Why SC ruling on GST error corrections is a major relief for businesses
New Delhi, Mar 27, 2025
'This ruling is particularly crucial for small and medium enterprises, which may lack sophisticated accounting systems and are more prone to clerical mistakes'
The Supreme Court recently held that companies can rectify clerical or arithmetical errors in Goods and Services Tax (GST) filings and they should not be penalised for doing this.
This decision upheld businesses’ right to correct such mistakes without facing penalties or denial of Input Tax Credit (ITC), as long as there is no revenue loss.
“The court has noted that human errors and mistakes are normal, and errors are also made by the Revenue department. The court has stated that the right to correct mistakes in the nature of clerical or arithmetical error is a right that flows from the right to do business. The right to do business is protected by the Constitution of India. The Court has held that software limitation cannot be a good justification as software is meant to ease compliance and can be configured,” said Kamal Aggarwal, Senior Advisor, Singhania & Co.
Ankit Jain, Partner, Ved Jain and Associates, said, “Businesses are generally required to file at least two returns a month (GSTR-1 and GSTR-3B), and some businesses may even be required to file more depending on their operations. This makes the process of filing tax returns extremely cumbersome and prone to errors, especially when handling vast volumes of transactions.”
“One of the most significant challenges that businesses face is when there is a mismatch between data across any of these returns. The GST system automatically detects such discrepancies and calculates the tax liability accordingly. This results in notices being issued to taxpayers, demanding payment of the tax due, often including penalties. This automated system of error detection, while well-intentioned, often leads to additional complications for businesses that have made honest, inadvertent mistakes while filing. This is where the recent Supreme Court ruling comes as a major relief,” Jain said.
How will small and medium enterprises benefit?
“This ruling is particularly crucial for small and medium enterprises, which may lack sophisticated accounting systems and are more prone to clerical mistakes. While this judgment sets a broader precedent for a more business-friendly tax regime, it is unclear how the same will be executed as no mechanics have yet been announced,” said Kunal Savani, Partner, Cyril Amarchand Mangaldas.
“The GST system should evolve to incorporate provisions for rectifying errors, particularly minor clerical errors, without penalty, and provide businesses with a clear, simple process for doing so. This would not only reduce the burden on taxpayers but also foster a culture of compliance, where businesses are encouraged to be accurate without the fear of severe repercussions for small, genuine mistakes,” Jain said.
[The Business Standard]
