GST Act 2017 was introduced w.e.f. 1st July 2017 with the object to achieve one tax one nation and good & simple tax and suitable provisions are incorporated in the act and rules made thereunder. Electronic Intelligence Unit is also designed for the ease of govt officials to do the desk review and assessment therefrom.
GSTN Portal is designed to facilitate taxpayer to file the return with ease for compliance of the law as well as it is also designed risk analysis and developed electronic intelligence to raise the query and obtain the suitable data for better analysis for implementation of law and to detect evasion of taxes, if any. There cannot be any dispute on such mechanism, rather it is always provided it has been used in the same spirit.
Some of the State Govts including Maharashtra has developed certain parameters from such facilities created by GSTN for Govt officials. The parameters and impact thereof is given below:
| Para No. | Findings from GSTN | Action Expected from GST Officials | Remarks |
| PARAMETER-0069
SCRUTINY PARA1_ITC_FROM_NGTP
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In-eligible ITC claimed from non-genuine taxpayers (NGTPs) whose RC is cancelled ab-initio: ITC of recipient/claimant taxpayer appearing in GSTR 1 of NGTP supplier is required to be disallowed if NGTP supplier RC is cancelled ab-initio. List of NGTPs is made available on Mahagst website. Annual details of supplies shown by NGTP suppliers to recipient/claimant taxpayers are made available on SAP Feedback Module. Expected Action- Reversal of ITC claimed from these NGTP dealers as per SoP.
Limitation of Data: NGTPs from other States and CBIC authorities are not known fully. IGST 2A of GST Prime does not consider CN/DN table of GSTR 2A. |
To scrutinize such data and check & verify with recipient of actual receipt of goods considering number of counter checks and established collaborative evidences of non receipts of the goods and also study the legal provisions alongwith limitations of GSTN portals for the period covered and then issue ASMT-10,analyse the reply in the form of ASMT-11, issue DRC-01A after studying replies filed in the form of ASMT-11 and specific non agreement points and after going through the reply in Part B of DRC-01A is not satisfied, issue SCN with specific allegations providing not the difference amount but providing details wise ITC is not allowed.
Further, before issuance of ASMT-10, officials needs to study whether the differential duty has been paid at the time of filing Annual Return in the form of GSTR-9 and GSTR-9C and also tax paid under DRC-03 and reported to the tax officials. |
Unfortunately, most of the GST officials copy paste whatever is reported by GSTN for providing details of ITC from NGTP and do not verify with annual returns in the form GSTR-9 and GSTR-9C do not bother to read the reply given by the taxpayer in the form DRC-11, Part B of DRC-01A and confirms the demand issuing single line letter without passing the speaking order which is the mandatory requirement as per law.
In some of the cases, personal hearing is not granted.
Further, Appellate Authority also needs to apply judicious mind keeping aside the revenue biasness otherwise the benefit of GST implementation will not be truly achieved. |
| PARAMETER-0070 (SCRUTINY PARA2_GSTR1_3B_BIFA) | Excess outward tax in GSTR 1 compared to GSTR 9/GSTR 3B: Annual tax liability disclosed by taxpayers in GSTR-1 is compared with tax liability shown by him in annual return in form GSTR-9 in case of GSTR-9 filers. In case of GSTR-9 non-filer tax liability disclosed by taxpayers in GSTR-1 is compared with tax liability shown by him in GSTR-3B. This comparison is made only for the periods where GSTR-1 as well as GSTR-3B both are filed for the respective financial year. Nodal officer is required to verify difference of tax liability. Expected Action- To verify submission of dealer vis a vis claims shown in GST R1 and GSTR 9/GSTR 3B to find out actual difference and liability arising out due to output tax deficit. Limitations : 1. Because of difference in date and time of download of data there can be differences in figures if Nodal officers download data from GST BO at the time of proceedings. | To scrutinize such data and check & verify reconciliation of GSTR-1 and GSTR-3B and also taking the data reported in Annual Return as well as reconciliation with financial accounts in the form of GSTR-9C.
Also study the legal provisions alongwith limitations of GSTN portals for the period covered and then issue ASMT-10,analyse the reply in the form of ASMT-11, issue DRC-01A after studying replies filed in the form of ASMT-11 and specific non agreement points and after going through the reply in Part B of DRC-01A is not satisfied, issue SCN with specific allegations providing not the difference amount but providing details wise ITC is not allowed.
