Denial of Legitimate ITC Solely based on GSTR 2A & 3B difference, Kerala HC directs Assessing Authority to reconsider Petitioner’s Contentions relying on GST Circular No.183 [Read Order]

The High Court of Kerala has directed the Assessing Authority to reconsider the contentions of the petitioner relying on Circular No.183/15/2022-GST dated 27.12.2022 issued by the Government of India, Department of Revenue on the observation that the petitioner was denied the legitimate Input Tax Credit (ITC) solely based on the difference in the ITC depicted in the Goods and Services Tax (GST) Returns GSTR 2A & GSTR 3B. GSTR 2A is an auto-populated tax return that compiles details of purchases as per the records of the supplier whereas GSTR 3B is a summary return that the taxpayers file monthly, providing a consolidated overview of their sales and purchases, facilitating easier tax payment.

It is a mechanism to declare their summary GST liabilities for a particular tax period and discharge these liabilities The decision came in response to the Writ Petition filed by Mr. Raju Joseph, proprietor of Future Graphic Systems, Alappuzha, challenging the validity of the orders issued by the State Goods and Services Tax (SGST) Department. The petitioner, represented by K.N. Sreekumaran, P.J. Anilkumar and N. Santhoshkumar, challenged the denial of their ITC solely based on the difference between the Eligible ITC as populated under Form GSTR 2A and the actual ITC availed under Form GSTR 3B for the tax period 2017-18.

The petitioner argued that the discrepancy in ITC arose due to genuine errors and difficulties faced by them during the initial years of GST implementation. Drawing attention to Circular No.183/15/2022-GST issued by the Government of India, Department of Revenue, the petitioner highlighted the clarification provided for situations where the supplier has filed GSTR–1 and GSTR–3B but has declared the supply with the wrong GSTIN of the recipient in GSTR–1. Paragraph 4 of the Circular outlines the procedure for the proper officer to verify and seek details from the registered person regarding invoices on which ITC has been availed in Form GSTR 3B but is not reflected in Form GSTR 2A. It emphasised the conditions of Section 16 of the Central Goods and Services Tax (CGST) Act, 2017, including possession of valid documents such as tax invoices, receipt of goods or services and payment to the supplier.

The Circular provides a framework for officers to check for reversals of ITC as per sections 17 or 18 of the CGST Act, 2017 and the specified time period for availing the credit. Additionally, the Circular introduces measures to verify whether the tax on the supplies has been actually paid to the government exchequer by the supplier. For discrepancies exceeding Rs.5 lakh, the registered person is required to produce a certificate from a Chartered Accountant (CA) or Cost Accountant, certifying the actual supplies and tax payments by the supplier.

For discrepancies up to Rs.5 lakh, a certificate/undertaking from the supplier is deemed sufficient. The petitioner also relied on a previous judgment of the Kerala High Court in the case of Diya Agencies v. State of Kerala, emphasising that denial of ITC solely based on differences between Form GSTR-2A and Form GSTR-3B is not sustainable. The court, in the case of Diya Agencies, had directed the assessing officer to provide an opportunity for the petitioner to substantiate their claim for ITC, emphasising that discrepancies in GSTR-2A should not be sufficient ground for denial of legitimate ITC. The respondent revenue, represented by Thushara James, K.R. Rajkumar and Sreejith P. R. argued that the petitioner failed to reconcile the differences adequately and did not meet the conditions specified in Section 16 of the CGST Act. The Kerala High Court, in compliance with the Circular, allowed the writ petition, setting aside the orders passed by the Assessing Authority.

The bench remitted the matter back to the Assessing Authority, directing a re-evaluation of the petitioner’s case irrespective of the discrepancies in Form GSTR 2A. The petitioner was directed to deposit 10% of the assessed amount within fifteen days and appear before the Assessing Authority with all relevant documents so as to substantiate the claim of ITC. The single bench of Justice Dinesh Kumar Singh concluded that the legitimate claims of ITC shall not be denied solely based on differences between GSTR-2A and GSTR-3B, provided they have complied with all the necessary conditions for availing ITC as contemplated under Section 16 of the CGST Act, 2017.

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