In a Landmark ruling GST

In a landmark ruling, the GST Appellate Tribunal (GSTAT), Principal Bench, has held that a mismatch between GSTR-1 and GSTR-3B cannot automatically result in a tax demand or penalty. In its first-ever judgment (M/s Sterling & Wilson Pvt. Ltd. vs Commissioner, Odisha), the Tribunal emphasized that taxpayers must be given a fair opportunity to reconcile differences arising from timing adjustments, credit notes, or advances. 

Key takeaways from the GSTAT ruling include:

• Reconciliation Opportunity: Where differences are recorded in the books of accounts due to valid business reasons like credit/debit notes or advance adjustments, the taxpayer should be allowed to reconcile and revise their details rather than face an immediate penalty.

• No Automatic Tax Evasion: A mere mismatch does not establish tax evasion, fraud, or suppression. Detailed factual verification is required before confirming a demand.

• Procedural Safeguards: The Tribunal ruled that the First Appellate Authority (FAA) cannot unilaterally convert a case from Section 74 (fraud) to Section 73 (non-fraud) and confirm a demand. Any such redetermination of tax liability must be performed by the Proper Officer after allowing the taxpayer to submit their explanation.

• Consideration of Early System Limitations: The GSTAT acknowledged that during the early years of GST (like FY 2018-19), portal glitches and manual filing led to human errors that should be reconsidered by authorities.