GSTR 2A and GSTR 3B Discrepancy Not Grounds for ITC Denial
In a significant ruling, the Hon’ble High Court of Kerala, in the case of M/s. Henna Medicals vs. State Tax Office, Thalassery & Ors., held on 19th September 2023 that the disparity between GSTR 2A and GSTR 3B cannot serve as a valid reason to disallow Input Tax Credit (ITC). The court directed the Revenue Department to re-examine the provided evidence and issue fresh orders accordingly.
Case Background
M/s. Henna Medicals, the petitioner, sought to claim Input Tax Credit (ITC) for the Goods and Services Tax (GST) paid. However, the Revenue Department rejected their claim based on the discrepancy between GSTR 2A and GSTR 3B, as mentioned in the Order dated December 28, 2021, and the subsequent Recovery Notice dated September 2, 2023.
The petitioner, aggrieved by this decision, filed a writ petition challenging the rejection of their ITC claim and sought relief for the claimed ITC amount of Rs. 2,58,116/-, along with interest and penalty.
Court’s Decision
The court also referred to the Hon’ble Kerala High Court’s judgment in the case of M/s Diya Agencies vs. State Tax Officer [WP (C) 29769/2023 dated September 12, 2023], highlighting that the difference between GSTR 2A and GSTR 3B should not be the sole basis for denying a legitimate ITC claim. The court directed the Assessing Authority to provide the petitioner an opportunity to present evidence supporting their ITC claim.
Furthermore, the court ordered the matter to be sent back to the Respondent for a thorough examination of the petitioner’s evidence related to the ITC claim. The Respondent was instructed to issue fresh orders based on a comprehensive assessment of the provided evidence. The petitioner was directed to appear before the Respondent Officer with all the necessary evidence to substantiate their ITC claim.
Conclusion
This ruling by the Hon’ble Kerala High Court underscores that a mere difference between GSTR 2A and GSTR 3B should not be grounds for disallowing Input Tax Credit. The court has emphasized the importance of considering all available evidence to establish the bona fide and genuine nature of the transaction behind the ITC claim, ensuring a fair and just assessment in accordance with the law.
Note for clarity on Section 16 of CGST Act (Eligibility & Conditions to avail ITC)
According to the GST Law, any registered individual can claim input tax credit (ITC) under certain conditions and provisions outlined in Section 16. This credit pertains to the tax paid on goods or services purchased for business use. The credited amount is added to the individual’s electronic credit ledger, in line with the procedures detailed in Section 49.
However, to be eligible for this credit, the registered individual must meet certain conditions. They must possess a valid tax invoice, debit note, or other specified tax-paying documents from a supplier registered under this act. Additionally, the goods or services must have been received by the individual, acting either directly or through an agent, as outlined in the explanation provided. Furthermore, the tax due for the supplied goods or services should have been paid to the government, either in cash or through the utilization of available ITC. Lastly, the individual must have filed the necessary return under Section 39.
To access the ICMAI paper on ‘ITC denial due to mismatch between GSTR 2A and GSTR 3B”, CLICK HERE
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Appeal to Income Tax Appellate Tribunal (ITAT): A complete Guide as per I-T Act 1961