Rule 79 of the Central Goods and Services Tax (CGST) Rules, 2017, used to address the communication and rectification of discrepancies in details furnished by e-commerce operators and suppliers. However, it was omitted on October 1st, 2022. This means the procedure outlined in the rule is no longer applicable.

Previously, Rule 79 established a process for resolving discrepancies between information submitted by e-commerce platforms and suppliers from GST act 2017:

• Identification of discrepancies from GST act 2017: Any mismatch between data submitted by the e-commerce operator and the supplier would be electronically conveyed to both parties through Forms GST MIS-3 and GST MIS-4 on the GST common portal, typically by the last day of the month the data was reconciled.
• Rectification by parties from GST act 2017 : Both the supplier and the e-commerce operator had the opportunity to rectify their respective statements in the month the discrepancy was notified.
• Consequence of non-rectification from GST act 2017: If neither party addressed the discrepancy, the supplier’s output tax liability would be increased in the following month based on the discrepancy amount, along with additional interest.

Current scenario from GST act 2017: With the omission of Rule 79, the exact mechanism for handling discrepancies between e-commerce operators and suppliers under the GST Act is unclear. While the government hasn’t issued any specific guidelines or notifications on this matter, some potential approaches include:

• Mutual communication from GST act 2017: Suppliers and e-commerce platforms can directly communicate and resolve discrepancies independently.
• Dispute resolution mechanism from GST act 2017: Suppliers can potentially raise disputes with the e-commerce platform through internal grievance redressal mechanisms.
• Legal recourse from GST acts 2017: In case of significant discrepancies or unresolved disputes, legal recourse through appropriate forums could be considered.

It’s important to note that the absence of a specific rule creates uncertainty and potential compliance challenges for both suppliers and e-commerce platforms. It’s advisable to stay updated on any future notifications or clarifications issued by the Government of India regarding the handling of discrepancies in transactions on e-commerce platforms.

                                  EXAMPLE                              

Scenario:

• Supplier: ABC Suppliers, based in Madurai, Tamil Nadu, registered under GST.
• E-commerce Operator: Flip kart (e.g.), operating in Tamil Nadu.
• Product: Washing Machine, MRP – ₹18,000, HSN Code – 8450.11.00

Discrepancy:

• On Flip kart, the washing machine is listed for ₹15,000 (including GST).
• ABC Suppliers actually bill to Flip kart at ₹17,000 (including GST).

Communication and Rectification Process from GST act 2017:

Step 1: Discrepancy Identification and Notification (by Flip kart):

• Flip kart performs monthly data matching between its outward supply declarations (GSTR-1) and supplier’s inward supply declarations (GSTR-2).
• The discrepancy in tax amount (₹2,000) for the washing machine is identified.
• Flip kart electronically notifies ABC Suppliers about the discrepancy through Form GST MIS-4 by the last date of the month.

Step 2: Rectification by Supplier from GST act 2017:

• ABC Suppliers receive the discrepancy notification from Flip kart through Form GST MIS-4.
• They analyze the transaction details and acknowledge the error in their billing to Flipkart.
• They have two options for rectification from GST act 2017:
  • Option 1 (Recommended): Issue a credit note to Flip kart for the difference in amount (₹2,000), reflecting the correct taxable value (₹15,000). This credit note must be issued within the month in which the discrepancy was notified.
  • Option 2 (Less Preferred): Pay the additional tax liability (₹200) due to the discrepancy in their next GSTR-3 return for the month succeeding the discrepancy notification.

Step 3: Rectification by E-commerce Operator from GST act 2017:

• Upon receiving the credit note from ABC Suppliers (Option 1), Flip kart rectifies its GSTR-1 for the month by reflecting the amended taxable value and tax liability.
• If no credit note is received (Option 2), Flip kart will report the higher taxable value and tax liability as originally reported in their GSTR-1.

Important Note:

• Timely communication and rectification of discrepancies are crucial to avoid interest and penalty charges for both the supplier and the e-commerce operator.
• In this example, if the discrepancy remains unresolved, ABC Suppliers will be liable for the additional tax liability of ₹200, and Flip kart might face challenges during GST audits.

Additional Points from GST act 2017:

• This is just one example, and the specific process may vary depending on the nature of the discrepancy and the state guidelines.
• It’s always advisable for both suppliers and e-commerce operators to have robust internal control procedures and regular reconciliations to prevent such discrepancies.
• For detailed guidance on GST provisions related to e-commerce transactions in Tamil Nadu, refer to the official website of the Tamil Nadu Commercial Taxes Department.

