The Kerala High Court has set aside an assessment order that imposed an “impossible” 36% Goods and Services Tax (GST) due to a technical error in the GST portal. The Court held that such an inflated rate was not contemplated under the GST law and directed authorities to conduct a fresh assessment after verifying and rectifying the system glitch.
The bench of Justice Ziyad Rahman A.A. noted that the error occurred because the web portal had doubled the applicable tax rate, showing 18% each for Central GST (CGST) and State GST (SGST) instead of the total 18% (9% + 9%).
The case arose after a registered GST entity in Kannur was issued an intimation notice pointing out a mismatch between its GSTR-1 and GSTR-3B returns for the 2019–20 financial year. The company explained that while it had correctly declared and paid 18% GST, a technical issue in the GSTN system had incorrectly generated tax at 36%, leading to a mismatch.
Despite the clarification, the State Tax Officer proceeded to issue a show-cause notice and later finalized an assessment order under Section 73 of the CGST/SGST Act, upholding the inflated demand. The entity challenged the order before the High Court, citing repeated representations to the GST Network (GSTN) regarding the portal error.
The Court observed that the imposition of a 36% GST rate “is not possible under the scheme of the CGST Act.” The taxpayer had consistently highlighted the issue from the start, but the tax officer ignored these submissions. The GSTN admitted that the taxpayer had lodged a complaint about the portal issue, but it was closed for want of further documents.
The court concluded that the excessive tax demand was clearly due to a system malfunction, and such an error required correction before any valid assessment could be made.
The Court quashed the assessment order and directed the State Tax Officer to reassess the case after considering the portal-related discrepancy. The taxpayer to file a fresh complaint before the GSTN within one month. The GSTN to verify and rectify the error within one month of receiving the complaint. A new assessment order to be issued after hearing the taxpayer and taking into account GSTN’s findings.
Case Details
Case Title: Sunlight Boards Private Limited Versus State Tax Officer
Case No.: WP(C) NO. 16590 OF 2025
Date: 25/07/2025
Counsel For Petitioner: Adv Rajesh Nambiar
Counsel For Respondent: Rajesh. K.Raju
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