If you are a business owner or a startup founder in India, you must be aware of the Goods and Services Tax (GST), which is a comprehensive indirect tax levied on the supply of goods and services across India. GST has become a game-changer for businesses in India, as it has simplified the tax structure and brought transparency to the system.
As per the GST law, every registered dealer has to file monthly returns in GSTR 3B and GSTR 1 to report their inward and outward supplies. However, there are certain cases where the input tax credit (ITC) claimed by the dealer in GSTR 3B does not match with the details reported in GSTR 1. In such cases, the GST department may issue a notice to the dealer for the mismatch of ITC in GSTR 3B and GSTR 1.
Let's understand this in detail:
Input tax credit is the credit that a business can claim for the tax paid on the purchase of goods or services that are used in their business. For example, if a business purchases raw materials worth Rs. 10,000 and pays Rs. 1,800 as GST, it can claim the Rs. 1,800 as input tax credit to offset against the GST payable on the sales made by the business.
GSTR 3B is a monthly return that every registered dealer has to file by the 20th of the following month. It is a summary of the outward and inward supplies, input tax credit claimed, and tax payable for the month.
GSTR 1 is a monthly or quarterly return that every registered dealer has to file to report the details of their outward supplies of goods and services for the month or quarter. It contains details such as the name and address of the buyer, the HSN code of the goods or services supplied, the value of the goods or services supplied, and the tax charged on the goods or services supplied.
The GST department may issue a notice to the dealer if the ITC claimed in GSTR 3B does not match with the details reported in GSTR 1. This notice is issued under Section 42 of the CGST Act, 2017.
The notice will contain the following details:
1. The GSTIN of the dealer
2. The period for which the notice is issued
3. The amount of ITC claimed in GSTR 3B
4. The amount of ITC available as per GSTR 1
The dealer has to respond to the notice within a specified time, which is usually 15 days from the date of receipt of the notice. The dealer has to either accept the mismatch and pay the tax along with interest, or reject the notice and provide a valid explanation for the mismatch.
If the dealer does not respond to the notice within the specified time, the GST department may initiate proceedings against the dealer under Section 73 or Section 74 of the CGST Act, 2017. This may lead to the following consequences:
1. Penalty: The dealer may be liable to pay a penalty of up to 10% of the tax amount due, subject to a minimum of Rs. 10,000.
2. Interest: The dealer may have to pay interest on the tax amount due at the rate of 18% from the due date of filing the return till the date of payment.
3. Prosecution: The GST department may initiate criminal proceedings against the dealer for non-compliance with the GST law.
It is important for businesses to ensure that the ITC claimed in GSTR 3B matches with the details reported in GSTR 1. In case of any mismatch, the dealer should respond to the notice and provide a valid explanation for the same, failing which they may be liable to pay a penalty, interest, or face prosecution. GST has brought about a significant change in the Indian tax system, and businesses should ensure compliance with the law to avoid any legal consequences.