Further, before issuance of ASMT-10, officials needs to study whether the differential duty has been paid at the time of filing Annual Return in the form of GSTR-9 and GSTR-9C and also tax paid under DRC-03 and reported to the tax officials. |
Unfortunately, most of the GST officials copy paste whatever is reported by GSTN for providing details of ITC from NGTP and do not verify with annual returns in the form GSTR-9 and GSTR-9C do not bother to read the reply given by the taxpayer in the form DRC-11, Part B of DRC-01A and confirms the demand issuing single line letter without passing the speaking order which is the mandatory requirement as per law.
In some of the cases, personal hearing is not granted.
Further, Appellate Authority also needs to apply judicious mind keeping aside the revenue biasness otherwise the benefit of GST implementation will not be truly achieved. |
| PARAMETER-0071 (SCRUTINY PARA3_E_WAY BILL_3B) | While calculating tax liability as per E-way bills following points are considered. Only active E way bills are considered. Cancelled and Rejected E way bills are not considered. Sub-supply type; job work job work returns For own use and import are not considered. For Sub Supply Type ‘Supply’ and Export all Doc Types are considered i.e. invoice chalan others bill of entry bill of lading etc. For Sub Supply Type ‘Exhibition’ ‘Line Sales’ ‘Others’ ‘Recipient Not Known’ ‘SKD/SCD’ only Doc type ‘INV’ is considered. While calculating liability as per GSTR-3B GSTR3B Sec 3.1.a and 3.1.b data is used (3.1a+3.1b). While calculating the differential liability tax as per e-way bill is deducted from tax as per GSTR 3B. While doing this only periods in which taxpayer has issued both; e-way bills as well as filed GSTR-3B are considered. Since e-way bill for interstate and intrastate movements is made compulsory from 25/05/2018 this liability is calculated for the periods Jun-2018 onwards. Nodal officer is expected to verify difference between tax as per E-way bill and tax as per GSTR-3B calculated as per this method. It may be noted that tax as per E-way bill is given in the supporting transactions recipient wise. Tax as per GSTR-3B and difference is not given. Nodal officer may refer GSTR-3B from GST BO system. | The data so received needs to be analysed and counter check with GSTR_1 and records of the taxpayers w.r.t. movement of goods.
Further, it also needs to be checked with turnover reported in financial statements and reconcile with annual return and also consider all the aspects before arriving the conclusion.
Further, technical glitches on e-way bill portal at the start of the year even today needs to be considered. Officials also needs to better investigation and collect the evidences including collaborative evidences before alleging tax evasion on point out discrepancy.
Also study the legal provisions alongwith limitations of GSTN portals for the period covered and then issue ASMT-10,analyse the reply in the form of ASMT-11, issue DRC-01A after studying replies filed in the form of ASMT-11 and specific non agreement points and after going through the reply in Part B of DRC-01A is not satisfied, issue SCN with specific allegations providing not the difference amount but providing details wise ITC is not allowed.
Further, before issuance of ASMT-10, officials needs to study whether the differential duty has been paid at the time of filing Annual Return in the form of GSTR-9 and GSTR-9C and also tax paid under DRC-03 and reported to the tax officials.
Analyse the reply in the form of ASMT-11, issue DRC-01A after studying replies filed in the form of ASMT-11 and specific non agreement points and after going through the reply in Part B of DRC-01A is not satisfied, issue SCN with specific allegations providing not the difference amount but providing details wise ITC is not allowed. |
Unfortunately, most of the GST officials copy paste whatever is reported by GSTN for providing details of ITC from NGTP and do not verify with annual returns in the form GSTR-9 and GSTR-9C do not bother to read the reply given by the taxpayer in the form DRC-11, Part B of DRC-01A and confirms the demand issuing single line letter without passing the speaking order which is the mandatory requirement as per law.
In some of the cases, personal hearing is not granted.
Further, Appellate Authority also needs to apply judicious mind keeping aside the revenue biasness otherwise the benefit of GST implementation will not be truly achieved. |
| PARAMETER-0072 (SCRUTINY PARA4_GSTR3B_NONFILERS) | In-eligible ITC claimed from GSTR 3B Non-filers: ITC of recipient/claimant taxpayer appearing in GSTR 1 of supplier who has not filed GSTR-3B is required to be disallowed if the default is not made good. Annual details of supplies made by suppliers who are non-filers of GSTR-3B to recipient/claimant taxpayers are made available. Limitations – Non filer suppliers from other States cannot be identified. Expected Action- To verify current status of GSTR 3B filing of non filing dealer from BO before taking any action. In case dealer is still non filer or RC is cancelled ab initio or from last date of return filed then to get reversed ITC claimed from such non filing dealers.
