No GST ITC Denial for Supplier Errors: Supreme Court Rulings

GST is built on a chain of credit. A supplier collects tax from the buyer. The buyer claims that tax as Input Tax Credit. The government receives the revenue once but allows the buyer to offset it against her own tax liability. This prevents double taxation and keeps the system clean.

The chain depends entirely on return filing. The supplier reports outward supplies in GSTR-1. The buyer’s credit ledger, GSTR-2B, is auto-populated based on the supplier’s GSTR-1. If the supplier files correctly, the buyer’s ITC appears in GSTR-2B and she claims it in GSTR-3B.

Now consider what happens when the supplier makes a mistake. She reports the wrong GSTIN. She enters an incorrect invoice number. She mentions the buyer’s branch in a different city instead of the correct one. In all these situations, the buyer’s GSTR-2B does not reflect the correct ITC. The department then denies ITC to the buyer.

How ITC Works Under the CGST Act

Section 16 of the CGST Act, 2017 sets four basic conditions for claiming ITC. The buyer must hold a valid tax invoice. The goods or services must have been received. The supplier must have paid the tax to the government. And the buyer must have filed her own return. Section 16(2)(aa), inserted with effect from 1 January 2022 by the Finance Act, 2022, added a fifth condition: ITC is available only to the extent it appears in the buyer’s GSTR-2B. When a supplier’s GSTR-1 has errors, the buyer’s GSTR-2B suffers directly.

The Rectification Limits: Sections 37(3) and 39(9)

Section 37(3) governs corrections to GSTR-1 (outward supply statement). Section 39(9) governs corrections to GSTR-3B. Both permit rectification only up to 30 November of the financial year following the one in which the error occurred, or the date of filing the annual return, whichever is earlier.

Background and Bombay High Court

Aberdare Technologies Pvt. Ltd. is a Mumbai-based company. It filed its GST returns on time. However, in December 2023, the company discovered clerical errors in its already-filed GSTR-1 and GSTR-3B returns. Crucially, these errors caused no loss of revenue to the government. The underlying transactions were genuine and the tax had been paid correctly.

Aberdare approached the GST authorities with a request to rectify the returns. The authorities refused, citing the expired Section 39(9) deadline. Aberdare filed W.P. No. 7912 of 2024 before the Bombay High Court. A Division Bench of Justice K.R. Shriram and Justice Jitendra Jain decided the matter on 29 July 2024. The court relied on its earlier judgment in Star Engineers (I) Pvt. Ltd. v. Union of India (W.P. No. 15368 of 2023, decided 14 December 2023), which held that if there is no loss of revenue, corrections to GSTR-1 must be allowed even after the November deadline.

Supreme Court Order: 21 March 2025

CBIC challenged the Bombay HC order before the Supreme Court. A bench of the Chief Justice and Justice Sanjay Kumar dismissed the SLP on 21 March 2025. The court found no reason to interfere. It noted that no revenue loss arose from the errors. More importantly, it directed CBIC to re-examine the timelines fixed for correcting bona fide errors under Sections 37(3) and 39(9) and held that the right to correct genuine clerical or arithmetical mistakes flows from the right to do business and should not be denied without good justification.

The court also observed that certain High Court decisions, specifically Bar Code India Limited v. Union of India and Yokohama India Private Limited v. State of Telangana, prima facie do not lay down good law on this issue. This is a notable adverse observation against rulings that had previously supported the Revenue’s rigid stance.

Background and Bombay High Court

Brij Systems Ltd. is a Maharashtra-based company. Its supplier made errors in GSTR-1 filings for FY 2017-18. These errors caused mismatches that resulted in ITC being denied to Brij Systems. The company approached the GST portal to correct the GSTR-1. The portal rejected the request because the Section 37(3) rectification period had elapsed. Brij Systems filed W.P. No. 783/2022 before the Bombay High Court. The court decided the matter on 2 July 2024, ruling in favour of Brij Systems and holding that ITC could not be denied to the buyer on account of mistakes or errors or mismatches in the supplier’s returns.

Supreme Court Order: 24 March 2025

The Union of India and CBIC challenged the Bombay HC order before a three-judge bench of the Chief Justice, Justice Sanjay Kumar, and Justice K.V. Viswanathan. The court dismissed the SLP on 24 March 2025, referring to its own earlier dismissal of the Aberdare Technologies SLP (SLP (C) No. 7903/2025), already decided on 21 March 2025.

The court’s order recorded a significant observation from the proceedings: in all such cases, even the Revenue accepted that the underlying mistake was a clerical or arithmetical error. Yet the Revenue’s position was that correction is not possible after expiry of the period under Sections 37(3) and 39(9). The court found this stance unacceptable. The bench issued notice to CBIC to address the broader systemic issue and appointed Senior Advocate Mr. Arvind P. Datar as Amicus Curiae. The case was re-listed for the week commencing 28 April 2025.

The Brij Systems SC order does not just dismiss the Revenue’s SLP. It issues notice to CBIC and appoints an Amicus Curiae to address the broader systemic issue. The Supreme Court is not merely ruling on one case. It is signalling that the GST rectification framework itself needs fixing.

Specifically, CBIC has been directed to respond on whether the timelines under Sections 37(3) and 39(9) are adequate and whether a more liberal rectification regime should be introduced for genuine clerical or arithmetical errors where no revenue loss occurs. Until CBIC acts, courts have been consistently directing authorities to either open the portal within one week of the order or accept manual correction requests, with a hearing before any rejection.

This article is for informational and educational purposes only. It does not constitute legal or tax advice. All case citations and factual details are based on verified publicly available sources including the Supreme Court’s actual order in Brij Systems (Diary No. 6334/2025) and the Aberdare Technologies order (SLP (C) No. 7903/2025), verified as of June 2026. Readers should consult a qualified GST professional for guidance specific to their circumstances.