2024 (2) TMI 1175 - HC - GST

Rectification of DRC-3 - Entitlement to concessional rate of tax without ITC for new projects and unsold units of existing projects post 1st April 2019 - requirement to reverse ITC, in terms of the said Notification No. 3/2019, pertaining to unsold units as on 31st March 2019 as per Rule 42 of the CGST Rules - it is the case of Petitioner No. 1 that it would be immaterial as to for which period Petitioner No. 1 had reversed the ITC or made payment of GST for such ITC utilised on unsold units as on 31st March 2019 - HELD THAT - Petitioner No. 1 has made a bona fide mistake in Form DRC 03 dated 26th August 2022 and 1st September 2022. Petitioner No. 1 had inadvertently shown the year as Financial Year 2019-20 instead of Financial Year 2018-19. As correctly submitted by Petitioner No. 1, the fact, that the there was a bona fide mistake, was clear from the narration in the said Form DRC 03. Further, as rightly submitted by Petitioner No. 1, in Financial Year 2019-2020, Petitioner No. 1 was not entitled to avail of any ITC and had not availed of any ITC, and, consequently, there was no question of ITC for Financial Year 2019-20 being reversed by Petitioner No. 1. The Division Bench of this Court, in STAR ENGINEERS (I) PVT. LTD. VERSUS UNION OF INDIA, STATE OF MAHARASHTRA AND DEPUTY COMMISSIONER OF STATE TAX-GST 2023 (12) TMI 729 - BOMBAY HIGH COURT , has held that a bona fide inadvertent error in furnishing details in a GST return need to be recognised, and ought to be permitted to be corrected by the Department, when, in such cases, the Department is aware that there is no loss of revenue to the Government. This Court further held that such free play in the joints requires an eminent recognition and that the Department needs to avoid unwarranted litigation on such issues, and make the system more assessee friendly. Applying the ratio of the aforesaid judgment, in the present case also, since the error made by the Petitioner No. 1 is a bona fide error, the Department is required to be directed to permit Petitioner No. 1 to rectify the said error. In these circumstances, there are no doubt that this Petition is required to be allowed - petition allowed.

Summary

Issues involved:
The issues involved in this case include the applicability of a new GST scheme for real estate developers introduced through Notification No. 3/2019, the reversal of Input Tax Credit (ITC) for unsold units, the treatment of ITC for different financial years, and the rectification of errors in Form DRC 03.

Applicability of New GST Scheme:
The new GST scheme introduced for real estate developers under Notification No. 3/2019 provided different GST rates without ITC for affordable housing properties and residential properties outside the affordable segment. Developers were given the option to choose between old rates with ITC or new rates without ITC for under-construction projects. The petitioner, a real estate developer, had not availed the option to pay GST under the old regime and was entitled to the concessional rate of tax without ITC for new projects and unsold units of existing projects post 1st April 2019.

Reversal of ITC for Unsold Units:
Developers paying tax under the new regime were required to reverse ITC pertaining to unsold units as of 31st March 2019. The petitioner had reversed ITC through DRC 03 Forms, but there was a discrepancy in the financial year mentioned in some of the forms. The petitioner contended that the reversal was made for the Financial Year 2018-19, and it was a bona fide clerical error. The petitioner had requested the authorities to consider the payments made for the correct financial year.

Treatment of ITC for Different Financial Years:
The petitioner had inadvertently shown the financial year as 2019-20 in some DRC 03 Forms instead of 2018-19. The petitioner argued that it was not entitled to avail ITC for the Financial Year 2019-20 and had not done so. Despite the petitioner's submissions and requests to consider the payments for the correct financial year, the authorities issued demands for reversal of ITC and payment of dues.

Rectification of Errors in Form DRC 03:
The petitioner sought to rectify the clerical error in the mentioned financial year in the DRC 03 Forms. The authorities initially refused to allow the amendment, stating there was no facility to amend the forms on the GST portal. However, the court held that the error was bona fide and directed the respondents to permit the petitioner to amend the forms to reflect the correct financial year within a specified period.

Conclusion:
The court, applying the principles from a previous judgment, directed the respondents to allow the petitioner to rectify the error in the DRC 03 Forms. The court ordered the respondents to permit the petitioner to amend the forms to reflect the correct financial year and disposed of the petition, with no costs imposed on either party.