Tax Vista

Your weekly tax recap

Edn. 281 - 30th March 2026

Kasi Viswanathan V

Are Liabilities Reported in GSTR-1 Self-Assessed Tax?

A recurring difficulty in GST compliance is the treatment of mismatches between GSTR-1 and GSTR-3B. Many of these arise not from any real tax shortfall but from reporting errors. The present case is a familiar illustration. The registered person reported an excess liability in GSTR-1 due to application of a tax rate of 18% instead of 12%, coupled with an error in reporting of credit notes. The corresponding GSTR-3B, however, correctly reflected the tax payable for March 2019. The issue was whether this excess disclosure in GSTR-1 could, by itself, be treated as "self-assessed tax" and straightaway recovered.

An order came to be passed on 30.04.2024 under section 73, without issuance of any notice, treating the differential as non-payment of admitted liability. Reliance was placed on the explanation to Section 75(12), inserted with effect from 01.01.2022, to justify this action. The taxpayer's contention was that the said explanation could not be applied to March 2019. There were also broader challenges to various notifications, though the Court confined itself to examining the validity of the order as passed.

The Court's reasoning turns to the statutory mechanism governing returns and mismatches. It refers to the provisions for rectification of outward supply statements under Section 37 and the prescription under Rule 59. Importantly, it also considers Rule 88C, introduced on 26.12.2022, which deals specifically with discrepancies between GSTR-1 and GSTR-3B. The rule requires issuance of an intimation in FORM GST DRC-01B calling upon the taxpayer to either pay the differential or explain the same.

The Court referred to the decisions permitting correction of returns and observed that if tax imposed by statute is 12%, the same cannot be recovered at 18%. In view of this, the Court opined that an opportunity should be given to explain and accordingly set aside the order and remanded the matter to the adjudicating authority with an opportunity to explain the difference within 30 days.

There are a few important takeaways from the decision. The power under section 75(12) is meant to operate notwithstanding Section 73 in specified situations. However, once proceedings are initiated under section 73, there is no occasion to simultaneously rely on section 75(12) to dispense with the requirements of notice and opportunity of personal hearing under section 73.

In any case, the consequence of invoking section 75(12) is recovery under Section 79. The Court, in effect, recognizes the process required to be followed in terms of Rule 88C before initiation of recovery action under section 79. The scheme that emerges is that the differential does not become automatically recoverable merely because it appears in GSTR-1. The liability travels further only if the taxpayer either does not respond to the intimation or the explanation is found unacceptable. It is at that stage that recovery can be initiated in terms of section 79. Read in this manner, the power under section 75(12) operates in a structured setting and cannot bypass the preceding steps.

The order also involved an additional issue in respect of input tax credit for March 2019. The dispute relating to limitation under Section 16(4) stood resolved with the introduction of Section 16(5) through the Finance Act, 2024. There appears to be no clear reason for directly passing an order on this issue, except that the order was passed on 30.04.2024, being the last date for passing an order under section 73, which suggests that the explanation to section 75(12) was not the real basis for the action [Re: 2026-VIL-293-GAU]

Self-Assessment is No Estoppel against Claiming Benefits

The second decision also revolves around self-assessment, but in a different setting. The issue arises in a customs matter where basic customs duty exemption available under the SAFTA Agreement, through Notification No. 99/2011-Cus. dated 09.11.2011, was inadvertently not claimed in the Bills of Entry filed under provisional assessment for imports from a related party covered under SVB. The importer subsequently filed an appeal against the said Bills of Entry to claim the exemption.

The appellate authority denied the claim on two counts: first, that exemption cannot be claimed at the appellate stage as the department would not be in a position to examine the goods which had already been cleared (given out of charge); and second, that the appeal itself was premature since the Bills of Entry were under provisional assessment. The importer, on the other hand, contended that the country of origin certificate, as required under the notification, had in fact been submitted at the time of import.

The Tribunal observed that reassessment is legally permissible where appropriate evidence in support of the claim was available at the time of initial documentation. On facts, it was noted that the importer had, at the time of initial assessment itself, furnished the SAFTA Certificate issued by the prescribed authority.

It further observed that a provisional assessment, for any reason, is provisional for all purposes. Its scope cannot be restricted merely to valuation when the assessment itself remains open. As long as the importer is able to satisfy the conditions prescribed under the notification, the benefit cannot be denied. The decision also reiterates that it is incumbent upon the authorities to ensure that lawful benefits are granted, even where the importer has failed to make a specific claim at the time of filing the import documents.

The matter was accordingly remanded for examination of the admissibility of the exemption and to grant the same, if admissible, at the time of finalisation of the provisional assessment.

While the Tribunal found the second objection of prematurity to be appropriate, it did not examine the issue further recognizing that the appeal had been filed by way of ex abundanti cautela to avoid the risk of the claim being treated as not having been challenged. The Tribunal appreciated that the first objection could come in the way of entitlement to exemption, if otherwise eligible, and addressed that issue upfront.

The importer filed a protective appeal against the provisional assessment to avoid the issue of whether a 'provisional' Bill of Entry constitutes an 'order' of assessment.

Protective appeals, however, do come with certain challenges, including parallel proceedings and potential delays. In the present case, this concern did not fully arise as the assessments had not yet been finalised, allowing the issue to be addressed in a consolidated manner. [Re: 2026-VIL-499-CESTAT-KOL-CU]

[Read previous edition dated 23.03.2026]

(The views expressed are personal. The author can be reached for feedback or queries on v.k.vishwa@gmail.com)