Notice received in GST for difference in GSTR-1 and GSTR-3B

This query is : Resolved

DIVYESH JAIN (Querist)
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21 November 2019 Dear Sir,

I have received a notice from GST officer as NOTICE FOR INTIMATING DISCREPANCIES IN THE RETURN AFTER SCRUTINY.

While going through my GSTR-3B and GSTR-1 returns it shows that the amounts are completely matched apart from the Non-GST sales which I have mentioned only in GSTR-1 in the Non-GST column. My cleint is into Transportation business and in regsitered under Reverse Charge Mechanism. Hence he is not liable to pay any GST.

In GSTR-3B I have put the Sales amount in Nil Rated sales for the above mentioned person and in GSTR-1 I have mentioned the sales amount in the Outward Sales column.

Please help me how can this issue be resolved.

Regards,
Divyesh Jain

CS Advocate Abhishek Goyal

CS Advocate Abhishek Goyal (Expert)
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21 November 2019 You have correctly shown sales in 3B and if you have B2B supplies if you have shown them by ticking the reverse charge check mark it is OK.

DIVYESH JAIN

DIVYESH JAIN (Querist)
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21 November 2019 But then how should I reply to this notice if incase the counter party who was liable to pay gst on my behalf has not paid it. There are 100 parties with whom I deal and make sales bill in their name.

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Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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04 August 2024 To address the GST notice for discrepancies between GSTR-1 and GSTR-3B, especially in cases involving reverse charge mechanism (RCM), here are the steps and considerations to resolve the issue:

### Understanding the Discrepancy

The notice indicates discrepancies between GSTR-1 and GSTR-3B. In your case:

- **GSTR-1**: Shows outward sales including non-GST sales in the relevant columns.
- **GSTR-3B**: Reflects the sales amount under "Nil Rated" sales, assuming the non-GST sales fall under this category.

### Common Reasons for Discrepancies

1. **Non-GST Sales Reporting**: If non-GST sales are reported in GSTR-1 but not matched in GSTR-3B, it could lead to discrepancies, especially if non-GST sales are not appropriately accounted for in GSTR-3B.
2. **Reverse Charge Mechanism (RCM)**: In RCM, GST is to be paid by the recipient of goods/services, not the supplier. If the counterparty has not paid GST, the supplier should still report correctly in GSTR-1 and GSTR-3B.

### Steps to Resolve the Issue

1. **Reconcile GSTR-1 and GSTR-3B**:
- **Check Non-GST Sales**: Ensure that non-GST sales are correctly reported in GSTR-1. These should be appropriately matched with the corresponding figures in GSTR-3B.
- **Verify Nil Rated Sales**: Ensure that nil-rated sales or those under RCM are accurately reported in GSTR-3B as per the GST guidelines.

2. **Verify the Details with Counterparties**:
- **Communicate with Counterparties**: Confirm whether the counterparty has fulfilled their GST payment obligations. If they haven’t, they should file the correct GSTR-1 with the relevant GST payments.

3. **Responding to the Notice**:
- **Prepare a Detailed Reply**: Draft a reply explaining the nature of the discrepancy. Include:
- **Details of Non-GST Sales**: Clarify how non-GST sales are reported and why they appear in GSTR-1 but not in GSTR-3B.
- **RCM Implications**: Explain how the RCM mechanism applies to your transactions and confirm that GST on such sales is to be paid by the recipient (counterparty).
- **Documentation**: Attach relevant documents, including copies of GSTR-1 and GSTR-3B, invoices, and correspondence with the counterparty if applicable.

4. **Address GST Payment by Counterparties**:
- **Provide Evidence**: If the counterparty has not paid GST, provide any available evidence or communication indicating that the GST payment responsibility lies with them.
- **Highlight RCM Compliance**: Emphasize that under RCM, the supplier (your client) is not liable to pay GST if the counterparty has not fulfilled their obligations.

### Sample Reply to GST Notice

Here’s a draft reply format you can use:

---

**Subject: Reply to Notice for Discrepancies in GSTR-1 and GSTR-3B**

**Respected Officer,**

I am writing in response to the notice dated [Notice Date] regarding discrepancies between GSTR-1 and GSTR-3B for the period [Period]. I have reviewed the discrepancies and would like to clarify the following points:

1. **Non-GST Sales Reporting**:
- The non-GST sales reported in GSTR-1 amounting to [Amount] are correctly reported. These transactions are categorized under [Relevant Column in GSTR-1]. They are not subject to GST as per the applicable GST provisions.

2. **Nil Rated Sales in GSTR-3B**:
- The sales reflected under "Nil Rated" in GSTR-3B include non-GST sales and reverse charge mechanism (RCM) transactions. These entries are in compliance with GST regulations.

3. **Reverse Charge Mechanism**:
- For transactions involving reverse charge mechanism, the responsibility to pay GST lies with the recipient of the goods/services. Despite being a registered dealer, my client is not liable to pay GST in such cases as per RCM provisions.

4. **Counterparty GST Compliance**:
- I am in communication with the counterparty regarding their GST payment obligations. The counterparty is responsible for fulfilling the GST payment requirements.

Please find attached the relevant documents, including copies of GSTR-1, GSTR-3B, and correspondence with the counterparty. I request you to consider these clarifications while reviewing the notice.

Thank you for your understanding.

**Yours faithfully,**

[Your Name]
[Your Designation]
[Your Contact Information]

---

### Summary

1. **Ensure Reconciliation**: Verify that the reporting in GSTR-1 and GSTR-3B is accurate.
2. **Communicate with Counterparties**: Confirm GST compliance with the counterparty.
3. **Respond to Notice**: Provide a detailed reply explaining the discrepancies and compliance with RCM provisions.

If the discrepancies persist or further complications arise, consider consulting with a GST professional for additional guidance.