Kerala HC ruling may bring relief to companies in GST litigation

Categories: GST Recent News

A recent Kerala High Court ruling might bring some relief to scores of Indian companies stuck in litigation over rejected input tax credit (ITC) claims under GST after their suppliers failed to pay taxes, experts said.

In a case filed by Galaxy Traders, the Kerala High Court held that disallowing credit based solely on the absence of entries in the GSTR-2A form is not warranted. GSTR-2A is a system-generated statement of inward supplies that automatically reconciles the purchases of a company with the outward supplies mentioned in the GSTR-1 filing of the supplier.

Assessing authorities, the court said, are expected to consider alternative eligibility criteria.

The ITC claim of Galaxy Traders was rejected by the assessing authority on the grounds that the claim was not reflected in the GSTR-2A form after the company’s supplier did not mention the supplies in its GSTR-1 filing.

In its judgement dated September 20, the court sent the case back to the assessing authority to examine the evidence provided by the petitioner irrespective of the difference in GSTR-2A and GSTR-3B forms. Following the assessment of the evidence provided by the petitioner, the court directed the assessing authority to pass orders in accordance with law.

“When the recipient has paid both the consideration and the tax, the recipient of such a supply is not at any fault and is ideally eligible to avail the credit, irrespective of whether there is non-compliance on the part of the vendor”, the advocate said, who is arguing writs on this issue.

To be sure, the Section 155 of the GST Act, 2017, mentions that the burden of proof for ITC lies on the claimant. This means that in situations like this where the claimant has purchased goods and paid GST on it, but the supplier has not deposited this tax amount to the government, the claimant has to provide the proof of tax payment.

“This decision is in line with established legal criteria for credit eligibility, which include possession of invoices, receipt of supplies, compliance reporting, and payment for supplies,” one of the expert said.

This judgement will have a precedence value for other similar cases, he said. “The judgement sets a persuasive precedent and offers a valuable avenue for the industry to resolve ongoing litigation by seeking relief based on this judgement.”

However, according to some other experts, there have been multiple high court rulings in this matter, often contradictory to each other, which further obfuscates the matter.

“As there are contrary high court rulings, this entire issue of non-appearance of invoices in GSTR-2A is likely to be settled by the Supreme Court only,” another expert said.

Further, in this case, the matter has been remanded to the assessing authority for reexamination and has not been decided on the validity of the provisions, the advocate said.

“Only after the provisions test the constitutional validity, the larger base of taxpayers, may get the benefit,” he said.

Source from: