Initiation Of Recovery Proceedings Due To Difference Between Gstr 1 And Gstr 3b

Under Goods and Services Tax,

various amendments were made effective from 1st January 2022. Out of them, one of the important amendment that is creating a huge hue and cry between the trade and industry is relating to the initiation of recovery proceedings in case of difference between outward supplies detailed by a registered person via Form GSTR-1 and Form GSTR-3B. The present article firstly explains the provisions relating to the said recovery proceedings; discusses the CBIC tweet in the matter and also briefs the instruction issued by CBIC in the matter.

Provisions relating to the recovery proceedings in case of difference between GSTR-1 and GSTR-3B-

Vide Section 114 of the Finance Act, 2021, an explanation was inserted to section 75(12) of the Central Goods and Services Tax Act, 2017. Before understanding the newly inserted explanation, firstly let us understand the provisions of section 75(12). Section 75(12) simply states that recovery proceedings will be initiated in case of any amount of unpaid ‘self-assessed tax’ in accordance with the return furnished under section 39. Now, the inserted explanation states inclusion of the term ‘self-assessed tax’. Accordingly, the explanation states that the term ‘self-assessed tax’ will include tax payable in respect of which details of outward supplies are furnished via

Form GSTR-1, but the tax on the same is not paid through Form GSTR-3B. The said explanation was inserted vide the Finance Act, 2021 but was made effective from 1st January 2022 [refer notification no. 39/2021- Central Tax dated 21st December 2021].

CBIC clarification in the matter via Twitter-

As the matter was hitting up the market, the CBIC via Twitter provided some clarification on 24

th December 2021. Accordingly, CBIC clarified as under- Explanation to section 75(12) is to clarify the tax on self-declared supplies by the registered person in Form GSTR-1, which is not been paid via Form GSTR-3B, will be considered as self-assessed liability and can be recovered. It was also clarified by CBIC that the main purpose behind imposing the amendment was to impart discipline in the system and to facilitate the recipient of the supply to avail Input Tax Credit in a timely manner.

CBIC instruction in the matter-

Vide instruction no. 01/2022- GST dated 7

th January 2022, the Central Board of Indirect Taxes and Customs has issued the following guidelines in the matter-

Cases, wherein, recovery proceedings can be initiated under section 79 of the Central Goods and Services Tax Act, 2017 on the basis of the explanation under section 75(12)-

Tax payable as per details of outward supplies furnished by the registered person in Form GSTR-1 is wholly not paid via return in Form GSTR-3B; or
Tax payable as per details of outward supplies furnished by the registered person in Form GSTR-1 is partly not paid via return in Form GSTR-3B; or
Any amount of interest payable on non-paid or short paid tax as above.

Manner of working for recovery proceedings in the matter-
- Firstly, the proper officer will send a communication (with Document Identification Number) to the registered person instructing the person to-

Either pay the short paid or not paid amounts/ tax payable in terms of provisions of section 75(12); or
Provide an explanation for the reasons of such short payment or non-payment within a prescribed time limit.
- If the registered person is able to satisfactorily justify the difference between the figures of Form GSTR-1 and Form GSTR-3B, then the recovery proceedings under section 79 may not be initiated by the proper officer.
- If the registered person didn’t reply at all or was not able to justify the difference, then the recovery proceedings under section 79 will be initiated by the proper officer.

Genuine cases for which proper officer may not initiate the recovery proceedings, if the registered person provides appropriate reply-
- Typographical error or wrong reporting of details in Form GSTR-1 or Form GSTR-3B;
- Supply of an earlier tax period not declared in Form GSTR-1, however, the tax was correctly paid by reporting the said supply in Form GSTR-3B.

Synopsis-

The summary of the entire provisions is tabulated hereunder-

Particulars	Details
Provisions referred	Explanation to section 75(12)
Provisions states	‘Self-assessed tax’ includes tax payable in respect of outward supplies detailed by the registered person in Form GSTR-1, but not included while paying taxes via Form GSTR-3B.
Application of the provisions	Recovery proceedings may be initiated by the proper officer in case the supplies are detailed by the registered person in Form GSTR-1 but the same is not reflected and accordingly tax is not paid via Form GSTR-3B.
Manner of recovery proceedings to be followed by the proper officer	· Issue communication relating to short-paid or not paid tax; · Registered person can reply the said communication within the prescribed time limit; · If satisfied with the reply, proper officer may not initiate the recovery proceedings; · If the registered person has not replied or the reply is not satisfactory, proper officer may initiate the recovery proceedings.

Back to Learn

Frequently Asked Questions

Common questions about GSTR.

The explanation inserted to Section 75(12) aims to clarify that the term 'self-assessed tax' includes tax payable on outward supplies detailed by a registered person in Form GSTR-1 but not paid through Form GSTR-3B. This amendment intends to promote discipline in the system and facilitate timely input tax credit availability for recipients.

The explanation to Section 75(12) was inserted through the Finance Act, 2021, but it became effective from 1st January 2022, as per Notification No. 39/2021-Central Tax dated 21st December 2021.

Recovery proceedings under Section 79 can be initiated in the following cases based on the explanation to Section 75(12): (a) Tax payable as per outward supplies in Form GSTR-1 is wholly not paid through Form GSTR-3B, (b) Tax payable as per outward supplies in Form GSTR-1 is partly not paid through Form GSTR-3B, or (c) Any interest payable on non-paid or short-paid tax as mentioned above.

The process involves the proper officer sending a communication (with Document Identification Number) to the registered person, instructing them to either pay the short-paid or not-paid amounts or provide an explanation for the reasons within a prescribed time limit. If the explanation is unsatisfactory or the registered person doesn't reply, recovery proceedings under Section 79 may be initiated.

The proper officer may not initiate recovery proceedings if the registered person provides a satisfactory explanation for the difference between Form GSTR-1 and Form GSTR-3B, such as typographical errors, wrong reporting of details, or supplies of an earlier tax period correctly reported in Form GSTR-3B but not in Form GSTR-1.

Through a tweet on 24th December 2021, CBIC clarified that the explanation to Section 75(12) is meant to consider the tax on self-declared supplies by a registered person in Form GSTR-1 but not paid through Form GSTR-3B as a self-assessed liability, which can be recovered.

The CBIC issued Instruction No. 01/2022-GST dated 7th January 2022, providing guidelines on the cases in which recovery proceedings can be initiated based on the explanation to Section 75(12) and the manner of working for such recovery proceedings.

A registered person can avoid recovery proceedings by ensuring that the tax payable on outward supplies detailed in Form GSTR-1 is correctly and fully paid through Form GSTR-3B. If there is a genuine reason for the difference, the registered person should provide a satisfactory explanation to the proper officer within the prescribed time limit.

The amendment related to the explanation to Section 75(12) is significant as it aims to promote compliance and discipline in the Goods and Services Tax (GST) system. It encourages registered persons to accurately report their outward supplies in Form GSTR-1 and pay the corresponding tax through Form GSTR-3B, thereby facilitating timely input tax credit availability for recipients.

To ensure compliance, a registered person should carefully reconcile their outward supplies reported in Form GSTR-1 with the tax payments made through Form GSTR-3B. They should maintain accurate records, promptly address any discrepancies, and seek professional assistance if needed to avoid potential recovery proceedings or penalties.