GST paid by the Recipient but not remitted to the Government by the Supplier does not provide ground for denying ITC

[CA Bimal Jain]

The Hon’ble Kerala High Court, in the case of MR. GOPARAJ GOPALAKRISHNAN PILLAI PROPRIETOR, M/S. TAURUS COMMUNICATION VERSUS THE STATE TAX OFFICER-1 THRIPUNITHURA., JOINT COMMISSIONER (APPEALS) KOTTAYAM - 2023 (10) TMI 1042 - KERALA HIGH COURT  allowed the writ petition and held that the Input Tax Credit (“ITC”) should not be denied on the ground that GST paid is not reflected in Form GSTR-2A due to non-remittance by Supplier. Therefore, the High Court set aside the Assessment Order to the extent of denial of ITC and directed the Revenue Department to examine the evidence placed on record by the assessee and pass fresh orders accordingly.

Facts:

M/s. Goparaj Gopalkrishnan Pillai (“the Petitioner”) is a registered dealer under the GST Act, 2017 and was alleged by the Revenue Department (“the Respondent”) that ITC as per Form GSTR-2A was Rs.65,39,776/-whereas the ITC availed and utilised as per Form GSTR-3B was Rs.98,44,815/-, therefore,  the Petitioner has availed and utilised excess ITC of Rs.33,05,038/- for the Financial Year (“FY”) 2017-2018. The Respondent issued Show Cause Notice dated August 26, 2022 (“SCN”) to the Respondent for which response was filed by the Petitioner stating that, the Petitioner had mistakenly entered the GST amount of Rs.36,47,624.24/- instead of Rs. 3,64,724.24/- in GSTR-3B of December, 2017 and has not utilised ITC till date. The excess ITC of Rs. 22,922/- was deducted in GSTR-3B of August 2018.

Thereafter, the Revenue Department vide Assessment Order dated November 17, 2022 (“the Impugned Order”) rejected the claim of ITC of the Petitioner on the ground that supplier/dealer has neither remitted the tax collected on supply of goods to the Government nor uploaded the details of the supply in Form GSTR-1 on the portal and held that the Petitioner was not entitled to avail ITC on supplies for which the supplier has not remitted the tax collected to the Government. Therefore, the excess ITC of Rs.19,830/-, availed was disallowed and Interest and penalty of Rs. 12,742/- and Rs. 20,000/- were imposed respectively. Thus, the Respondent directed the Petitioner to pay the total amount of Rs. 52,572/-.

Aggrieved by the Impugned Order, the Petitioner filed an appeal before the Hon’ble Kerala High Court for setting aside the Impugned Order and SCN.

Issue:

Whether GST paid by the recipient but not remitted by the Supplier to the Government is ground for denying ITC?

Held:

The Kerala High Court in MR. GOPARAJ GOPALAKRISHNAN PILLAI PROPRIETOR, M/S. TAURUS COMMUNICATION VERSUS THE STATE TAX OFFICER-1 THRIPUNITHURA., JOINT COMMISSIONER (APPEALS) KOTTAYAM - 2023 (10) TMI 1042 - KERALA HIGH COURT  held as under:

• Relying upon the judgement of the Hon’ble Kerala High Court in the case of DIYA AGENCIES VERSUS THE STATE TAX OFFICER, THE STATE TAX OFFICER, UNION OF INDIA, THE CENTRAL BOARD OF INDIRECT TAXES & CUSTOMS, THE STATE OF KERALA - 2023 (9) TMI 955 - KERALA HIGH COURT, the High Court noted that, the amount of GST paid, not reflected in Form GSTR-2A should not be the sole basis for denial of the claim for ITC when there is evidence on record to prove that the claim of ITC is bonafide and genuine.
• Held that, the Impugned Order to the extent of denial of ITC of Rs.19,830/- was set aside, hence the Writ Petition is allowed.
• Directed that, the matter be remanded back to Respondent for the purpose of examination of the evidence and documents submitted by the Petitioner for claiming ITC. Thereby, the Petitioner should be allowed to avail ITC denied if the Respondent Officer is satisfied that the ITC claim is bonafide and genuine. 
• Further directed that, the Petitioner shall appear before the Respondent Officer with evidence to support his claim for ITC and fresh orders be passed by the Respondent Officer after examination of Evidence, in accordance with law.

Author can be reached at [email protected])

Discussions to this article

[Damodar Sahoo]

Sir,

The article is verbatim the judgment pronounced. It is not clear as to the following:

1. Whether ITC will be allowed when the supplier has NOT paid the tax to the Government or not? There are many cases where the supplier has paid the GST and it doesn't get reflected in GSTR-2A.

2. What is the sort of evidence that will suffice the requirements of ITC? Proof of payment to the supplier or proof of payment to the Government by the supplier, which one will be deemed to be sufficient evidence for availing ITC?

Please give your valuable opinion on the issues raised.