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GST Officials needs to analyse and seek the evidences from taxpayer about non-payment of tax by such suppliers / taxpayer.
Since such taxpayers has not paid the tax to the government as assumed based on the data of non-fillers, GST officials, before issuing notices to the recipient of such suppliers they should make attempt to recover the same under various powers under GST ACT including collecting the amount from taxpayer’s bankers, debtors, or any person from whom , money is received from such taxpayers who has not paid the tax. Officials have also got the authority to attach the property (movable and immovable goods) before taking the action on recipient of such supplier abiding the decisions of various Hon. high courts and Supreme Court.
Analyse the reply in the form of ASMT-11, issue DRC-01A after studying replies filed in the form of ASMT-11 and specific non agreement points and after going through the reply in Part B of DRC-01A is not satisfied, issue SCN with specific allegations providing not the difference amount but providing details wise ITC is not allowed.
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Recipient of Suppliers are been harassed seeking the reversal of input tax credit availed by them even though all the conditions of Section 16 are fulfilled. The replies filed by recipient of such suppliers in the form ASMT-11, Part B of DRC-01A nit been considered and SCN are issued without providing any data to such persons.
In most of the cases, no speaking orders are passed either by Jurisdictional GST Officials or Appellate Authority. |
| PARAMETER-0073 (SCRUTINY PARA5_GSTR3B_2A_GSTR9) | Excess ITC claimed in GSTR 3B/9 which is not confirmed in GSTR 2A or 8A of GSTR 9: GSTR 9 is considered for the availment of ITC in preference to GSTR 3B which will reduce false positive cases. In case of GSTR 9 filer difference of table 8B-8A of GSTR 9 is taken. In case of GSTR 9 non-filer as taxpayers are showing ITC availment in any of the boxes of GSTR 3B Table 4 this parameter has considered sum of all types of ITC differences as under : Difference (Table 4A5-section 3 and 5 of GSTR-2A) Difference (Table 4(A)(1)- IGST paid on imports(ICEGATE data)) Difference calculation(Table 4(A)(2)+4(A)(3)-RCM cash paid in 6.1 0f GSTR 3B) Difference (Table 4(A)(4)-Table 6 of Part B of GSTR2A (ISD data)) In GSTR 9 cases no clubbing of sub parameters is done and these sub parameters like IGST on imports RCM ITC and ISD ITC claim are separately taken. The updated ITC reports from Back Office needs to be verified while scrutinising the case. Accordingly appropriate actions as per the provisions of law is expected to be taken by the Nodal Officer. Expected Action- 1) To identify ITC claim on local or interstate B2B purchases and tally it with 2A to find out difference. The difference can be on account of ITC of IGST paid on imports or ISD credit received or RCM paid wrongly entered in incorrect column 4A(5) of Table 4 of GSTR 3B. Therefore officer has to verify other ITC differences also in case of GSTR 9 non filers. 2) To verify whether dealer has already reversed partial or full amount. If still there is difference then to get such ITC reversed. Limitation : 1. There is possibility of ITC reversal in subsequent financial year/period but the information can not be used to reduce cases for current year. 2. Because of difference in date and time of download of data there can be differences in figures if Nodal officers download data from GST BO at the time of proceedings. | GST officials should study all the provisions of the law applicable in the relevant period i.e. 2017-18 & 2018-19. During the period provisions of matching was not introduced in the GSTN Portal. Rather, Rule 36(4) of CGST Rules 2017 was made effective from 9th Oct 2019 without having any section backing.
Further, GSTR-3B was declared return as against GSTR-3 with retrospective effect from 1st July 2017.
Section 16(2)(aaa) was made effective 1st Jan 2022 giving the section backing to Rule 36(4) and therefore, before issuance of any notice, Govt officials ought to analyse all the limitations of GSTN portal read with legal provisions and then only issue ASMT-10. Officials needs to study whether the differential duty has been paid at the time of filing Annual Return in the form of GSTR-9 and GSTR-9C and also tax paid under DRC-03 and reported to the tax officials.
