-reported while paying taxes. in GSTR-3B.
The measure was designed to curb the threat of false billing, where sellers would show higher sales in GSTR-1 to allow a buyer to claim a VAT credit (ITC), but suppressed sales in GSTR-3B to reduce GST liability.
So far, under the Goods and Services Tax Acts, notifications were first issued and then a recovery procedure was initiated in such cases of non-conformity in GSTR-1 and GSTR-3B.
After doubts expressed by the trade and the field formations regarding the modalities for initiating the recovery procedure, the CBIC issued guidelines on January 7, stating that the companies involved should be given an opportunity for short-term payment or non-payment of the amount of your own tax liability.
She noted that in some cases there may be a real reason for the difference between the details of the outbound deliveries specified in GSTR-1 and those in GSTR-3B.
For example, the CBIC said the GST Act allows for correction of typographical errors or omissions in the GSTR-1 or GSTR-3B of a particular month, in the returns or tax payments of subsequent months.
There may also be cases where a delivery by the registrant could not be declared in GSTR-I of a previous tax period, although the tax was paid on it by correctly reporting the said delivery in GSTR-3B. The details of such delivery can now be reported by the registrant in the GSTR-I of the current tax period.
“In such cases, there may be a mismatch between GSTR-1 and GSTR-3B (liability reported in GSTR-I > tax paid in GSTR-3B) in the current tax period.
“Therefore, in all such cases, the registrant concerned should be given the opportunity to explain the differences between GSTR-I and GSTR-3B, if any, and for short-term payment or non-payment of the amount of self-payment assessed tax liability and interest thereon before taking any action under Section 79 of the Act to recover the said amount,” the CBIC said.
When such a tax amount, which is determined by the registrant himself in his extradition statement GSTR-I, is underpaid or not paid through his GSTR-3B declaration, the tax officer sends a message to pay the amount underpaid or not paid or to explain the reasons for such short-term payment or non-payment of self-assessed tax, within a “reasonable time” as prescribed in the notice.
“If the person concerned is able to justify the differences between GSTR-I and GSTR-3B, or is able to explain the reasons for such deficiency or non-payment of tax, to the satisfaction of the authorized officer, whether the amount is such a short-paid or unpaid amount, then there may not be any requirement to initiate a chargeback procedure under Section 79,” the CBIC said.
However, if the registrant either fails to respond to the notice, or fails to make payment of such amount, or fails to pay, within the time period prescribed in the notice, or the reasons for such difference/short payment of tax are to the satisfaction of the appropriate official, then the tax official can proceed with recovery, it added.
The government had made this change to the GST Act as part of the Finance Act passed by Parliament last year. The CBIC last month reported January 1, 2022 as the date on which this provision would come into effect under the GST Act.