Author: Ashwarya Sharma, Advocate, Co-Founder & Legal Head, RB LawCorp
Published on: 18/07/2026
Introduction: Can Technology Override the Statute?
The GST ecosystem is on the verge of one of its most significant procedural transformations. With the proposed hard-locking of GSTR-3B, taxpayers may soon lose the ability to manually edit Input Tax Credit (ITC) figures while filing their monthly returns. Instead, ITC availability would effectively be driven through a technology-led chain – GSTR-1 and GSTR-1A filed by suppliers, the Invoice Management System (IMS), and ultimately GSTR-2B.
At first glance, the proposal appears entirely logical. A taxpayer should ordinarily claim only that input tax credit which has been reported by the supplier and reflected in the system. Such a mechanism promises cleaner reconciliations, reduced litigation, and greater protection against fraudulent ITC claims.
Yet, what appears administratively efficient is not necessarily legally sustainable.
The practical realities of business rarely fit into a perfectly synchronised technological workflow. Suppliers delay filing returns, invoices are amended, credit notes are issued months later, goods remain in transit across tax periods, commercial disputes temporarily suspend credits, and statutory provisions themselves contemplate reversals and subsequent reclaims across multiple months.
More fundamentally, the CGST Act presently recognises ITC as an exercise of statutory self-assessment. The proposed hard-lock seeks to replace that legislative framework with a software-driven mechanism without any corresponding amendment to either the Act or the Rules.
This article examines whether the proposed hard-locking of GSTR-3B has adequate statutory support and whether technology can legitimately restrict rights that Parliament has expressly conferred through legislation.
The Statutory Framework: ITC Is Built on Self-Assessment
The architecture governing Input Tax Credit under the CGST Act is carefully structured across multiple provisions rather than being confined to a single section.
Section 16 constitutes the foundation of the entire credit regime by prescribing the conditions for availing ITC. Sections 17, 18, 19 and 20 supplement this framework by respectively dealing with blocked credits, special circumstances, job work credits and Input Service Distributor credits.
The procedural machinery operates through Chapter IX of the Act.
Section 37 requires suppliers to furnish outward supply details.
Section 38 provides for communication of inward supply details to recipients.
Section 39 governs the filing of GSTR-3B.
Most importantly, Section 41 expressly provides that every registered person shall be entitled to avail eligible input tax credit as self-assessed in his return, subject only to prescribed conditions and restrictions.
This statutory language is significant.
The Act does not state that ITC is to be determined by the GST portal.
Nor does it provide that GSTR-2B is the exclusive source from which credit must flow.
Instead, Parliament consciously adopted a system of statutory self-assessment.
That legislative intent becomes even clearer when Section 41 is read together with Section 59, which mandates self-assessment for every registered person. Further, Section 2(11) expressly includes self-assessment within the statutory definition of “assessment.”
Accordingly, both tax liability and input tax credit reflected in GSTR-3B are products of statutory self-assessment—not software-generated assessments.
Self-Assessment Is More Than Procedure — It Creates Legal Rights
Indian jurisprudence has consistently recognised that an assessment gives rise to vested legal rights.
In CED v. M.A. Merchant, the Supreme Court held that once an assessment is completed, the resulting rights cannot be disturbed except through legislative authority expressly providing otherwise.
This principle was reaffirmed by the Constitution Bench in Commissioner of Income Tax v. Vatika Township Pvt. Ltd., where the Court reiterated that accrued rights flowing from assessment cannot be retrospectively curtailed unless the legislature clearly authorises such interference.
The GST framework incorporates self-assessment within the statutory concept of assessment itself.
Consequently, the legal consequences that attach to an assessment equally apply to self-assessment under Sections 41 and 59.
The Supreme Court’s decision in Union of India v. Bharti Airtel Ltd. further strengthens this position.
The Court held that GST is fundamentally a books-based system of self-assessment, and that the common portal merely serves as a technological facilitator.
The portal assists the taxpayer.
It does not replace the taxpayer’s statutory obligation—or authority—to determine the correct tax position based upon the books of account.
If portal-generated figures are treated as final irrespective of the taxpayer’s books, the statutory scheme itself undergoes a fundamental transformation without any legislative amendment.
Where Is the Rule Making GSTR-2B the Sole Source of ITC?
Perhaps the most significant legal difficulty with the proposed hard-lock is that no provision presently exists under the CGST Rules mandating that ITC can be claimed only to the extent reflected in the GSTR-2B of that particular month.
This omission is neither accidental nor insignificant.
