The Hon'ble Kerala High Court in Diya Agencies v. The State Tax Officer [WP(C) No. 29769 of 2023 dated September 12, 2023] held that, if the taxpayer is able to prove that tax amount is paid to the seller and the Input Tax Credit claim is bonafide so the Input Tax Credit cannot be denied merely on non-reflection of transaction in GSTR-2A.

Facts: 

M/s. Diya Agencies ("the Petitioner") claimed the Input Tax Credit (ITC) of INR 44,51,943.08/- for year 2017-18. 

The Revenue Department ("the Respondent") denied the ITC claim of INR 1,04,376.05/- in respect to invoice not reflected in GSTR-2A. 

Aggrieved by the order passed by the Adjudicating Authority the Petitioner filed a writ before the Hon'ble Kerala High Court.

The Petitioner relied upon the judgement of Suncraft Energy Private Limited and Another v. The Assistant Commissioner, State Tax [MAT 1218 of 2023 dated August 02, 2023] wherein the Hon'ble Calcutta High court held that, before reverting the ITC by the assessee, the Adjudicating Authority should take action against the selling dealer if it is found that he has not deposited the tax paid by the assessee. Unless the collusion between the assessee and the seller dealer is proved, the ITC is not to be denied if the assessee has genuinely paid the tax to the seller dealer.

The Petitioner contended that, it has fulfilled all the conditions stated under Section 16(2) of the Central Goods and Services Tax Act, 2017 ("the CGST Act"). 

The Petitioner further contended that the Central Board of Indirect Tax and Customs (CBIC) had issued press release dated October 18, 2018 clarifying that Form GSTR-2A is the facility to view the details furnished by the supplier in GSTR-1 and cannot impact the ability of the recipient to avail ITC on self-assessment basis in consonance with the provisions of Section 16 of the CGST Act.

Issue:  

Whether the taxpayer%u2019s ITC can be denied solely based on ground that transaction not reflected in GSTR-2A?

Held:

The Hon'ble Kerala High Court in WP(C) No. 29769 of 2023 held as under:

Observed that, that the Petitioner claim for ITC has been denied only on the ground that the said amount was not mentioned in the GSTR 2A.

Noted that, if the supplier has not remitted the said amount paid by the Petitioner to him, the Petitioner cannot be held responsible.

Directed the Adjudicating Authority to give opportunity to the Petitioner to claim for ITC.

Considered the CBIC press release dated 18 October 2018 which clarified that GSTR-2A is in the nature of facilitation and does not impact the ability of the taxpayer to avail ITC on self-assessment basis as per Section 16 of the CGST Act. 

Held that, merely on the ground that in Form GSTR-2A the said tax is not reflected should not be a sufficient ground to deny the assessee the claim of the ITC. 

Remanded back to the Adjudicating Authority to give opportunity to the Petitioner to claim for ITC.

Author's Note

The Kerala High Court in this case underscores the unfairness of denying ITC solely on the basis of non-population of transaction in GSTR-2A. The court recognizes that taxpayers should not be held liable for a condition which is outside the control, such as the non-payment of taxes by the Supplier. The court has instructed the Adjudicating Authority to give taxpayers the chance to furnish evidence in support of their ITC.

In a recent judgment, the Kerala High Court addressed the issue of denying input tax credit to taxpayers based solely on discrepancies in GSTR-2A. The case, titled Diya Agencies vs. State Tax Officer, revolves around the denial of input tax credit amounting to Rs. 44,51,943.08 for both CGST and SGST.

Detailed Analysis The petitioner, Diya Agencies, contested the denial of input tax credit, arguing that it should not be solely based on the amounts mentioned in GSTR-2A, as taxpayers have no control over this data. The petitioner emphasized that assessing authorities must independently evaluate input tax credit claims, irrespective of GSTR-2A figures. 

To support their case, the petitioner 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.

The court examined Section 16(2) of the GST Act, which outlines the conditions for eligibility to claim input tax credit. While this section mandates that a registered person can only claim input tax credit if the details are mentioned in GSTR-2A, the court emphasized that other conditions under Section 16(2) must also be met. 

The petitioner asserted that they had fulfilled all the stipulated conditions and had valid tax invoices from the seller dealer. Their grievance was that, despite meeting these conditions, the assessing authority had reversed the claimed input tax credit. 

In its analysis, the court considered 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 input tax credit based on self-assessment, in accordance with Section 16 of the Act. The court also noted that the Supreme Court had ruled in Union of India (UOI) vs. Bharti Airtel Ltd. that GSTR-2A serves as a facilitator for self-assessment. 

Drawing from the Calcutta High Court's judgment, the Kerala High Court emphasized that input tax credit should not be revoked unless the assessing authority takes action against the selling dealer for not depositing the tax collected from the petitioner. The court stated that unless collusion between the taxpayer and the seller dealer is proven, input tax credit cannot be denied if the taxpayer genuinely paid the tax to the seller. 

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 input tax credit claims. It clarified that the burden of proving the correctness of the input tax credit 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 highlights that denying input tax credit based solely on discrepancies in GSTR-2A is unjust. Taxpayers should not be penalized for issues beyond their control, such as the non-deposit of taxes by the seller dealer. The court has directed assessing authorities to allow taxpayers the opportunity to provide evidence supporting their input tax credit claims. This ruling emphasizes the importance of a fair and evidence-based approach when evaluating input tax credit claims. 

DISCLAIMER:-

(Note: Information compiled above is based on my understanding and review. Any suggestions to improve above information are welcome with folded hands, with appreciation in advance. All readers are requested to form their considered views based on their own study before deciding conclusively in the matter. Team BRQ ASSOCIATES & Author disclaim all liability in respect to actions taken or not taken based on any or all the contents of this article to the fullest extent permitted by law. Do not act or refrain from acting upon this information without seeking professional legal counsel.)

In case if you have any query or require more information please feel free to revert us anytime. Feedbacks are invited at brqgst@gmail.com or contact at 91-96-33-18-18-98.