MISTAKE IN 3B
This query is : Resolved
17 September 2025
IN F.Y.2019-20 MONTH JUNE GST-1 SUBMITED CORRECTLY BUT IN 3B DURING MANUAL DATA INPUT, GST TOTAL SALES INCREASE DURING THIS GSTR 3B RETURN. SO TOTAL SALES INCREASE BUT NOT TAXABLE SALES INCREASE. IN SCRUTINY SEC 17(2) ITC REVERS , ALTHOUGH THIS IS A TRADING BUSINESS & NO COMMON CREDIT UTILISED. APPEAL IT . ANY CASE LAW REGARDING THIS OR HOW TO DEFEND IT.
18 September 2025
Section 17(2) of the CGST Act mandates ITC reversal only on proportionate 'common credit' attributable to exempt supplies.
In pure trading businesses, if there is no exempt supply or common credit utilized (only taxable supplies and exclusively used credits), ITC reversal under this section does not arise.
Overreporting of sales in GSTR-3B, if not corresponding to higher taxable/exempt supplies or higher ITC claim, is a procedural reporting error, not a basis for ITC reversal.
In pure trading businesses, if there is no exempt supply or common credit utilized (only taxable supplies and exclusively used credits), ITC reversal under this section does not arise.
Overreporting of sales in GSTR-3B, if not corresponding to higher taxable/exempt supplies or higher ITC claim, is a procedural reporting error, not a basis for ITC reversal.
18 September 2025
How to Defend During Appeal
Demonstrate with documentary evidence (purchase registers, sales registers, GST returns) that no common inputs or input services were used for both taxable and exempt supplies.
Emphasize that the business involved solely taxable trading, and all ITC availed was specifically attributable to taxable supplies, not common credits.
Argue that Section 17(2) read with Rule 42 applies only where ITC relates to both taxable and exempt output supplies, not to pure trading of taxable goods.
Cite that reversal calculations per Rule 42 are triggered only if there is actual exempt supply or dual-use of input/input services, which is not the case.
Demonstrate with documentary evidence (purchase registers, sales registers, GST returns) that no common inputs or input services were used for both taxable and exempt supplies.
Emphasize that the business involved solely taxable trading, and all ITC availed was specifically attributable to taxable supplies, not common credits.
Argue that Section 17(2) read with Rule 42 applies only where ITC relates to both taxable and exempt output supplies, not to pure trading of taxable goods.
Cite that reversal calculations per Rule 42 are triggered only if there is actual exempt supply or dual-use of input/input services, which is not the case.
18 September 2025
Several recent High Court judgments have clarified that technical or clerical mismatches between GSTR-1 and GSTR-3B, where all documentary and commercial compliance is present and there is no wrongful claim of ITC, do not justify outright reversal or denial of ITC:
1. Orient Traders v. Deputy Commissioner Karnataka HC :
Allowed amendment/correction of GSTR-3B, noting no revenue loss and bona fide mistakes can be rectified if there is no excess credit availed.
2. Suncraft Energy v. Assistant Commissioner Calcutta HC:
No ITC denial solely for mismatch if Section 16(2) conditions satisfied and record trail supports bona fide claims.
3. Jose Paul v. State Tax Officer Kerala HC:
GSTR-1 vs GSTR-3B mismatch alone not ground for penalty/amendment if underlying transactions are correct and no fraudulent intent.
1. Orient Traders v. Deputy Commissioner Karnataka HC :
Allowed amendment/correction of GSTR-3B, noting no revenue loss and bona fide mistakes can be rectified if there is no excess credit availed.
2. Suncraft Energy v. Assistant Commissioner Calcutta HC:
No ITC denial solely for mismatch if Section 16(2) conditions satisfied and record trail supports bona fide claims.
3. Jose Paul v. State Tax Officer Kerala HC:
GSTR-1 vs GSTR-3B mismatch alone not ground for penalty/amendment if underlying transactions are correct and no fraudulent intent.
18 September 2025
File reconciliation explaining the nature of the error, with all evidence that only taxable trading was undertaken, and no common inputs were used.
Cite the above judgments and Section 17/Rule 42 logic.
Request for chance to revise or correct reporting errors if possible, referencing the Karnataka HC's ruling.
Point out that demand for reversal without actual benefit gained or revenue loss is contrary to GST principles and fairness.
The demand for ITC reversal under Section 17(2) in this scenario is not sustainable for pure trading businesses with no common credit. Courts consistently favor substance over form when there is procedural reporting mistake but no wrongful gain or use of ineligible ITC. Use business records and cited case laws in your appeal to strengthen defense and seek relief from reversal or penalty.
Cite the above judgments and Section 17/Rule 42 logic.
Request for chance to revise or correct reporting errors if possible, referencing the Karnataka HC's ruling.
Point out that demand for reversal without actual benefit gained or revenue loss is contrary to GST principles and fairness.
The demand for ITC reversal under Section 17(2) in this scenario is not sustainable for pure trading businesses with no common credit. Courts consistently favor substance over form when there is procedural reporting mistake but no wrongful gain or use of ineligible ITC. Use business records and cited case laws in your appeal to strengthen defense and seek relief from reversal or penalty.
19 September 2025
Good Luck...
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