ITC Denied Despite GSTR 2A? Kerala HC’s Landmark Ruling

The recent judgment in the case of Diya Agencies vs. State Tax Officer by the Kerala High Court has significant implications for businesses claiming Input Tax Credit (ITC) under Section 16(2)(c) of the CGST Act, 2017. The Writ application was admitted and the order was delivered on the same day.This article delves into the facts of the case, the legal provisions invoked, the petitioner’s submissions, and the court’s ruling. It sheds light on the crucial issue of ITC denial based on non-reflection in GSTR 2A and its impact on taxpayers.

Facts of the Case:

In this case, the petitioner had  claimed ITC for a sum of  Rs.1,04,376.08 as CGST & SGST. It was rejected stating that it was not reflected in GSTR 2A. Aggrieved by the order, the Petitioner challenged it by filing Writ Application in the High Court of Kerala.

Legal Provision:

Sec.16 2 (c) of CGST Act, 2017,

“subject to the provisions of [1]section 41 [2], the tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilisation of input tax credit admissible in respect of the said supply; and”

Submission of the Petitioner:

1. The ITC cannot be denied on the ground of not appearing in GSTR 2A as it is not under the control of the Petitioner. The Assessing authority is required to do examination of the the credits availed by the taxpayer.

2. The petition relied on Suncraft Energy Private Limited and Another v. The Assistant Commissioner, State Tax, & The State of Karnataka v. M/s. Ecom Gill Coffee Trading Private Limited and placed that for allowing ITC, the purchasing dealer has to prove the genuineness of the transactions as the burden of proof rests with him while claiming ITC.

3. The petitioner has fulfilled the conditions specified u/s 16(2) of the CGST Act. Despite fulfilling the conditions, the petitioner cannot be asked to pay the ITC,  due to non payment of taxes by the supplier.

4. Further, reference of CBIC Press Release, was drawn which clarified, furnishing of outward supply in GSTR 1 by the supplier and the facility to view the same in GSTR 2A by the recipient are for facilitation purpose only.  It doesn’t impact the availment of ITC.

5. The petitioner counsel relied on the Union of India (UOI) v. Bharti Airtel Ltd. And Others reported in 2022 (4) SCC 328, wherein, it was held that, GSTR2A is a facilitator to confirm availment of ITC while making self assessment tax.

6. The Assessing Authority before denying the credit, should have taken action against the selling dealer if the taxes are not paid by the seller. The Suncraft Energy Private Limited and Another, Calcutta High Court case was relied upon, wherein, “unless and until the Assessing Authority is able to bring out the exceptional case where there has been collusion between the buyer and seller or the dealer is missing or he has closed down its business or he does not have any assets and such other contingencies,  the Assessing Authority, straight away  is not justified in directing the registered person to reverse the input tax credit.”

Held:

1. The assessment order denying ITC, merely on the ground that it not reflected in GSTR-2A is not sustainable.

2. The matter is remanded back to the Assessing Officer and the petitioner is given opportunity to claim ITC and directed to appear before him within fifteen days with all evidence.

3. If on examination of the evidence, the assessing officer is satisfied that the claim is bonafide and genuine, the petitioner should be given input tax credit and the Assessing Authority will pass a fresh order in accordance with law.

The Hon’ble Hight Court of Kerala, relied on Supreme court Judgments remanded back to Assessing Office to collect evident before dening the ITC.

Conclusion: 

The Kerala High Court’s decision in the Diya Agencies vs. State Tax Officer case is a significant development in the realm of GST and ITC. It highlights that non-reflection of ITC in GSTR 2A should not be an automatic ground for denial. Taxpayers have the opportunity to prove the genuineness of their claims, ensuring a fair and just application of tax law. This ruling provides clarity and relief to businesses facing ITC challenges, setting a precedent for similar cases in the future.

[1] . Substituted “section 41” (w.e.f. a date yet to be notified) by s. 8 of The Central Goods and Services Tax (Amendment) Act, 2018 (No. 31 of 2018).

[2] 5. Omitted “or section 43A” (w.e.f. 1st October, 2022 vide Notification No. 18/2022 – CT dated 28.09.2022.) by s. 100 of The Finance Act 2022 (No. 6 of 2022).

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