GST Update on Denial of Substantial Benefit for Technical Glitches


GST Update on Denial of Substantial Benefit for Technical Glitches

GST is not free from any technical glitches. There is a possibility of technical errors in GST network which can also affect the admissibility of Input Tax Credit. It is the most crucial area of any indirect tax regime. In fact, authorities hyped entry of GST and said that there would be a free flow of ITC; that the service tax and central Excise regime were lacking. On the other hand, the free movement of ITC seems to be a vision as there are many cases where the technical errors hinder the availment of ITC. Some of these instances are as follows:

  1. If the supplier does not upload any invoice and mistakenly files the GSTR-1. And if the buyer also forgets to show the invoice in missing invoices and files GSTR-2. Now, whether the supplier can upload this invoice in the GSTR-1 of next month? If not, whether the ITC on that invoice will lapse?
  2. Further, if the supplier has uploaded an invoice but did not file the return. Accordingly, it didn’t auto-populated in the buyer’s GSTR-2A and; if the buyer also fails to show it in missing invoices and if he files his GSTR-2. Afterward, as the date of filing GSTR-1 is prolonged, the supplier files his GSTR-1. Now as the buyer has already filed the GSTR-2, where will that invoice be shown? Whether it will auto-populate in the GSTR-2A of the buyer of next month or will it lapse? It is not clear.
  3. Also, if in a case where the supplier has made a “B2B sale” but mistakenly shows it in the head of “B2C sale”. In Such a case, the supplier has already paid the tax but since he has shown it in “B2C sale”, it did not auto-populate in GSTR-2A of the buyer. Now, following such options are possible in this case:
    – The buyer shows it in missing invoices & the supplier accepts it. However, once the supplier accepts it, the tax will again be payable by the supplier for the same. This will not be acceptable to the supplier as he had already paid the tax on a said invoice; the only mistake was that he had incorrectly shown it in the “B2C” column.
    – The buyer does not opt to show it is missing invoice & issues a credit note to the supplier. If the supplier accepts it, he shall have to issue a new invoice, and it will again form a liability on him which has already been paid.

Therefore, both options available in this case are not practicable. In such case, there also seems the possibility that the ITC will lapse. If not, how GSTN will make it workable, it is not clear.

There are some similar problems that the taxpayers are facing every day while filing the several returns on GSTN. There seems no solution to such issues as of now, and the taxpayers fear that the ITC included in such cases will lapse. But whether the substantial right in a form of ITC can lapse on account of a technical fault at the government site?


The honorable Supreme Court had held in the above case that the departmental authorities cannot deny the substantial benefit on account of procedural lapses. In this case, the assessee had not followed the proper procedure for claiming the exemption notification. Thus, the departmental authorities had denied the benefit of notification by invoking the proceedings against them; by claiming that they had not followed the proper procedure as prescribed in that notification. However, the Supreme Court had held that though there was a mistake on the part of the assessee by not following the proper procedure, it is merely a technical lapse for which the authorities cannot deny the substantial benefit.

In the view of above judgment of the Supreme Court, one thing is clear that if the assessee is legally qualified for some benefit, the authorities cannot deny the same on account of some mistakes, even if the same has occurred at the end of the assessee himself. Going by the above resemblance, in the given cases also, we can assume that if the taxpayer forgets to upload the invoice or; if he uploads the invoice, but not files the return due to some error at the site of GSTN; it will be termed as a technical lapse only. Thus, the analogy drawn by the Supreme Court in the case of Formica India will be uniformly applicable in the GST regime too, and the authorities cannot deny the substantial benefits of ITC because of these technical lapses.

Further, some civil writ petitions are filed against the working of GSTN & errors occurring there. Once the honorable Rajasthan High Court gave such decision in the civil writ petition no. 15239/2017 on 5/10/2017. The Rajasthan Tax Consultants Association filed this writ against the working of GSTN. In this case, the court granted the relief to the petitioner if he immediately reports the non-responding of the system to District information officer through e-mail. However, the benefit of this decision was given to the petitioner only, and it was not generally allowed. However, there are much more such petitions in the pipeline which are going to consume the time, money and energy of both; the government and assesses. Therefore, to avoid these unnecessary litigations, it is better for the government to issue some clarification at the earliest.

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