M Trade Links Vs Union of India (Kerala High Court)
The Kerala High Court considered a batch of writ petitions challenging the constitutional validity of Sections 16(2)(c) and 16(4) of the Central Goods and Services Tax Act and the corresponding State GST Act. The petitioners questioned the validity of the provisions governing eligibility for Input Tax Credit (ITC), particularly the requirement that the supplier must have actually paid tax to the Government under Section 16(2)(c) and the statutory time limit for claiming ITC under Section 16(4).
The judgment began by tracing the evolution of the GST regime in India from the recommendations of the Kelkar Committee through the Constitution (101st Amendment) Act, 2016, the establishment of the GST Council, and the enactment of the GST legislation. It discussed the objectives of GST, including the elimination of cascading taxes, creation of a unified tax system, and seamless flow of ITC across the supply chain. The Court also explained the statutory framework governing ITC, including Sections 16, 41, 49 and 54 of the CGST Act, the electronic cash, credit and liability ledgers, and the statutory conditions governing entitlement to ITC.
The Court noted that Section 16 provides for eligibility and conditions for taking ITC. Section 16(2) prescribes four cumulative conditions, namely possession of prescribed documents, receipt of goods or services, actual payment of tax to the Government in respect of the supply, and furnishing of returns. Section 16(4) prescribes the time limit beyond which ITC cannot be claimed in respect of invoices or debit notes. The judgment also referred to Rule 36 governing documentary requirements for claiming ITC and the role of Forms GSTR-1, GSTR-2A, GSTR-2B and GSTR-3B.
