Monday, May 20

Kerala High Court: Purchaser Entitled to GST Input Tax Credit Despite Seller’s GSTR-2A Recording

The Kerala High Court has ruled that a purchaser is entitled to claim GST input tax credit even if the seller did not record the transaction in their GSTR-2A form. The court’s decision clarifies that the purchaser should not be denied this credit solely due to the seller’s failure to update their GSTR-2A.

The Kerala High Court has recently ruled that Input Tax Credit (ITC) should not be denied to a purchaser solely on the grounds that the transaction is not reflected in the seller’s GSTR-2A Form. The court has sent the case back to the Assessing Officer to reevaluate the petitioner’s claim, emphasizing that if the assessing officer finds the claim to be genuine and bona fide based on the evidence provided by the petitioner, they should grant the input tax credit.


Kerala High Court: Purchaser Entitled to GST Input Tax Credit Despite Seller's GSTR-2A Recording
Kerala High Court: Purchaser Entitled to GST Input Tax Credit Despite Seller’s GSTR-2A Recording


The ruling underscores that the absence of the transaction in Form GSTR-2A alone should not be a sufficient reason to reject the purchaser’s claim for input tax credit. This decision aims to protect the rights of taxpayers and ensure that legitimate claims are not unjustly denied.

The petitioner in this case was dissatisfied with the limitation imposed on their Input Tax Credit (ITC) claim, which amounted to Rs. 44,51,943.08 for CGST and SGST. The authorities restricted the CGST credit to an excess claim of Rs. 1,04,376.05 and denied the same amount as SGST credit. This denial was based on the argument that, according to GSTR-2A, the taxpayer would only be eligible for the input tax amount shown in CGSTR-2A.

The petitioner’s counsel argued that the ITC claim should not be denied solely on the basis of the GSTR-2A amount, as it was beyond the petitioner’s control. They contended that the Assessing Authority should independently assess the petitioner’s ITC claim, regardless of the amount mentioned in GSTR-2A. This position underscores the need for a fair and thorough examination of ITC claims to ensure that taxpayers are not unfairly denied their rightful credits.

In support of their case, the petitioner’s counsel referred to Section 16(2) of the GST Act. This section stipulates that a registered person can only claim input tax credit for the supply of goods or services if they meet the specified conditions. The counsel argued that the petitioner had satisfied all the conditions outlined in this provision. Furthermore, they emphasized that the tax had been duly paid to the seller dealer, who had issued a valid tax invoice. This legal standpoint underscores the importance of adhering to the GST Act’s conditions and procedures to facilitate input tax credit claims.

The petitioner expressed deep dissatisfaction with the assessing authority’s decision to reverse the input tax credit despite adhering to the prescribed conditions. The counsel highlighted a significant body of legal precedents that consistently supported the notion that input tax credit should not be denied if the taxpayer had genuinely paid the tax to the seller dealer and there was no evidence of collusion or wrongdoing between the parties involved. This legal argument underscores the principle of fairness and genuine compliance in the context of GST regulations.

The Kerala High Court, considering the arguments and the assessment order in question, concluded that the denial of the petitioner’s claim for higher input tax credit was solely based on the absence of a corresponding amount in the GSTR 2A. The Court emphasized that if the seller dealer (supplier) had not remitted the tax amount paid by the petitioner, the petitioner could not be held responsible. The determination of whether the petitioner had indeed paid the tax amount and whether the transactions between the petitioner and the seller dealer were genuine should be based on factual evidence.

In line with the Supreme Court’s ruling in The State of Karnataka v. M/S. Ecom Gill Coffee Trading Private Limited (2023), the Court found the assessment order, to the extent it denied input tax credit to the petitioner, unsustainable. The matter was remanded to the Assessing Officer, who was instructed to provide the petitioner with an opportunity to present evidence in support of the claim for input tax credit. The petitioner was directed to appear before the assessing authority within fifteen days with all relevant evidence.

The Court ordered that after examining the evidence presented by the petitioner, the assessing authority should issue a fresh order in accordance with the law. This decision effectively allows the petitioner to substantiate their claim for higher input tax credit with supporting evidence.

Counsel for the Petitioner: Advocates Aji V. Dev, H. Abdul Lathief, Alan Priyadarshi Dev, and S. Sajeevan
Counsel for the Respondents: Government Pleader Jasmine M.M.

Citation: 2023 LiveLaw (Ker) 495
Case Title: Diya Agencies v. State Officer & Ors.
Case Number: W.P.(C) No.29769 of 2023

Click Here To Read/Download The Judgment

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