Delhi HC allows Bharti Airtel to rectify GST returns, claim Rs 923-crore refund

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Published: May 7, 2020 4:30:38 AM

In a relief to Sunil Bhari-led Bharti Airtel, the Delhi High Court has allowed the telco to rectify its GST returns for July 2017 to September 2017 and thus claim refund of Rs 923 crore, which was denied earlier by the tax department.

Bharti argued that it had paid excess tax of Rs 923 crore on inputs based on estimates due to non-operationalisation of the GSTR-2A form during the error period. Bharti argued that it had paid excess tax of Rs 923 crore on inputs based on estimates due to non-operationalisation of the GSTR-2A form during the error period.

In a relief to Sunil Bhari-led Bharti Airtel, the Delhi High Court has allowed the telco to rectify its GST returns for July 2017 to September 2017 and thus claim refund of Rs 923 crore, which was denied earlier by the tax department. It also asked the revenue authorities to verify the rectified GSTR-3B form and process the refund, if any, within two weeks.

A division bench of Justices Vipin Sanghi and Sanjeev Narula allowed Bharti to rectify the returns for the error period July to September 2017, saying “we do not find any cogent reasoning behind the logic for restricting rectification only in the period in which the error is noticed and corrected, and not in the period to which it relates.

There is no provision under the Act that has been brought to our notice which would restrict such rectification”.
“Indisputably, if the statutorily prescribed returns, GSTR-2 and GSTR-3 had been operationalised by the government, the petitioner (Bharti) would have known the correct the Input Tax Credit (ITC) amount available to it in the relevant period, and could have discharged its liability through ITC,” it said.

“As a consequence, the deficiency in reporting the eligible ITC in the months of July-September 2017 in the form GSTR-3B has resulted in excess payment of cash by the petitioner,” the bench stated.

Bharti argued that it had paid excess tax of Rs 923 crore on inputs based on estimates due to non-operationalisation of the GSTR-2A form during the error period. It wanted to correct the anomaly in October 2018 as it had underreported its claim for credit, but was prevented from doing so as the government’s December 2017 circular disallowed companies from making rectifications under the earlier circular of September 2017.

Terming the judgment as “path breaking,” senior counsel Tarun Gulati, who appeared for Bharti, said that the HC held that the failure of the government to operationalise the statutory returns — GSTR 2, 2A and 3 — prescribed under the CGST Act, cannot prejudice the assessee.

“The GSTR 3B which was merely a summary return as an alternative did not have the statutory features of the returns prescribed under the Act. Therefore, if there were errors in capturing ITC on account of which cash was paid for discharging GST liability instead of utilising ITC which could not be captured correctly at that time, the return should be allowed to be rectified in the very month in which the ITC was not recorded and the cash paid should be available as refund. The HC read down the circular which did not permit such rectification as being contrary to the scheme of the CGST Act,” he said.

During the migration to GST, the indirect tax regime experienced severe teething woes. Gulati argued that this Form was filled in manually and, therefore, had no inbuilt checks and balances that could ensure that the data uploaded by the company was accurate, verified and validated.

Senior counsel Harpreet Singh, on behalf of the GST department, opposed the telco’s stand, arguing that the rectification of mistakes of an earlier tax period couldn’t be done in any subsequent period.

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