Union of India vs. Bharti Airtel Ltd. – Supreme Court on Rectification of GSTR-3B and ITC Claim Beyond Prescribed Period (2021)

Union of India vs. Bharti Airtel Ltd. – Supreme Court on Rectification of GSTR-3B and ITC Claim Beyond Prescribed Period (2021)

📌 Background

Union of India vs. Bharti Airtel Ltd.: The introduction of GST in July 2017 marked a massive transition in India’s indirect tax system. In the initial months, the GST return-filing mechanism was not fully operational, and businesses faced practical challenges in reconciling Input Tax Credit (ITC).

In this backdrop, Bharti Airtel Ltd. paid an excess of ₹923 crore in cash towards GST liability instead of using ITC available in its books, due to the non-availability of automated reconciliation (GSTR-2A not operational at the time).

Bharti Airtel approached the Delhi High Court, which allowed it to revise GSTR-3B returns and claim refund of the excess tax. However, the Union of India challenged this before the Supreme Court, leading to a landmark ruling on self-assessment, ITC entitlement, and rectification of GSTR-3B.

📂 Facts of the Case – Union of India vs. Bharti Airtel Ltd.

• Assessee: Bharti Airtel Ltd. (telecom operator)
• Year: 2017 (initial phase of GST implementation)
• Issue: Paid ₹923 crore in cash instead of utilizing ITC…

❓ Point of Dispute

1. Can a supplier revise Form GSTR-3B beyond prescribed timelines to avail ITC?
2. Does non-availability of automated reconciliation justify rectification of past returns?
3. Validity of CBIC Circular No. 26/26/2017-GST dated 29.12.2017, which restricts rectification of GSTR-3B.

📑 Submissions by the Revenue

• Self-assessment duty on assessee:
  • Section 16 obliges taxpayers to self-assess ITC based on books, invoices, and agreements, not on portal auto-population.
  • Assessee cannot shift responsibility onto system glitches.
• GSTR-3B = valid return:
  • Amended Rule 61(5) makes GSTR-3B a prescribed return under Section 39.
• No legal right to swap cash & ITC:
  • If assessee chooses to pay liability in cash despite having ITC, it is its own option.
  • No provision allows reversal of cash payment into credit ledger.
• Section 39(9) is clear:
  • Errors in GSTR-3B can be corrected only in subsequent returns, not retrospectively.
• Circular 26/2017 valid:
  • Circular correctly clarifies statutory position that rectification can only be made in subsequent tax periods.

📑 Submissions by the Assessee

• Systemic limitation:
  • Due to non-operational GSTR-2A, assessee could not verify ITC.
  • As a result, huge excess cash was deposited.
• Double taxation:
  • Both cash and ITC stood with the Government, creating unjust enrichment.
• Equitable relief sought:
  • Requested permission to revise GSTR-3B, so that excess cash paid could be refunded by adjusting with ITC.
• Circular unreasonable:
  • Circular 26/2017 restricted rectification and caused undue hardship; contrary to Section 39(9).

⚖️ Legal Principles & Supreme Court’s Findings

1. Self-Assessment Responsibility
   • GST is based on self-assessment; assessee must rely on its own records, invoices, and books.
   • The portal is only a facilitator; it is not the primary source for computing ITC.
2. Rectification of Returns
   • Section 39(9) allows correction of errors/omissions only in the return for the month/quarter in which such omission is noticed.
   • This ensures certainty and prevents retrospective changes.
3. Circular Validity
   • Circular 26/2017 is consistent with Section 39(9); hence legally valid.
   • It reiterates that corrections cannot be made in past GSTR-3B returns.
4. Refund of Excess Tax Paid
   • No provision permits reversal of cash ledger payments into credit ledger.
   • Excess payment in cash is a consequence of assessee’s own self-assessment.

Held:

• Delhi High Court order set aside.
• Assessee cannot revise GSTR-3B for earlier periods.
• Corrections can be made only in subsequent returns under Section 39(9).
• Refund of excess cash paid not allowed.

✅ Practical Impact on Businesses

• No retrospective revision: Businesses cannot reopen past GSTR-3B returns once filed.
• Self-reliance emphasized: Taxpayers must maintain robust internal records and not rely solely on system auto-population.
• Double taxation risk: If excess cash is paid, refund cannot be claimed merely because ITC balance remains unutilized.
• Compliance strategy: Businesses must strengthen reconciliation practices to avoid such errors.

🔑 Key Takeaways

1. GSTR-3B rectification not allowed retrospectively – corrections only in subsequent returns.
2. ITC claim must be based on books and invoices, not portal data.
3. Excess cash paid is not refundable by swapping with ITC.
4. Circular 26/2017 is valid and binding.
5. Reinforces principle of finality of self-assessment under GST.

📢 Why This Case Matters

The Bharti Airtel ruling is a landmark judgment on rectification of GST returns. It clarifies that the GST system is based on self-assessment and taxpayers cannot blame system glitches for excess payments.

This case sends a strong message: businesses must adopt stringent reconciliation practices and rely on their own records rather than portal data. It also emphasizes finality of returns, ensuring stability in the GST system.

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