GSTR-1 is declaration of Tax Liability and GSTR-3B is Evidence of Actual Payment, says Madhya Pradesh HC [Read Order]

The Madhya Pradesh High Court held that the GSTR-1 is the declaration of tax liability and GSTR-3B is evidence of actual payment.

The High Court, while deciding the case of Kabeer Reality Private Limited v/s The Union of India & Others, made the relevant ruling. The divisional bench constituted of Justice S.C. Sharma and Justice Shailendra Shukla.

In the present case, the petitioner was a Company that carried on the business of renting the immovable property and also provides allied services. An order for recovery of service tax was passed by the authorities, due to the default of payment.

The petitioners argued that procedure relating to demand and recovery, as provided under the Act of 2017 was not followed by the authorities. The petitioners contended that without determination of tax payable by the taxable person, no recovery could have been initiated under Section 79 (1) (c) of the Act of 2017.

The petitioner also filed a rejoinder and stated that CGSTR-1 cannot be termed or classified as self-assessed liability as it is only a declaration made for the limited purpose as prescribed under Section 37 of the Act of 2017 regarding details of outward supply and in absence of Return filed under Section 39, no recovery proceedings could have been initiated without following the procedure set out in Section 73 and 74 of the Act of 2017.

The respondent, meanwhile, stated that Section 78 and 79 empower the respondents to initiate the recovery of the government dues. The respondents further argued that the petitioner should have filed GSTR-3B and deposited the dues as the tax liability worked out by himself (self-assessed) shown as GSTR-1. It is when the petitioners failed to comply with the proceedings that the action was initiated by the Department to recover the dues under Section 79 (1) (c) of the Act of 2017.

The respondents in the additional reply stated that the filing of GSTR-1 does not mean that the petitioner is not required to file GSTR-3B. The respondents further stated that the moment the clients have been issued invoices for providing taxable services and charged the GST also, the tenants are entitled to avail the ITC under Section 2 (62) of the Act of 2017 and in the present circumstances, in which the petitioner failed to deposit the credit availed by the tenant on the basis of invoices issued by the petitioner also became invalid/ineligible despite no fault on their part.

The Court, after analysing the case at hand noted that from the various provisions including rule 61, that it was mandatory for the petitioner to file GSTR-3B Return. The Court also concluded that, “the tax determination has already been done in the present case, as the petitioner itself has quantified its tax liability under the GSTR-1 Returns”.

The Court further concurred that, “respondents have rightly proceeded ahead in the matter by taking appropriate steps for recovering the government dues.”