Madras HC Sets Aside Tax & Interest on Unutilised ITC Reflected in GSTR-2A/2B

G.R. Organic Company Vs Commercial Tax Officer (Madras High Court)

The petitioner, engaged exclusively in making 100% exempt supplies during the assessment year 2021-22, challenged an order dated 25.11.2025 imposing tax and interest on input tax credit (ITC) reflected in GSTR-2A/2B. The petitioner submitted that although ITC was reflected pursuant to supplies received, it was never utilised because the petitioner was aware that it dealt only in exempt supplies, and the ITC was reversed on 07.03.2026. Based on written instructions, the respondent also stated that the petitioner had not utilised the ITC, while contending that the ITC ought to have been reversed. The Madras High Court observed that ITC is reflected in GSTR-2A/2B based on supplies received by the taxpayer and that, since the petitioner had not used the ITC to offset its outward tax liability, the levy of tax and interest was unsustainable. Accordingly, the Court set aside the impugned order while leaving it open to the respondent to initiate appropriate action if the ITC had not been reversed.

FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT

The petitioner was engaged in effecting 100% exempt supplies during the assessment period 2021-22. Because ITC for said period, was reflected in the GSTR 2A, pursuant to the initiation of proceedings, order dated 25.11.2025 was issued. Said order is impugned herein.