Gauhati High Court Holds Taxpayers Entitled to Rectify GSTR-1 Errors and Claim Input Tax Credit Under Amended CGST Act

Background and Issues
The petitioner challenged several GST notifications and, primarily, an order dated 30.04.2024 issued by the Assistant Commissioner, Central Goods and Services Tax, Dimapur Division under Section 73 of the CGST Act, 2017. The order related to the financial year 2018-19 and was based on two grounds: (1) a mismatch between GSTR-1 and GSTR-3B returns, and (2) denial of input tax credit (ITC) for returns filed after the statutory deadline.

Court’s Analysis on GSTR-1 and GSTR-3B Mismatch
The Court noted that the petitioner admitted to errors in GSTR-1, specifically reporting a higher tax rate (18% instead of 12%) for four invoices and an incorrect credit note entry. However, the correct details were reflected in GSTR-3B and GSTR-9F. The Assistant Commissioner, relying on the Explanation to Section 75(12) of the CGST Act (effective from 01.01.2022), treated the excess liability in GSTR-1 as an admitted liability, without affording the petitioner an opportunity to explain.

The Court emphasized that, as per Supreme Court and High Court precedents, taxpayers should be allowed to rectify bona fide errors in GST returns. The Supreme Court in Central Board of Indirect Taxes and Customs v. Aberdare Technologies Pvt. Ltd. recognized the right to correct clerical or arithmetical mistakes, and the Madras High Court in Deepa Traders followed this principle. The Court further highlighted that Rule 88C of the CGST Rules, inserted in December 2022, requires authorities to issue a notice and provide an opportunity to explain discrepancies before recovery.

The Court found that the petitioner was not given such an opportunity, and the tax liability was imposed directly based on GSTR-1. It held that the petitioner should be allowed to explain the mismatch and provide supporting materials to establish the correct tax rate.

Entitlement to Input Tax Credit
The second issue concerned the denial of ITC for the March 2019 return, which was filed on 13.03.2021, allegedly beyond the permissible period under Section 16(4) of the CGST Act. The Court observed that the Finance (No. 2) Act, 2024 inserted Section 16(5) into the CGST Act, with retrospective effect from 01.07.2017. This amendment allows registered persons to claim ITC for invoices or debit notes pertaining to financial years 2017-18 to 2020-21 in any return filed up to 30.11.2021.

Since the petitioner filed the relevant return within this extended period, the Court held that the denial of ITC was unsustainable.

Directions and Outcome
The Gauhati High Court set aside the impugned order dated 30.04.2024. It directed that the petitioner be given 30 days to explain the mismatch between GSTR-1 and GSTR-3B to the Assistant Commissioner, who must then decide on the acceptability of the explanation in accordance with the CGST Act and Rules. The Court also declared that the petitioner is entitled to claim ITC for the financial year 2018-19 as per Section 16(5) of the CGST Act.

The Court clarified that its decision did not address the validity of the challenged notifications, as the primary grievance could be resolved without such adjudication. No order as to costs was made.