Right of ITC can not be denied due to non reflection of credit in GSTR-2A

In a plethora of judgments various courts have taken a view that the procedural grounds can not supersede the provisions of the legislation. In line of those judgments recently the honorable Kerala High court in the matter of the St. Joseph Tea Company Ltd Vs. (i) The State Tax Officer (ii) Deputy Commissioner , State GST Department (iii) State Goods & Service Tax Department (iv) Goods & Service Tax Network Ltd  {WP (C)  No. 17235 of 2020}, has examined the facts of the case and accordingly ordered  that the ITC shall not be denied only on the ground that the transaction is not reflected in GSTR 2A.

The key take away of the judgment are :

• The petitioner, a registered dealer under the Kerala Value Added Tax Act, had migrated to the Goods and Services Tax Act regime and applied for registration under the GST statutes.
• Having failed to obtain registration due to technical glitches in the GST portal, the petitioner filed WP(C) No.768 of 2018. An interim order was passed in that writ petition permitting the petitioner to apply for registration afresh.
• Accordingly, the petitioner applied and was granted fresh registration with effect from 09.03.2018.
• The petitioner was unable to upload the returns for the period from 01.07.2017 to 09.03.2018 and to remit tax. This disabled the petitioner’s customers from claiming Input Tax Credit (ITC) and many of them stopped during business with the petitioner.
• The Department also started issuing notices in Form GST Asmt-10 to the petitioner’s customers, citing discrepancy in the return.
• The petitioner filed representation before the first respondent, requesting to make arrangements to rectify the technical issues and to provide opportunity for filing monthly returns for the period prior to 09.03.2018 but the respondent failed to provide such opportunity to the petitioner .
• Then the petitioner filed a writ petition against respondents .
• The honorable court has made observations as under and accordingly ordered:

“I find merit in the submission that the fresh registration on 09.03.2018 having been obtained by the petitioner in terms of the interim order issued in W.P.(C) No.768 of 2018, an opportunity for statutory compliance for the period prior to 09.03.20218 ought to be provided. At the same time, there is substance in the submission made on behalf of the respondents that it is technically impossible to make changes in the GST portal for providing opportunity for an individual assessee to comply with the statutory requirements from a date prior to its registration.

In the circumstances, the only possible manner in which the issue can be resolved is for the petitioner to pay tax for the period covered by provisional registration from 01.07.2017 to 09.03.2018 along with applicable interest under Form GST DRC-03 dealing with intimation of payment made voluntarily or made against the show cause notice (SCN) or statement. If such payment is effected, the recipients of the petitioner under its provisional registration (ID) for the period from 01.07.20217 to 09.07.2018 shall not be denied ITC only on the ground that the transaction is not reflected in GSTR 2A. It will be open for the GST functionaries to verify the genuineness of the tax remitted and credit taken. Ordered accordingly.”

My comments:

Once the honorable court has clearly marked that the right of input Tax credit can not be withheld only by the reasons that it has not been reflected in the GST portal . Now the question arises what is the logic behind the  introduction of Rule 36(4), 86A , 86B  by the government and which is clearly not in consonance with the provisions of the GST Act. Also when the various courts are given the like judgments whether it is not indirectly marked the big question mark upon the constitutional validity upon the like and similar provisions where the right which is conferred by the express provisions of the act which knowingly or unknowingly gets defeated by making procedural provisions . We must understand that the rules , notifications , circular etc. are only issued for the smooth implementation of the provisions of the law and on the other hand such machinery provisions  can not overrule or override the express provisions given in the statute.

This article is an endeavor to share some learnings obtained. The views expressed are of the author and are intended solely for informational purpose only.   Though due care is taken while preparing the document, possibility of errors cannot be ruled out. Expert guidance, where required and  reference to the original act, notification, circular, rules etc is highly recommended.

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(About the author – The author is a member of ICAI and can be reached at Email: nikhilkumarca@gmail.com,  Mobile: 09936424523, Twitter : @CA_NikhilKumar, FB: canikhillko  Office: Flat No. 102, First Floor, Vasundhara Complex, Ring Road, Sector-16, Indira Nagar, Lucknow-226016 , U.P., India)