Ques: Hey act tax consultant AI one of my claint doing Bulding construction work he filed GSTR1 AND 3B FOR THE f.y-2024-2025 NIL RETURN, AFTER VERIFY THE BANK STATEMENT 22 lakhs income received till not filed income tax return , pls advise how do filed income tax return and how rectified GSTr

Ans:

Based on the facts stated, your client (a building construction contractor) has filed NIL GSTR-1 and NIL GSTR-3B for FY 2024-25, but bank statements show receipts of ₹22 lakhs, indicating undisclosed turnover. The issue needs to be handled separately but consistently under GST and Income-tax.

Income-tax return (ITR):
The client must disclose the full ₹22 lakhs as business receipts in the Income-tax Return for FY 2024-25, irrespective of the GST position. Expenses incurred for construction activity can be claimed if supported by evidence, and the correct net profit should be offered to tax. Filing NIL or suppressing income in ITR is not advisable and may attract penalty and prosecution. If the due date has expired, the return should be filed as a belated return (or updated return, if applicable), ensuring income matches bank credits.

GST rectification:
Since the client has already filed NIL GSTR-1 and GSTR-3B, and if the time limit to amend returns has not expired, the turnover should be reported by filing amendments in GSTR-1 (through amendment tables) and paying the corresponding GST liability through GSTR-3B of the permissible subsequent period. If the time limit for amendment has expired, the correct course is to pay GST along with interest through DRC-03, and then report correct figures in GSTR-9 (Annual Return) and reconcile differences in GSTR-9C (if applicable) with proper explanation that earlier NIL returns were filed due to oversight.

Important caution:
Mismatch between bank receipts, GST returns, and ITR is a high-risk area and commonly triggers notices. Therefore, GST turnover disclosed (either through amended returns or DRC-03 + GSTR-9) must align with income disclosed in ITR.

Practical advice:
First finalise correct turnover and GST liability
Pay GST + interest voluntarily to reduce penalty exposure
File correct ITR reflecting ₹22 lakhs receipts
Maintain reconciliation between bank, GST and books

Ques: Kindly guide in which situation REVERSAL OF GST ON CREDIT NOTE not required with supporting Notification / Circulars after Circular No. 112/31/2019-GST dated 03.10.2019: Seeks to withdraw Circular No. 105/24/2019-GST dated 28.06.2019.

Ans:

After issuance of Circular No. 112/31/2019-GST dated 03.10.2019, which withdraws Circular No. 105/24/2019-GST dated 28.06.2019, the settled position is that reversal of ITC by the recipient is not required merely because a credit note is issued, unless the supplier reduces his output tax liability. Where a credit note is issued purely for commercial or financial reasons—such as post-supply discounts, incentives, price adjustments or secondary discounts—which do not satisfy the conditions of section 15(3) and where the supplier does not adjust GST or report the credit note in GSTR-1, the original tax paid remains unchanged and therefore no ITC reversal is required by the recipient. ITC reversal becomes mandatory only when a credit note is issued under section 34 of the CGST Act with reduction of tax liability, since such reduction directly impacts the tax originally availed by the recipient. Thus, in line with sections 15(3) and 34 of the CGST Act and the clarification given in Circular No. 112/31/2019-GST, ITC reversal is linked strictly to reduction of tax component and not to reduction of value alone.

Ques: There is a development agreement and power of attorney with the landowner, but we have developing the plot and after NA (Non Agriculture) we are going to sell it before the completion received from RERA. The document created will be an agreement to sell, so GST will be charged in the full amount, i.e. agreement to sale or on the development charges.

Ans:

In the given facts, where there is a development agreement and power of attorney with the landowner, and you are developing plots, obtaining NA (Non-Agricultural) permission and selling the plots before completion / before RERA completion certificate, the GST treatment depends on the nature of what is being transferred to the buyer. Sale of developed plots (land) per se is neither a supply of goods nor a supply of services, being covered under Schedule III of the CGST Act, and hence no GST is payable on the value of land or on the agreement to sell for land. However, any amount charged towards development activities such as levelling, laying of roads, drainage, water, electricity or other amenities constitutes a supply of service, and GST is chargeable only on the development charges component, provided such charges are separately identifiable or recoverable. Merely because the sale happens before RERA completion does not convert sale of plots into construction service, unlike sale of under-construction flats or buildings. Therefore, GST is not payable on the full agreement value, but only on the development charges, either explicitly mentioned or reasonably attributable, while the land value remains outside GST. Proper bifurcation in the agreement to sell and accounting records is critical to sustain this position and avoid future disputes.