Input Tax Credit Claims under GST: A Case Study of the Kerala High Court Ruling

Deciphering Legal Judgments: A Comprehensive Analysis of Case Law

Reported as:

2023 (9) TMI 955 - KERALA HIGH COURT

Introduction

The 2023 judgment of the Kerala High Court provides a significant exploration of the complexities surrounding the claims of Input Tax Credit (ITC) under the Goods and Services Tax (GST) regime in India. This article offers an analysis of this landmark decision, highlighting the intricacies of ITC claims, the burden of proof, and the role of GST forms in the adjudication process.

Background of the Case

The case revolves around a writ petition filed by Diya Agencies challenging an assessment order for the financial year 2017-18, which limited their claim for the ITC of Rs. 4451943.08 for CGST and SGST to an excess claim of Rs. 104376.05. The central contention was that the denial of credit was based solely on the GSTR 2A form, which, according to the petitioner, was beyond their control​​.

Legal Arguments and Deliberations

1. Petitioner’s Argument: The petitioner argued that the denial of ITC based solely on the GSTR 2A was unjust. They asserted that the assessing authority should independently examine the ITC claim, irrespective of the GSTR 2A amount. The petitioner relied on precedents from the High Court of Judicature at Calcutta and the Supreme Court to bolster their argument​​.

2. Eligibility for ITC: As per Section 16(2) of the GST Act, to be eligible for ITC, certain conditions must be met, including the mention of the input tax in specific clauses GSTR-2A​​.

3. Petitioner’s Compliance with GST Act: The petitioner contended they had complied with all conditions under Section 16(2) of the GST Act, including paying the tax to the seller and obtaining a valid tax invoice. However, despite this compliance, their ITC was reversed, and they were directed to deposit the tax for the disallowed credit​​.

4. Central Board of Indirect Taxes and Customs Clarifications: It was highlighted that the CBIC had issued clarifications in 2018 stating that furnishing outward details in GSTR-1 and viewing them in GSTR-2A was a facilitation measure and did not impact the taxpayer's ability to avail ITC on a self-assessment basis​​.

5. Burden of Proof: The Supreme Court’s judgment in a similar case underlined that the burden of proving the correctness of an ITC claim lies with the dealer claiming it. The genuineness of the transaction must be demonstrated with substantive evidence, beyond just the production of invoices and payment details​​.

Court’s Findings and Conclusion

The court found that the petitioner’s ITC claim had been denied solely based on the non-mention of the amount in GSTR 2A. It emphasized the need for the petitioner to provide evidence of the tax payment and the genuineness of the transactions with the seller. Consequently, the court remanded the matter back to the Assessing Officer, directing them to reassess the petitioner's claim for ITC. The court clarified that the mere absence of tax details in Form GSTR-2A should not be a sufficient ground to deny ITC claims​​.

Directions issued by the Hon'ble High Court

The assessing authority is therefore, directed to give an opportunity to the petitioner to give evidence in respect of his claim for input tax credit. The petitioner is directed to appear before the assessing authority within fifteen days with all evidence in his possession to prove his claim for higher claim of input tax credit. After examination of the evidence placed by the petitioner/assessee, the assessing authority will pass a fresh order in accordance with law.

Implications and Impact

This judgment is significant for several reasons:

1. It underscores the importance of the burden of proof in ITC claims under the GST regime.
2. It highlights the need for assessing authorities to consider claims beyond the mere reflection of details in GST forms.
3. The decision emphasizes the facilitative nature of GST forms and supports the self-assessment mechanism in the GST framework.

Conclusion

The Kerala High Court's judgment in "Diya Agencies vs The State Tax Officer" sets a precedent in the interpretation of ITC claims under the GST Act. It reinforces the principle of self-assessment in the GST regime and mandates a thorough and independent examination of ITC claims by the assessing authorities, ensuring a fair and just process for taxpayers.

Full Text:

2023 (9) TMI 955 - KERALA HIGH COURT