Mismatch in GSTR-1& GSTR-3B: GST department started recovery

Mismatch in GSTR-1 & GSTR-3B: Now, businesses that have declared more sales in their monthly GSTR-1 but underreport the sale while paying tax in GSTR-3B are been specifically targeted for recovery action by GST officers. Many Taxpayers have received GST ASMT-10 – Notice for Discrepancies in GST Returns even for Rs 1 difference in GSTR-1 & 3B.

This action would assist in reducing “fake billing,” in which sellers record larger sales in their GSTR-1 to allow the buyer to claim a higher input tax credit (ITC), but report less sales in their GSTR-3B to reduce their GST tax burden. Businesses must now ensure that their GSTR-3B and GSTR-1 correspond with one another; any deviations from this rule are prohibited.

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Why any Mismatches in GSTR-1 & GSTR-3B?

Let’s first understand the provisions of Section 75(12) of the CGST Act, 2017. According to Section 75(12), if any unpaid self-assessed tax as per the return submitted under Section 39 is present, recovery actions will be started. The mention of “self-assessed tax” has been included to the explanation.

With the help of this explanation in sub-Section(12) of Section 75 of CGST Act, the government has clarified that “self-assessed tax” would include the GST payable for outward supplies reported in the GSTR-1 but not included in the return furnished by the taxpayer in his GSTR-3B.

Now, as per Section 75, where there’s any unpaid self-assessed tax, it could be recovered without issuing any show-cause notice, and the proceedings for recovery under Section 79 could be directly invoked.

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The GST authority can initiate the recovery proceedings in the cases mentioned below:

a) Where the GST payable as per GSTR-1 hasn’t been paid wholly or partly through the GSTR-3B.

b) There is unpaid interest on the above-mentioned unpaid GST tax liability

In such cases, the amount of tax that hasn’t been paid on such self-assessed and the interest thereon will be recovered by the taxman under Section 79.

Read Also: GST collection records 11% year-on-year growth July 2023

How to Correct any Mismatches in GSTR-1 & GSTR-3B?

In certain cases (as listed below), there could be genuine reasons for the variances between the details of outward supplies furnished in the GSTR-1 and those furnished in GSTR-3B –

In case of any omission or typographical errors or incorrect reporting of details in the return GSTR-1 or GSTR-3B. Such omissions or errors could be rectified in the following month GSTR-1/ GSTR-3B.
A supply that wasn’t declared in GSTR-1 of an earlier period, though the GST was paid correctly in GSTR-3B. Such a person could report the details related to such supply in his GSTR-1 for the current period.

Before any recovery action is taken against them for non-payment or short payment of taxes, the Central Board of Indirect Taxes and Customs (CBIC) has stated that the above-mentioned erring businesses will be given a reasonable amount of time to explain the circumstances related to the differences between sales reported in return GSTR-1 and tax paid in return GSTR-3B.

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Steps for Recovery by GST officers

a. The proper officer could send a communication to a registered person for:

i. Paying the tax that hasn’t been paid or short paid

ii. Explaining the reasons for such non-payment or short-payment of self-assessed tax

b. A reasonable time would be allowed for the payment of such tax

c. If the taxpayer can:

i. Justify the differences, or can explain the reasons for such non-payment or short payment of tax, and the said tax official isn’t satisfied with the explanation offered

ii. Pays the unpaid tax

then there might not be any need to initiate any recovery proceedings under Section 79.

d. If the said taxpayer:

i. Fails to reply to such communication

ii. Fails to make the payment within the prescribed time limit

then the recovery proceedings under Section 79 could be initiated by the proper officer.

e. Further, where the said taxpayer fails to provide the reasons for such difference of sales or the said tax official isn’t satisfied with the explanation offered. The recovery of the tax liability would be initiated by such a proper officer as per provisions of Section 79.