Analyse the reply in the form of ASMT-11, issue DRC-01A after studying replies filed in the form of ASMT-11 and specific non agreement points and after going through the reply in Part B of DRC-01A is not satisfied, issue SCN with specific allegations providing not the difference amount but providing details wise ITC is not allowed. |
Department is issuing blind notices in the form of ASMT-10, without appreciating the clarification provided in the Part B of DRC-01A and issuing SCN only reproducing the para given by GSTN portal without specific finding and allegation against supplies or receipts.
Department also do not go in the legal provisions at the relevant times and rely GSTR-2A data without appreciating relevancy thereof.
In most of the cases, no speaking orders are passed either by Jurisdictional GST Officials or Appellate Authority. |
| PARAMETER-0074 (SCRUTINY PARA6_ITC_RC_CANCELLED) | In-eligible ITC claimed from RC is cancelled suppliers: ITC of recipient/claimant taxpayer appearing in GSTR 1 of supplier whose RC is cancelled is required to be disallowed if the supply is made after the effective date of RC cancellation. Annual details of supplies made by RC cancelled suppliers after the effective date of RC cancellation to recipient/claimant taxpayers are made available. Expected Action- To verify current status of registration of such selling dealer from BO before taking any action. In case dealers RC is in cancelled status then to ascertain tax liability . To verify whether dealer has reversed it suo moto. If not then to get reversed ITC claimed from such RC Cancelled dealers. Limitations : 1. Data of suppliers from other States whose RC is cancelled is not available. Hence it is not considered. 2. For those cases of suppliers whose date of RC cancellation is not available ITC is not considered. | It has been observed that department have cancelled the GST Registration for certain taxpayers retrospectively from the date of granting registration.
Further, it is expected that even though registration is cancelled, such taxpayers have still filed the returns GSTR-1 and GSTR-3B. It has been settled legal position that no ITC can be demanded when retrospective cancellation of supplier has been done by department.
The position as on the date of receipt of goods needs to be verified before issuance of demand notices / discrepancy in the Form ASMT-10. Department is expected to issue SCN only after collecting specific evidences including collaborative evidences, analysing clarification provided in the form ASMT-11 or Part B of DRC-01A and then issue specific SCN with evidences providing transaction wise details in the form of DRC-01 and issue the speaking order. |
Department is issuing blind notices in the form of ASMT-10, without appreciating the clarification provided in the Part B of DRC-01A and issuing SCN only reproducing the para given by GSTN portal without specific finding and allegation against supplies or receipts.
Department also do not go in the legal provisions at the relevant times and rely GSTR-2A data without appreciating relevancy thereof.
In most of the cases, no speaking orders are passed either by Jurisdictional GST Officials or Appellate Authority. |
It is very important to appreciate and follow the following High Court decisions and Supreme Court decisions:
| Issues/
grounds |
Submissions | Case law/ Annexures |
| No ASMT-10/DRC-01A issued | SCN not valid | Vadivel Pyrotech Private Limited Vs Assistant Commissioner (ST) (Madras High Court)- ASMT 10 is mandatory before issuing GST DRC-01, failure would vitiate the entire proceedings.
Nanhey Mal Munna Lal Vs State of UP non issuance of DRC-01A violates natural Justice |
| Reco of E-way bill turnover with GSTR-09- diff only of Cess | Cess not applicable on us | Diff because of Cess. However, we are engaged in the business of manufacturing of Electrical apparatus, Razors and Razor blades and according to Sec 8 of the GST (Compensation to State) Act, 2017 Cess not applicable on us. |
| Excess ITC availed – difference in 2A vs 3B | · No matching provision in disputed period.
