GSTAT Quashes ₹1.41 Lakh Demand, Allowing Same-Year GSTR-1 Correction After Finding Tax On Supplies Was Paid

The appellant, a registered proprietorship, challenged an order confirming a demand for alleged short payment of tax for FY 2019–20, subsequently upheld on appeal.

The discrepancy arose because supplies reported as B2C in earlier GSTR-1 returns were later reported as B2B in the March 2020 GSTR-1, while the tax on the supplies had already been discharged through the relevant GSTR-3B returns. The authorities treated the difference between GSTR-1 and GSTR-3B as a short payment.

Before the Tribunal, the appellant produced GSTR-1 and GSTR-3B returns, a supply-wise statement and tax invoices; the Tribunal verified the records and found that the repeated reporting had inflated the GSTR-1 turnover and liability.

The Tribunal applied Section 39(9) of the CGST/UPGST Act, as it stood at the relevant time. It treated the provision as permitting a registered person to rectify omissions or incorrect particulars in a return, subject to the statutory time limit and the exclusion for errors arising from scrutiny, audit, inspection or enforcement activity.

The Tribunal held that the provision did not require correction to be made only in a return for the subsequent financial year; a correction could be made in a later return of the same financial year, provided the statutory conditions were met.

The Tribunal also referred to Sections 37 and 38 as qualifications to Section 39(9), and to Section 73 as the basis for the demand proceedings. No judicial precedents were cited.

The Tribunal examined the returns, recipient details and tax invoices and found that the supplies initially reported as B2C were in fact B2B supplies. It accepted that the tax on those supplies had already been paid through GSTR-3B and that reporting them again as B2B in March 2020 caused duplication in GSTR-1, rather than an actual short payment.

It further held that Section 39(9) did not bar correction in a later return within the same financial year. As the correction was made within the prescribed outer time limit and was not prompted by tax-authority scrutiny or enforcement, the authorities’ view that correction had to be made in the following financial year was erroneous.

Any remaining reporting errors were considered procedural and did not alter the appellant’s actual tax liability.

It allowed the appeal, set aside the Order-in-Original dated 24 August 2024 and the Order-in-Appeal dated 19 March 2025, and quashed the demand. It also held that the appellant was entitled to a refund of any amount recovered or deposited pursuant to the lower authorities’ orders, subject to the applicable statutory provisions and rules.