In a recent landmark judgment, the Kerala High Court has sent a strong message regarding the fairness and legality of denying Input Tax Credit (ITC) to taxpayers solely on the basis of discrepancies in GSTR-2A. The case, titled “Diya Agencies vs. State Tax Officer,“ has far-reaching implications for the taxation landscape in India, emphasizing the importance of a just and evidence-based approach in evaluating ITC claims.
The Dispute:
The crux of the matter in this case was the denial of ITC totaling an impressive Rs. 44,51,943.08 for both CGST and SGST to the petitioner, Diya Agencies. They vehemently contested the denial, arguing that ITC should not be solely reliant on the figures presented in GSTR-2A, as these figures were beyond the control of taxpayers. Diya Agencies made a compelling case that assessing authorities should independently assess ITC claims, irrespective of GSTR-2A data.
Legal Precedents:
To their argument, Diya Agencies referred to a judgment by the High Court of Calcutta in the case of “Suncraft Energy Private Limited and Another vs. The Assistant Commissioner, State Tax, Ballygunge Charge, and others,” delivered on 2nd August 2023. Additionally, they cited a Supreme Court decision reported in 2023 (3) TMI 533 SC, involving “The State of Karnataka vs. M/s. Ecom Gill Coffee Trading Private Limited.”
Section 16(2) of the GST Act, which outlines the conditions for eligibility to claim ITC, was thoroughly examined by the court. While this section mandates that a registered person can only claim ITC if the details are mentioned in GSTR-2A, the court emphasized that other conditions under Section 16(2) must also be met.
The Ruling:
The petitioner asserted that they had met all stipulated conditions and possessed valid tax invoices from the seller dealer. Their primary grievance was that, despite meeting these conditions, the assessing authority had reversed their claimed ITC.
In its analysis, the court took into consideration the Central Board of Indirect Tax and Customs’ press release from 18th October 2018, which clarified that GSTR-2A’s purpose was to facilitate taxpayers and did not affect their ability to claim ITC based on self-assessment, as per Section 16 of the Act. The court also noted that the Supreme Court had previously ruled in “Union of India (UOI) vs. Bharti Airtel Ltd.” that GSTR-2A serves as a facilitator for self-assessment.
The Kerala High Court, drawing from the Calcutta High Court’s judgment, stressed that ITC should not be revoked unless the assessing authority acts against the selling dealer for failing to deposit the tax collected from the petitioner. The court made it clear that unless collusion between the taxpayer and the seller dealer is proven, ITC cannot be denied if the taxpayer genuinely paid the tax to the seller.
Additionally, the court referred to another Supreme Court decision in “The State of Karnataka vs. M/s. Ecom Gill Coffee Trading Private Limited,” which discussed the burden of proof for ITC claims. It clarified that the burden of proving the correctness of the ITC claim lies with the purchasing dealer, who must provide evidence of genuine transactions, including details of the seller dealer, delivery of goods, freight charges, acknowledgment of delivery, tax invoices, and payment records.
Conclusion:
In conclusion, the Kerala High Court’s judgment in “Diya Agencies vs. State Tax Officer” underscores that denying Input Tax Credit based solely on discrepancies in GSTR-2A is fundamentally unjust. Taxpayers should not bear the brunt of issues beyond their control, such as the non-payment of taxes by the seller dealer. The court has instructed assessing authorities to allow taxpayers the opportunity to provide evidence supporting their ITC claims. A fair and evidence-based approach when evaluating ITC claims, setting a vital precedent for taxpayers and tax authorities alike.
This Article is only a knowledge-sharing initiative and is based on the Relevant Provisions as applicable and as per the information existing at the time of the preparation. In no event RMPS & Co. or the Author or any other persons be liable for any direct and indirect result from this Article or any inadvertent omission of the provisions, update etc. if any
Published on: October 21, 2023