Difference in E Way Bill and GSTR 3B Tax Liability

Hey Sathya, here’s a breakdown of your issue:

Issue:

• E-Way Bill (EWB) was generated for goods transport in July 2021.

• Goods movement was canceled/trade didn’t happen.

• EWB cancellation not done within 24 hours, so no cancellation possible.

• GST department now raising a demand for differential tax liability (likely due to mismatch between EWB data and GSTR-3B returns).

Why is this happening?

• The GST system matches EWB data with GSTR-1 and GSTR-3B.

• If EWB shows outward supply but corresponding tax is not declared or paid in returns, the system flags a mismatch.

• Canceling EWB after 24 hours is not allowed, so the system thinks the supply happened.

• This leads to demand notices for tax and interest.

Possible Solutions:

1. Show Proof of No Supply:

   • Try to provide documentary evidence that goods were not moved or supply was canceled.

   • Purchase orders, cancellation communication, or any correspondence with the customer.

2. File Amendment in Returns:

   • If the supply was never completed, adjust your GSTR-1 and GSTR-3B returns for that tax period, showing no supply or reduced supply.

   • If already filed, you may need to file a revised return or rectification (if allowed).

3. Representation to GST Authorities:

   • Submit a detailed explanation with evidence to your jurisdictional officer.

   • Request waiver of interest/penalty due to genuine reasons.

4. Legal Remedy:

   • If demand is raised unjustly, you can file a GST appeal before the appropriate authority.

   • Consult a GST expert or tax lawyer for representation.

Preventive Tips:

• Always cancel EWB within 24 hours if supply is canceled.

• Keep documentary evidence of cancellations.

• Regularly reconcile EWB data with returns.

An e-way bill alone does not prove a supply. Build the defence on evidence that the goods never moved:

• No movement: GSTR-1 shows no invoice; the stock register shows the goods still in stock; no payment was received; there is no transporter bill or LR; FASTag/RFID toll data on the e-way bill portal shows no trip.

• Buyer's confirmation: get a written confirmation from the buyer that the goods were not received. If the buyer had the e-way bill in their login, its non-acceptance helps.

• Note: a recipient can reject an e-way bill within 72 hours (Rule 138(12)). Train staff to cancel within 24 hours (Rule 138(9)) to avoid this situation.

• Law: tax is payable on "supply" (Sec 9). Courts have held that e-way bill data is only a ground for inquiry, and demand needs corroboration.

• Procedure:

– July 2021 relates to FY 2021-22. Normal-period limitation (Sec 73) for that year has run.

– For FY 2024-25 onwards, Sec 74A applies.

– Check whether the SCN was issued in time and carries a DIN.

– Reply to DRC-01A/SCN with the documents above, and seek a personal hearing (Sec 75(4)).