Gauhati HC sets aside S.73 Order – upholds Right to Correct GSTR 1 Errors

27Mar 2026 by admin

MOHAN & CHANDRASEKHAR,

Chartered Accountants 

Hosur • Bengaluru • Chennai

Gauhati HC Sets Aside Section 73 Order — Upholds Right to Correct

GSTR-1 Errors & Affirms Retrospective Applicability of Section 16(5)

M/s ITI Ltd v. Union of India | WP(C)/150/2024 | Gauhati HC (Kohima Bench) | 20.03.2026

Background: The Assistant Commissioner, CGST, Dimapur passed an order under Section 73 for FY 2018–19 on two grounds: (a) mismatch between GSTR-1 and GSTR-3B, where four invoices were erroneously reported at 18% in GSTR-1 instead of 12% (the actual rate), along with a wrongly reflected Credit Note; and (b) denial of ITC under Section 16(4) since GSTR-3B for March 2019 was filed on 13.03.2021, beyond the due date of 20.10.2019. The correct figures were consistently reflected in GSTR-3B and GSTR-9.

On GSTR-1 vs GSTR-3B Mismatch: The Revenue invoked the Explanation to Section 75(12) to treat the higher GSTR-1 liability as “self-assessed tax” and recovered the differential with interest, without issuing any DRC-01B intimation under Rule 88C or granting an opportunity of hearing. The Court, relying on the Supreme Court’s order in CBITC v. Aberdare Technologies [2025 (4) TMI 101] and the Madras HC ruling in Deepa Traders [2025 (4) TMI 1009], held that (i) Rule 88C compliance is mandatory before invoking Section 75(12); (ii) bona fide clerical errors in GSTR-1 must be permitted to be corrected; and (iii) tax can be recovered only at the rate actually applicable under law — if the statutory rate is 12%, recovery at 18% based on erroneous reporting is impermissible.

On ITC Denial under Section 16(4): The Court held that Section 16(5), inserted by the Finance (No. 2) Act, 2024 with retrospective effect from 01.07.2017 (Notification No. 17/2024-CT dated 27.09.2024), allows ITC for FYs 2017–18 to 2020–21 in any return filed up to 30.11.2021. Since the petitioner filed GSTR-3B on 13.03.2021, well within this extended window, the ITC denial was unsustainable.

Directions: The impugned order was set aside. The petitioner was granted 30 days to explain the mismatch with supporting materials. ITC entitlement for FY 2018–19 was upheld under Section 16(5). The pendency period (02.08.2024 to 20.03.2026) was directed to be excluded from limitation.

Key Takeaways

  1. Rule 88C procedure (DRC-01B intimation + opportunity to explain) is a mandatory prerequisite before invoking the Explanation to Section 75(12). Orders passed without this process are liable to be quashed.
  2. GSTR-1 is a statement of outward supplies, not a self-assessment return. Reporting errors therein cannot mechanically create “admitted liability” without verification against GSTR-3B, GSTR-9, and actual invoices.
  3. The right to correct bona fide clerical/arithmetical errors in GSTR-1 is now well-settled, following the SC’s affirmation in Aberdare Technologies.
  4. Section 16(5) conclusively resolves ITC limitation disputes for FYs 2017–18 to 2020–21 where returns were filed by 30.11.2021. Pending demands/appeals should be reviewed accordingly.

Mohan & Chandrasekhar, Chartered Accountants | 26.03.2026