Outward tax adjust agst inward tax

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Jiwan singh (Querist)
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24 January 2024 in fy 17-18 in aug entered tax on outward supply 50000 CGST 5000 SGST ( diff 50000-5000=45000) in 3B , in dec-18 45000 should be increase in SGST outward supply but wrongly 45000 sgst less in input hence there was no any tax payable , but now gst dept issue notice for difference between gstr 1 cgst 50000 3b 5000. ( at the 1st time 3b introduce for 3 month and after that they increase 6 month, 3b was not permanent return & itc set off through 3 not 3b , & itc mechanism as law was not apply as yet ) can dept disallow itc 45000/- ?

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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09 July 2024 Based on the scenario described, here are the key points to consider regarding the GST notice you received:

1. **Timing and Reporting**: In FY 17-18, you reported a CGST of Rs. 50,000 in GSTR-3B but only Rs. 5,000 in the CGST column. There was an apparent discrepancy of Rs. 45,000 between what was reported in GSTR-1 and GSTR-3B.

2. **Input Tax Credit (ITC) Utilization**: You mentioned that in December 2018, there was an increase of Rs. 45,000 in SGST outward supply but a corresponding reduction in SGST input, resulting in no tax payable. This adjustment was not reflected correctly in your filings.

3. **GST Department Notice**: The GST department has issued a notice regarding the discrepancy between the CGST reported in GSTR-1 and GSTR-3B.

4. **Disallowance of ITC**: The concern is whether the GST department can disallow the ITC of Rs. 45,000.

In such cases, the GST department typically verifies the details provided in GSTR-1 and GSTR-3B. If there is a discrepancy found where outward supplies or input tax credits were not reported correctly or matched as per law, they may take action:

- **ITC Disallowance**: If there is a discrepancy in ITC utilization, the GST department might disallow the excess ITC claimed if it cannot be substantiated with proper documentation or if it does not comply with GST laws.

- **Rectification**: If the discrepancy is genuine and due to an inadvertent error, you may rectify the mistake by filing a correct return and paying any additional tax due along with applicable interest. Rectification can help in avoiding penalties or further consequences.

Given the complexity and legal implications involved, it is advisable to consult a qualified GST practitioner or tax advisor who can review your specific case details, examine the notices received, and provide guidance on how to respond effectively to the GST department. They can also assist in preparing any necessary rectifications or responses to the notice.

It's crucial to address the notice promptly and provide accurate explanations supported by documentary evidence to resolve the issue with the GST department.