Kerala High Court Reverses Tax Credit Denial Amid Initial GST Rollout Challenges: Conclusive Ruling Dt. 29.09.23

In a significant development, the Kerala High Court has overturned the disallowance of tax credit for small-scale dealers, attributed to the challenges faced during the initial implementation of the GST regime.

The decision, handed down by Justice Dinesh Kumar Singh, comes as a relief for businesses grappling with understanding the intricate provisions of the GST Act during the 2017-18 fiscal period.

The court set aside the assessing authority’s orders, which had rejected input tax credit (ITC) claims from the petitioners, acknowledging the complexities and difficulties these dealers faced in comprehending the GST Act’s nuances. The case pertained to discrepancies identified in the monthly GSTR 3B returns filed by the petitioners for the Assessment Year 2017-18.

Following the discrepancies, the tax authorities issued notices to the petitioners, urging them to explain the irregularities within thirty days. Subsequently, Show-Cause Notices were issued due to the failure to provide evidence of tax remittance and interest payment. The assessing authority then denied their ITC claims, resulting in substantial financial impositions encompassing taxes, interest, and penalties.

The petitioner’s counsel argued that small-scale dealers, like their client, encountered significant challenges in the initial stages of GST implementation. They emphasized that the petitioner possessed adequate documentation supporting their eligibility for input tax credit. On the other hand, the respondents’ counsel contended that the petitioner had been duly notified and provided ample opportunities to substantiate their claims, asserting that the assessing authorities had followed legal provisions and principles of natural justice.

The Kerala High Court, taking into account the presented arguments, directed the State Tax Officer to reassess the claims by thoroughly examining the evidence provided by the petitioners and allowing them to present their case in a hearing. The petitioner was instructed to appear before the State Tax Officer in Kayamkulam, equipped with all relevant documents to support their input tax credit claim for the Assessment Year 2017-18. The State Tax Officer is mandated to re-evaluate the claims, consider the presented evidence, and after a comprehensive hearing, issue fresh orders in accordance with the law within two weeks.

In light of these directives, the court disposed of the writ petitions, providing a resolution to this matter concerning tax credit denial during the initial phases of GST implementation.

Case Title: Anaz Abdul Rahiman Kutty Vs State Tax Officer; Citation; WP(C) No.31056/2023

Source Link: https://blog.saginfotech.com/kerala-hc-overturns-tax-credit-disallowance-due-initial-gst-challenges

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