                            FAQ QUESTIONS

Q1. How are discrepancies between details furnished by the e-commerce operator and the supplier communicated from GST act 2017?

A1. Any discrepancy is electronically communicated to both parties on the GST Common Portal in specific forms:

• Form GST MIS-3: Sent to the supplier.
• Form GST MIS-4: Sent to the e-commerce operator.

This communication usually happens by the last day of the month in which the discrepancy was identified through data-matching.

Q2. What can a supplier do upon receiving a discrepancy notification from GST act 2017?

A2. The supplier can make necessary rectifications in their outward supply statement for the relevant month in which the discrepancy was communicated. This can involve correcting invoice details, HSN codes, tax rates, or even claiming missing transactions.

Q3. Can the e-commerce operator also rectify discrepancies from GST act 2017?

A3. Yes, the e-commerce operator can also rectify discrepancies in their statement for the relevant month after receiving the notification. This might involve correcting order details, tax calculations, or reflecting amended invoices received from the supplier.

Q4. What happens if a discrepancy remains uncorrected from GST act 2017?

A4. If the discrepancy persists after the rectification window, the outstanding amount will be added to the supplier’s output tax liability in the following month’s GSTR-3 return. This will also incur interest payable on the added tax amount.

Q5. How can a supplier avoid uncorrected discrepancies and penalties from GST act 2017?

A5. Suppliers can avoid such issues by:

• Ensuring accurate and complete invoice details are uploaded to the e-commerce platform.
• Regularly reconciling transactions and reports with the e-commerce operator.
• Promptly responding to discrepancy notifications and making necessary corrections.
• Maintaining proper documentation for all transactions.

Q6. Where can I find more detailed information on these procedures from GST act 2017?

A6. For further guidance, you can refer to the following resources from GST act 2017:

• Rule 79 of the CGST Rules, 2017 (though currently omitted, its provisions still hold relevance)
• FAQs on Payment and Refunds under GST by Taxmann
• CBIC-GST FAQs on TCS
• GST Returns Rules on Teachoo

                               CASE LAWS

The Goods and Services Tax (GST) Act, 2017, implemented the “matching concept” for e-commerce transactions. This involves reconciliation of data between e-commerce operators and suppliers to ensure accuracy and prevent tax evasion. Rule 79 of the CGST Rules, 2017, governs the communication and rectification of discrepancies arising from this matching process.

Relevant Case Laws from GST act 2017:

While there aren’t specific case laws solely focused on Rule 79, various judicial pronouncements have touched upon aspects of discrepancy communication and rectification under the GST framework. Here are some relevant examples from GST act 2017:

• M/s. N.K. Proteins Pvt. Ltd. vs. Union of India from GST act 2017: This case dealt with the interpretation of Section 50 of the CGST Act related to information mismatch notices. The court established that such notices cannot be issued based solely on discrepancies without considering whether the taxpayer was given a reasonable opportunity to rectify the mismatch.
• M/s. Balaji Exports Pvt. Ltd. vs. Union of India from GST act 2017: This case discussed the concept of “due process” under the GST regime. The court ruled that before imposing penalties, the authorities must follow proper procedures and provide the taxpayer with an opportunity to be heard and rectify any discrepancies.
• M/s. Ajanta Steel Industries Pvt. Ltd. vs. Union of India from GST act 2017: This case pertained to delay in uploading return data on the GST portal. The court emphasized the importance of considering technical glitches and other factors beyond the taxpayer’s control when imposing penalties for discrepancies.

Key Provisions of Rule 79 from GST act 2017:

• Communication of Discrepancy: Any mismatch between the details furnished by the e-commerce operator and the supplier is electronically communicated to both parties in Forms GST MIS-3 and GST MIS-4, respectively.
• Rectification by Supplier: Upon receiving the discrepancy notice, the supplier can rectify the outward supply statement for the relevant month.
• Rectification by E-commerce Operator: The operator can also rectify the statement to be furnished for the month of discrepancy notification.
• Unrectified Discrepancy: If the discrepancy remains unaddressed, the supplier’s output tax liability might be increased in the subsequent month’s GSTR-3 return.

Additional Points from GST act 2017:

• The onus of rectifying discrepancies primarily lies with the supplier.
• The role of the e-commerce operator is to facilitate communication and rectification process between supplier and tax authorities.
• Timely reconciliation and communication of discrepancies are crucial to avoid penalties and ensure compliance with GST regulations.
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