Self-assessed Tax Recovery for Mismatch in GSTR-1 vs 3B

Monisha Chaudhary

30 Mar, 2024

The tax short paid on such self-assessed and thus self-admitted liability and the interest thereon are subject to be recovered under the provisions of section 79 in cases where the tax payable in respect of tax payable in respect of details of outward supplies furnished by the registered person in GSTR-I has not been paid through GSTR-3B return, either wholly or partially, or in cases where any amount of interest payable on such tax remains unpaid.

The CBIC stated that there could be a valid basis for the discrepancy between the information on outbound supply disclosed in GSTR-1 and GSTR-3B. Therefore, before taking any action under section 79 to recover the abovementioned sum, the competent official must give the chance to explain any disparities between GSTR-I and GSTR-3B, if any, as well as for short payment or non-payment of tax.

However, the proper officer may start recovery proceedings for the said amount in accordance with section 79 provisions if the said registered person either fails to respond to the proper officer or fails to make the payment of the amount short paid or not paid within the time stipulated in the communication or any additional period that the proper officer may permit.

Mismatches in GSTR-1 vs 3B?

Let’s first comprehend what Section 75(12) of the CGST Act 2017 says. Recovery measures shall be initiated, in accordance with Section 75(12), if any unpaid self-assessed tax as per the return made under Section 39 is present. The explanation now includes a reference to “self-assessed tax”.

The government has clarified that “self-assessed tax” would include the GST payable for outbound supplies recorded in the GSTR-1 but not included in the return provided by the taxpayer in his GSTR-3B with the assistance of this clarification in sub-Section (12) of Section 75 of the CGST Act.

Section 75(12) of the CGST Act, 2017 – Regardless of what is stated in sections 73 or 74, if any amount of self-assessed tax in accordance with a return provided under section 39 remains unpaid, in full or in part, or if any amount of interest due on such tax remains unpaid, the unpaid amount must be recovered in accordance with the provisions specified under section 79.

When can Recovery Proceeding take place?

The following situations are where the GST authorities can start the recovery proceedings:

• In cases where the GSTR-1 GST due has not been fully or partially covered by the GSTR-3B.
• The aforementioned outstanding GST tax debt has unpaid interest.

In these situations, the taxman will use Section 79 to recover the unpaid tax amount on the self-assessed tax return as well as the interest associated with it.

There may be legitimate explanations for the discrepancies between the information on outbound supply provided in the GSTR-1 and those provided in the GSTR-3B in some situations (as noted below).

• Suppose any information in the GSTR-1 or GSTR-3B return is omitted, incorrectly spelt or reported incorrectly. Such omissions or mistakes might be fixed in the GSTR-1/GSTR-3B for the next month.
• A supply that was made during a previous period but wasn’t disclosed in GSTR-1, even if the GST was appropriately paid in GSTR-3B. A person like this might include information about such a supply in his GSTR-1 for the current period.

The Central Board of Indirect Taxes and Customs (CBIC)¹ states that before taking any legal action against errant businesses for tax underpayment or short payment, they should be given a reasonable amount of time to explain the differences between sales reported in return GSTR-1 and tax paid in return GSTR-3B.

Procedure for Recovery of Taxes

Recovery of the amount can take place in the following ways:

Payment of such Tax

Such tax would be due within a reasonable amount of time.

• There may not be a need to start any recovery proceedings under Section 79 if the taxpayer is able to explain the differences or the reasons for such nonpayment or short payment of tax and the tax official isn’t satisfied with the justification provided.
• The competent official may start recovery procedures under Section 79 if the taxpayer in question fails to respond to the communication or fails to make the payment within the allotted time frame.
• Additionally, if the said taxpayer doesn’t explain the causes for the disparity in sales or if the said tax official isn’t happy with the justification given. According to the terms of Section 79, such a qualified official would start the process of recovering the tax debt.

Recovery of the amount by a Proper Officer

1. The proper officer may withhold or instruct any other designated official to withhold the amount payable from any money owed to that individual that may be in their possession or under their control.
2. The competent official may hold and sell any items belonging to that individual that are in their possession or under their control in order to recover or compel any other designated officer to recover the sum thus payable.

Issuing a Notice for Recovery of the amount

The proper officer may, by written notice, require any other person to pay the government, either immediately upon the money becoming due or being held, or within the time period specified in the notice not being before the money becomes due or being held, so much of the money as is sufficient to pay the amount due from such person or the entire amount due, from any other person from whom money is due or may become due to such person, or who holds or may subsequently hold money for or on account of such person.

1. No matter any rule, practice, or requirement to the contrary, it shall not be necessary to produce any passbook, deposit receipt, policy, or any other document for the purpose of any entry, endorsement, or the like being made before payment is made when any such notice is issued to a post office, banking company or an insurer.
2. If the recipient of a notice fails to pay the government as required by the notice, he will be considered in default for the amount mentioned in the notice and will be subject to all of the penalties of the CGST Act or the rules adopted under it.

Conclusion

There are instances where there can be a mismatch in GSTR-1 vs. 3B. Now; the discrepancy can be either for the reasons where direct recovery of payment shall be initiated. On the other hand, the mismatch may be due to a valid reason for which the taxpayer shall provide a valid explanation. In case of such a mismatch, either the taxpayers can directly pay the due tax amount or provide a justifiable explanation that shall be accepted by the Department. If the taxpayer does not pay the due amount voluntarily, then the procedure given in Section 79 of the CGST Act shall be followed by a proper officer.

Frequently asked questions

Read Our Article: Payment and Computation of Self Assessment Tax

1. https://www.cbic.gov.in/