Landmark Ruling: Kerala HC Upholds ITC Claim Despite GSTR 2A Absence

Diya Agencies Vs State Tax Officer (Kerala High Court); WP(C) No. 29769 of 2023; 12/09/2023

In a recent case, Diya Agencies went to the Kerala High Court after their Input Tax Credit (ITC) claim was denied by the tax authorities. They had claimed ITC for about Rs. 1,04,376.08 in CGST & SGST, but it was rejected because it wasn’t reflected in GSTR 2A.

Here are the key points simplified:

Background: Diya Agencies claimed tax credit, but it was denied because the claimed amount wasn’t seen in GSTR 2A. They appealed this decision to the Kerala High Court.

Legal Provision: The law (Section 16(2)(c) of the CGST Act) says you can get ITC if you’ve actually paid the tax to the government, either in cash or through valid input tax credit.

Petitioner’s Argument:

1. They argued that denial based on GSTR 2A alone is unfair because they can’t control it.

2. They referred to legal cases saying the burden of proving genuine transactions lies with the buyer claiming ITC.

3. They fulfilled all the conditions for ITC under the law, and they shouldn’t be penalized for the supplier not paying taxes.

4. They cited a CBIC Press Release to emphasize that GSTR 2A is for information and doesn’t impact ITC claims.

5. They mentioned a court case saying GSTR 2A is a tool for confirming ITC during self-assessment.

6. They argued that the tax authority should take action against the seller before denying ITC, unless there’s collusion or exceptional circumstances.

Court’s Decision:

1. The court said denying ITC solely because it’s not in GSTR 2A is not justified.

2. The case is sent back to the tax officer, and Diya Agencies gets a chance to prove their ITC claim with evidence.

3. If the evidence is satisfactory, they should get the ITC, and a new order will be issued.

Conclusion: This Kerala High Court ruling is a big deal in the world of GST and ITC. It emphasizes that not seeing ITC in GSTR 2A doesn’t automatically mean denial. Businesses have the chance to prove their claims, ensuring fair application of tax law. This sets a precedent for similar cases in the future.