Case Law Details
Surat Mercantile Association Vs Union of India (Gujarat High Court)
Rule 36(4) of the Central GST Rules and Gujarat and GST Rules, 2017 restricts Input tax credit to be availed by the buyer of goods or services in respect of invoices or debit notes, the details of which have not been uploaded by the suppliers in GSTR-1 return, to 5% of ‘eligible credit’ available in respect of invoices or debit notes the details of which have been uploaded by the suppliers in GSTR-1 return. In other words, Input tax credit (ITC) of invoices or debit notes which are not reflected in GSTR-2A shall be available to the extent of 5% of eligible credit in respect of invoices or debit notes reflected in GSTR-2A.
Surat Mercantile Association has filed a petition before the Hon’ble Gujarat High Court challenging the constitutional validity and vires of Rule 36(4) of the Central GST Rules and the Gujarat GST Rules.
Hon’ble Gujarat High Court has issued notice to the Central and State Government to submit its response by 12th February, 2021.
The matter was argued by Advocate Vinay Shraff with Advocate Parth Shah. Hon’ble Gujarat High Court while issuing the notice observed that according to the learned counsel for the writ applicants, the same is unconstitutional being contrary to the scheme of the Act. It is further argued that the Rule in question puts an onerous and impossible burden on the buyer of the goods and service to ensure that the supplier of goods or services does in fact upload the details of the outward supplier on the common portal and if the supplier fails to do so, it has to face the risk of the benefit of the ITC being blocked or is kept in suspension. It is argued that the rule in question is arbitrary, irrational and therefore, violative of Article 14 of the Constitution. This rule will discourage business entities to make purchases from a small and medium supplier of goods or services who files their return on a quarterly basis and therefore it creates hostile discrimination against all such small and medium business enterprises and consequently violates Article 14 of the Constitution of India.
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