The design of GSTR-3B itself demonstrates that Parliament never intended month-wise one-to-one matching between GSTR-2B and admissible ITC.
Table 4 of GSTR-3B specifically provides for:
- temporary reversals,
- subsequent reclaims,
- cross-period adjustments,
- and reporting of ITC reclaimed after earlier reversals.
These reporting fields recognise an undeniable commercial reality—that ITC frequently moves across tax periods.
If the statutory return itself contemplates credits travelling between months, it becomes difficult to argue that a taxpayer can never claim anything beyond the GSTR-2B generated for that specific month.
Commercial Reality Rarely Fits a Single Tax Period
Business transactions seldom conclude neatly within one return cycle.
Consider perhaps the most common illustration.
A supplier dispatches goods on the final day of a month and reports the invoice in GSTR-1.
The recipient, however, physically receives the goods only in the following month.
Section 16(2)(b) permits ITC only upon receipt of goods.
The supplier’s invoice therefore appears in Month One.
The legal entitlement to credit arises only in Month Two.
Such timing differences are routine rather than exceptional.
The present GSTR-3B architecture accommodates these situations through temporary reversals and later reclaims.
A system that permanently hard-locks ITC to a single month’s GSTR-2B simply lacks the flexibility to accommodate these legitimate statutory scenarios.
Several Everyday Business Situations Become Legally Problematic
Goods in transit represent only one among numerous routine situations recognised by the existing statutory framework.
Credit reversed under the 180-day payment condition may later be reclaimed upon payment to the supplier.
Credit reversed under Rule 37A may subsequently become available once the supplier files the requisite returns.
Commercial disputes often require temporary reversals before eventual settlement.
Credit notes issued months after the original transaction also generate legitimate cross-period adjustments.
Every one of these situations is expressly contemplated under the current GST architecture.
Yet a portal-driven hard-lock tied rigidly to monthly GSTR-2B data has no apparent mechanism to accommodate such adjustments without overriding the statutory scheme itself.
Can IMS Become Mandatory Without Legislative Support?
The Invoice Management System (IMS) presently remains an optional technological functionality.
GSTN itself describes IMS primarily as a reconciliation tool intended to minimise mismatches between GSTR-3B and GSTR-2B.
That objective is undoubtedly desirable.
However, transforming an optional reconciliation mechanism into a mandatory statutory ceiling upon ITC requires legislative authority.
As matters presently stand, neither the CGST Act nor the CGST Rules establish IMS as a legally binding determinant of admissible credit.
Administrative advisories, however useful, cannot substitute delegated legislation.
Without appropriate statutory amendments, IMS cannot quietly evolve from a technological convenience into the legal foundation governing ITC entitlement.
Why This Debate Extends Beyond Technology
The issue ultimately extends far beyond return filing mechanics.
It concerns the relationship between technology and law.
Digital systems undoubtedly enhance compliance.
Automation reduces errors.
System validations improve efficiency.
None of these propositions is controversial.
The real question is whether software architecture can effectively alter statutory rights in the absence of legislative amendment.
The GST Act presently places self-assessment at the heart of the ITC framework.
If portal-generated data becomes legally conclusive without amendments to the Act or Rules, the character of GST assessment itself undergoes a fundamental shift—from statutory self-assessment to software-driven assessment.
That transformation cannot occur merely through technological configuration.
Conclusion
The proposed hard-locking of GSTR-3B undoubtedly pursues legitimate policy objectives.
Reducing fraudulent claims, improving reconciliation, and promoting compliance are goals worthy of support.
But legislative policy must precede technological implementation.
The present statutory framework continues to recognise ITC as a matter of self-assessment under Sections 41 and 59 of the CGST Act.
The existing return architecture consciously accommodates commercial realities through reversals, reclaims, and adjustments spanning multiple tax periods.
A portal configuration cannot eliminate what Parliament continues to permit.
If the Government intends to make GSTR-2B the exclusive source of Input Tax Credit and convert GSTR-3B into a completely system-generated return, that objective must first be supported by appropriate amendments to the CGST Act, the CGST Rules, and the legal framework governing the Invoice Management System.
Until such legislative changes are enacted, hard-locking GSTR-3B risks achieving something far more significant than technological reform.
It risks replacing statutory self-assessment with software-driven assessment.
In a legal system governed by parliamentary legislation and constitutional principles, technology should remain an instrument for implementing the law—not a substitute for making it.
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(The author is a practicing advocate, Co-Founder and Legal Head of RB LawCorp.
He specializes in GST law. Suggestions or queries can be directed to
ashsharma@rblawcorp.in. The views expressed in this article are strictly
personal.)
