'Timelines To Rectify Bonafide GST Form Errors Must Be Realistic' : Supreme Court Asks CBIC To Re-examine Provisions

The Supreme Court recently underscored the need for the Central Board of Indirect Taxes and Customs to fix realistic timelines for correcting bonafide errors by the assesses in forms when filing GST returns. The bench of CJI Sanjiv Khanna and Justice Sanjay Kumar was hearing a challenge to the Bombay High Court order which allowed an assesee to rectify its form GSTR-1 after missing the deadline under S. 39(9) of the CGST Act. The order was challenged by the Central Board of Indirect Taxes and Customs (CBIC). Before the High Court, the petitioner filed a writ petition against the non-grant of permission to rectify its form GSTR-1 for the period of July 2021, November 2021 and January 2022. The time prescribed under Section 39(9) of CGST Act states the rectification of such omission or incorrect particulars have to be made on or before 30th day of November, following the end of the financial year to which such details pertained. Though the petitioner filed returns timely but after some time in December 2023, it had missed the deadline as per S.39(9). The High Court noted that though filing has been done with certain errors it has caused no loss of revenue to the State and allowed the petition. The present bench upheld the impugned order and further observed the need for CBITC to revise its provisions on rectification of Bonafide errors while filing GST returns. The Court held : "Central Board of Indirect Taxes and Customs, must re-examine the provisions/timelines fixed for correcting the Bonafide errors. Time lines should be realist as lapse/defect invariably is realized when input tax credit is denied to the purchaser when benefit of tax paid is denied to the purchaser when benefit of tax paid is denied." It also acknowledged the procedural and financial implications that assessees may face due to such Bonafide errors and software limitations cannot be a valid grounds to disallow rectifications. "Purchaser is not at fault, having paid the tax amount. He suffers because he is denied benefit of tax paid by him. Consequently, he has to make double payment. Human errors and mistakes are normal, and errors are also made by the Revenue. Right to correct mistakes in the nature of clerical or arithmetical error is a right that flows from right to do business and should not be denied unless there is a good justification and reason to deny benefit of correction. Software limitation itself cannot be a good justification, as software are meant ease compliance and can be configured. Therefore, we exercise our discretion and dismiss the special leave petition." The Court also observed that the judgments of the High Courts in Bar Code India Limited v. Union of India and others and Yokohama India Private Limited v. State of Telangana prima facie, do not lay down good law in this regard. However, the Court said that it would consider the correctness of these judgments in another case.Observations By High Court The Bombay High Court single bench of Justice KR Shriram observed that the new digitally based GST filing mechanism may require the patience to deal with human errors by assessees who are still adapting to it. It held : "The GST regime as contemplated under the GST Law unlike the prior regime, has evolved a scheme which is largely based on the electronic domain. The diversity, in which the traders and the assessees in our country function, with the limited expertise and resources they would have, cannot be overlooked, in the expectation the present regime would have in the traders / assessees complying with the provisions of the GST Laws. There are likely to be inadvertent and bonafide human errors, in the assessees adopting themselves to the new regime. For a system to be understood and operate perfectly, it certainly takes some time." It further observed that the department has to understand the practical challenges one may face while adapting to the GST regime and allow correction of bonafide errors without dragging assessees into litigation. "The provisions of law are required to be alive to such considerations and it is for such purpose the substantive provisions of sub-section (3) of Section 37 and sub-section (9) of Section 39 minus the proviso, have permitted rectification of inadvertent errors." "It is considering such object and the ground realities, the law would be required to be interpreted and applied by the Department. This necessarily would mean, that a bonafide, inadvertent error in furnishing details in a GST return needs to be recognized, and permitted to be corrected by the department, when in such cases the department is aware that there is no loss of revenue to the Government. Such freeplay in the joint requires an eminent recognition.""The department needs to avoid unwarranted litigation on such issues, and make the system more assessee friendly. Such approach would also foster the interest of revenue in the collection of taxes." Also Read - Can GST Act Timelines Be Relaxed For Bonafide Errors?...

'Timelines To Rectify Bonafide GST Form Errors Must Be Realistic' : Supreme Court Asks CBIC To Re-examine Provisions

Anmol Kaur Bawa

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