India’s Supreme Court issued a decision on 28 October 2021 that prevents the taxpayer from requesting a large refund of goods and services tax (GST). The Supreme Court set aside a previous decision of the Delhi High Court that allowed the taxpayer to seek the refund. The court also held that the taxpayer cannot be granted permission to unilaterally amend its manually submitted GST return because that would have a cascading effect on recipients and suppliers associated with the relevant transactions and create uncertainty for tax administration.
Bharti Airtel Ltd., India’s largest wireless telecommunications company, and others (Taxpayers) claimed that they had paid excess GST of INR 9.23 billion during the period July-September 2017 due to the lack of a purchase-related tax return form (GSTR-2A); the form had not yet been released by the authorities since GST was introduced in India as from 1 January 2017. Because there was no online automated method to deal with GST input and output credits, the taxpayer paid its GST liability in cash, arguing that it was unable to ascertain the available input tax credit and, therefore, submitted details of the input credit based on estimates. The taxpayer then asked to amend its GST returns to obtain a refund of the excess GST paid.
In 2020, the divisional bench of the Delhi High court granted Bharti Airtel permission to amend its GSTR-3B returns to claim a refund of INR 9.23 billion for the period July-September 2017. The Indian tax authorities appealed the decision to the Supreme Court.
In ruling against the taxpayer, the Supreme Court noted that the taxpayer, with full knowledge and information derived from its books of accounts and records, carried out a self-assessment and assessed its output tax liability for the relevant period and elected to discharge that liability by paying cash. That being the case, the taxpayer cannot now seek to change its position. The court also noted that the taxpayer is not precluded from offsetting its excess input tax against any future output tax.
The Supreme Court decision will have a significant impact on any litigation where a taxpayer’s basic defense relates to incorrect filings/compliance issues due to glitches in the Indian GST portal. Based on the court’s rationale, as long as filing/compliance would have been possible with suitable internal processes, documentation, etc. that are fully within the taxpayer’s control, courts are not likely to adopt a lenient approach. However, the situation may be different if a taxpayer is able to substantiate that the noncompliance resulted from problems with the portal and the taxpayer took all steps that were practically possible. This decision has placed the burden on the taxpayer to ensure that its GST filings are accurate and timely.
Gunjan Prabhakaran
gunjanprabhakaran@bdo.in
Dinesh Kumar B
dineshkumar@bdo.in