· ITC availed as per Section 16 of the CGST Act
· Reco annexed below |
1. SC- Union of India v. Bharti Airtel Ltd- GSTR-2A is only a facilitator.
2. SC- State of Punjab and others vs Atul Fastener- the Supplier is the agent of the Government and shall be catch hold. 3. SC- Suncraft Energy Pvt. Ltd.- Court set aside the order of reversing excess credit availed in Form GSTR-3B as compared to Form GSTR-2A. 4. SC-Arise India Limited and Ors v. Commissioner of Trade & Taxes, Delhi and Ors- it is an impossible task for the buyer to determine which seller has not deposited the tax already collected, to the Government. 5. Diya Agencies v. The State Tax Officer if the taxpayer is able to prove that tax amount is paid to the seller and the ITC claim is bonafide THE ITC cannot be denied merely on non-reflection of transaction in GSTR-2A. 6. Kochi Medicals v. State Tax Officer Where ITC claimed was disallowed on ground of mismatch between GSTR-3B and GSTR-2A to extent of mismatch, impugned orders was to be set aside and matter was to be remitted back to consider case afresh in light of Para 4 of circular dated 27-12-2022. |
| Diff betwn reversals in 3B & 9 | Diff due to net reversals | Noticee followed the system of reporting the Net ITC which was calculated after deducting the reversals from the ITC available to them- situation is revenue neutral |
| ITC availed from non-filers | The amt is minuscule. Noticee ready to pay | Dhruv Engineers Enterprises- stamping fees of weighing scale- Suo moto cancellation- 20.11.2019
D.Y. Beathel Enterprises Vs Sate Tax Officer- that recovery action against the seller is must before denying the Input tax credit of the buyer. Rama Brick Field v. Additional Commissioner, Grade-2– time of supply, seller existed but subsequently it was found non-existent, Authorities could have verified as to how much tax had been deposited by selling dealer. |
| Seller to be examined in case wherein supply of goods challenged | Recovery to be first affected from the seller | D.Y Beathel Enterprises Vs. State Tax Officer (Data Cell) Tirunelveli [2021] 127 taxmann.com 80 (Madras) |
| Whether ITC can be denied to the recipient without conducting a proper investigation of the supplier
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Seller to be investigated and demand from recipient should not to be made without making any efforts of recovery from supplier. | Suncraft Energy Private Limited and Another v The Assistant Commissioner, State Tax [MAT 1218 of 2023](Calcutta HC) |
| A vague notice is violation of provision of Section 75 since the Statute itself prescribes for affording reasonable opportunity and any deficiency in that regard vitiates the result.
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Show Cause Notice to be issued with specific allegation after providing evidences thereof. | · [2023]151 taxmann.com (Madhya Pradesh) Balaji Electricals V Appellate Authority & Joint Commissioner State Tax
· Durge Metals v Appellate Authority and Joint Commissioner State Tax [2023]150 taxmann.com 333 |
| Buyer to establish his own credentials and not that of the seller.
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Buyer cannot be held responsible for the credentials of seller | Arhaan Ferrous And Non-Ferrous Solustion (P.) Ltd. V. Deputy Assistant Commissioner 1(ST) [2023] 153 taxmann.com 325 (Aandhra Pradesh |
| DRC-01 cannot be a substitute of SCN and proceedings were in violation of principle of Natural Justice when SCN did not strike out relevant particulars and did not enumerate contravention which petitioners were to reply
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Vikash Kumar Singhv Commissioner of State tax[2023] 157 taxmann.com 224 (Jharkhand)(23-03-2023)relying upon M/S Nkas Services Private Limited v. State of Jharkhand & others in W.P (T) No. 2659/2021 dated 9-2-2022 held that | |
| Merely on the grounds that in Form GSTR-2A the tax is not reflected should not be a sufficient ground to deny the claim of ITC
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· Diya Agencies Vs. State Tax Officer [2023] 154 taxmann.com 421 (Kerala) held that
· Raju Josephv.State Tax Officer[2023] 157 taxmann.com 400 (Kerala) (31-10-2023) |
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| SCN denying ITC due to retrospective cancellation of suppliers as nothing on record showing cancellation of the registration of any of suppliers in question retrospectively particularly for relevant assessment year 2018-19
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Goyal Sanitary Storev. Union of India[2023] 157 taxmann.com 289 (Madhya Pradesh)(30-10-23) | |
| Whether the Petitioner would be allowed to avail ITC where the supplier turned non-existent and registration of such supplier was cancelled retrospectively covering the date of transaction with the Petitioner
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Calcutta High Court-M/s. Gargo Traders – [WPA No. 1009 of 2022 dated June 12, 2023) held that The Calcutta High Court in WPA No. 1009 of 2022 held as under |
When Hon Supreme Court in the case of Suncraft has provided clear cut verdict, GST Council / CBIC / respective State Commissionerate should issue guidelines for issuance if Show Cause Notice only after ensuring directives of Supreme Court is followed and same ratio will be applicable for other cases based on the high court decision. Otherwise, by the time GSTAT (GST Appellate Tribunal) is formed there will be millions of cases piled up and again justice will be delayed. We need not to forget Justice Delayed is Justice Denied !!
