Supreme Court rejected a plea filed by GST authorities challenging a Calcutta High Court decision against ITC denial to Buyer for Non-Payment of Tax by Seller
Supreme Court Rejected Plea filed by GST Authorities: In a significant development, the Supreme Court has rejected a plea filed by GST authorities challenging a Calcutta High Court decision. The High Court had ruled that denying input tax credit (ITC) to a buyer based on a seller’s non-payment of GST is permissible only after a thorough investigation.
The Supreme Court, while declining to intervene in the matter, emphasized that its decision was influenced by the relatively small amount of disputed tax involved. “Having regard to the facts and circumstances of this case(s) and the extent of demand being on the lower side, we are not inclined to interfere in these matters…,” stated the Supreme Court.
The case in question involved a petition filed by the GST department against Suncraft Energy Ltd., where the disputed amount was Rs 650,511, inclusive of interest and penalty. The department sought to reverse the ITC claimed by the company, citing a mismatch in the supplier’s and company’s GST forms.
The Calcutta High Court’s verdict asserted that denial of ITC should only occur when the GST department faces genuine difficulties in collecting tax from the supplier. It stressed that before instructing a company to reverse ITC, authorities should take action against the defaulting supplier.
Abhishek Rastogi, founder of Rastogi Chambers, hailed the Supreme Court’s stance, noting that authorities must investigate the defaulting party and refrain from denying credit to the recipient without proper examination. He suggested that the fate of similar petitions before different courts would now be determined based on the specific facts and merits of each case.
However, Saurabh Agarwal, tax partner at EY, pointed out that the Supreme Court’s dismissal was primarily based on the small amount of disputed tax. While acknowledging the significance for Suncraft Energy, he highlighted that the judgment may not establish a broader precedent for other businesses facing similar GST-related challenges.
This ruling underscore the importance of a case-by-case examination of facts and merits, providing insights into the application of ITC rules within the GST framework.
To Access GST Instruction No. 5/2023 for CLICK HERE
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