GST

Supreme Court refuses Bharti Airtel’s plea for a GST refund of Rs. 923 crores

The Supreme Court, on 28^th October 2021, prohibited Bharti Airtel, the country’s top wireless telecom provider, from claiming a refund of rupees 923 crores in Goods and Services Tax (GST). The Supreme Court granted assent to the Government’s appeal against the release of refunds and overturned a Delhi High Court order that had granted relief to Bharti Airtel.

Bharti Airtel had requested a GST refund of rupees 923 crores for the period of July-September 2017, claiming that it had paid an excess tax since the GSTR-2A form was not available at the time. The Delhi High Court granted approval to Bharti Airtel’s petition in May 2020, ordering the government to verify and return the sum claimed. However, in July of last year, the Central Government appealed the High Court’s decision to the Supreme Court. The Central Government contended in their petition that Bharti Airtel has under-reported input tax credit between July and September 2017.

Facts of the GST Refund case: Union of India Vs Bharti Airtel Ltd. & Ors (Supreme Court of India)

In the case of Union of India vs. Bharti Airtel Ltd. and Others [CIVIL APPEAL NO. 2021 (ARISING OUT OF S.L.P. (C) NO. 8654 OF 2020) dated October 28, 2021], the honourable Supreme Court of India has denied the respondent, i.e., major telecom player “Bharti Airtel” to seek a GST refund of Rs. 923 crores by way of rectification of return.

According to the facts of this case, the respondent was having some issues while submitting GSTR Form-3B because of various glitches in the online GST portal. Following these glitches, the respondent submitted its GST returns for the period of July 2017 to September 2017 with an excess amount of rupees 923 Crores, for which they had requested a refund amount.

On this account, the Delhi High Court via [W.P. (C) No. 6345 of 2018 dated May 05, 2020] held that the rectification of GST returns for the relevant period to which the error pertains was imperative. And as a result, the Delhi High Court permitted the present case and allowed the respondent to file a rectified return for Form GSTR-3B in respect of the period for which the error relates, i.e., for the months of July 2017 to September 2017. The Delhi High Court further ordered the Respondents to verify the claim made in the revised Form GSTR-3B within two weeks of submitting it and to give effect to it once validated.

The Central Government (“the Appellant” in the given case) filed a petition with the Supreme Court in July 2020, to challenge the decision of the Delhi High Court granting the refund to Bharti Airtel. The authorities (or the tax department) alleged that the respondent under-reported Input Tax Credit (ITC) from July 2017 to September 2017. On the other hand, the respondent countered that it had paid an excess tax of rupees 923 crores on inputs based on estimations since the provision of Form GSTR-2A was not fully operational throughout the said period.

The honourable Supreme Court has allowed the appellant’s plea against the order of the Delhi High Court that had earlier directed to grant a refund to the respondent by way of rectifying its GST return for the period of July 2017 to September 2017.

The Supreme Court has held that despite the express provisions contained in the Central Goods and Services Tax Act, 2017^[1] along with the CGST Rules, it was not acceptable to the High Court to continue on the basis that the only option available to the respondent for benefiting from the seamless utilization of the ITC is for it to correct/ rectify its return made in Form GSTR-3B for the relevant period in which the error occurred.

The Supreme Court is of the view that any unilateral adjustment to such a return under the current regime would have a cascading effect on the beneficiaries and suppliers involved in the said transactions.

According to the apex court, the legislation only allows for the correction of mistakes and omissions in Forms GSTR-1 and GSTR-3 during the early phases and that too in a specified manner.

The Supreme Court agreed with the tax department’s argument that any deviation from the legislative mandate would not only be unconstitutional, but would also result in the collapse of tax administration in the Union, States, and Union Territories.

Form GSTR­2A is only a tool to assist a taxpayer in making an educated choice about his/ her self-assessment. Because the GST regime stipulated at the relevant time necessitated the registered person to submit returns on the basis of such self-assessment in Form GSTR-3B manually or on an electronic platform, the non-operability or non-availability of Form GSTR-2A, or for that reason, other similar forms, should be of no apparent benefit. The laws of Section 39(9) of the CGST Act and Rule 61 of the CGST Rules contained thereunder, as applicable at the time, apply to the returns submitted by the registered person/ taxpayer in Form GSTR­3B in full force and effect.

It further noted that Airtel was not denied the chance to correct omissions or wrong information in the return to be filed for the month or quarter in which the omission or incorrect information was discovered by it. As a result, it is not a matter of ITC denial as such. If anything, it is merely a deferral of taking the utilization of the input tax credit (ITC). The ITC amount is saved in the electronic credit ledger and can be used in future returns, including the next fiscal year.

In a nutshell

On the tax department’s appeal, a bench led by Justice AM Khanwilkar overturned the Delhi High Court’s May 2020 judgement allowing Bharti Airtel to rectify Form GSTR-3B for July to September 2017, saying such orders “cannot be upheld.”

The Supreme Court has dismissed the plea of Bharti Airtel for a refund of Rs. 923 crores on the ground that rectification of errors in GST should be permissible only at the initial stages. A taxpayer’s ‘unilateral’ correction of electronically-filed returns on a self-assessment basis would create a ‘chaotic scenario,’ with repercussions for all the parties involved in the relevant transaction chain.

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