Rectification Application to be considered by the GST Department if ITC wrongly claimed under CGST and SGST instead IGST – Kerala High Court in the case of Divya S. R. v. Union of India
Introduction: In a recent verdict (WP(C) No. 38 Of 2024), the Kerala High Court addressed a critical issue concerning the incorrect claiming of Input Tax Credit (ITC) under CGST and SGST instead of IGST. The court’s directive to the GST Department regarding rectification applications by taxpayers has significant implications.
The Hon’ble Kerala High Court in the case of Divya S. R. v. Union of India [WP(C) No. 38 Of 2024 dated January 03, 2024] held that the GST Department to consider the rectification application when the GST Department had mistakenly claimed the entire input tax credit (“ITC”) under heads of Central Goods and Service Tax (“CGST”) and State Goods and Service Tax (“SGST”), instead of claiming it under head Integrated Goods and Service Tax (“IGST”). Hence, the writ petition was disposed of with a direction to the Authority to consider the application filed by the Assessee and pass necessary orders thereon.
Facts:
Divya S. R. (“the Petitioner”) had received IGST credit through the interstate inward supply of goods. The total amount of IGST Credit as reflected in the FORM GSTR 2A was INR 1,14,957/-. The Petitioner while preferring monthly return in the FORM GSTR 3B for July, 2017, by mistake claimed the entire ITC of INR 1,14,957/- under the heads of CGST and SGST, instead of claiming it under the head IGST. This mistake resulted in passing the Assessment Order (“Impugned Order”) by the Revenue Department (“the Respondent”).
The Petitioner had filed a rectification application in FORM GST RFD-01 as provided under Rule 89(1)(A) of the Central Goods and Services Tax Rules, 2017 (“the CGST Rules”). However, no decision was taken on the said rectification application.
Hence, aggrieved by the Impugned Order the present writ petition was filed by the Petitioner.
Issue:
Should a rectification application be considered by the GST Department where ITC wrongly claimed under CGST and SGST instead IGST?
Held:
The Kerala High Court in WP (C) No. 38 of 2024 held as under:
- Directed that, the Respondent to consider the rectification application filed by the Petitioner under Section 89(1)(A) of the CGST Rules, inserted through Notification No. 35/2021-Central Tax dated September 24, 2021. Further, the Respondent is to pass necessary orders thereon expeditiously as per Section 18 of the Integrated Goods and Services Tax Act, 2017 (“the IGST Act”).
- Held that, the writ petition was disposed of with a direction to the Respondent to provide an opportunity of hearing to the Petitioner before the final order is passed on the rectification application, until which no coercive measures shall be taken against the Petitioner for realisation of tax amount assessed in the Impugned Order.
Relevant Provisions:
Transfer of input tax credit.
18. On utilisation of credit of integrated tax availed under this Act for payment of,––
(a) Central tax in accordance with the provisions of sub-section (5) of section 49 of the Central Goods and Services Tax Act, the amount collected as integrated tax shall stand reduced by an amount equal to the credit so utilised and the Central Government shall transfer an amount equal to the amount so reduced from the integrated tax account to the central tax account in such manner and within such time as may be prescribed;
(b) Union territory tax in accordance with the provisions of section 9 of the Union Territory Goods and Services Tax Act, the amount collected as integrated tax shall stand reduced by an amount equal to the credit so utilised and the Central Government shall transfer an amount equal to the amount so reduced from the integrated tax account to the Union territory tax account in such manner and within such time as may be prescribed;
(c) State tax in accordance with the provisions of the respective State Goods and Services Tax Act, the amount collected as integrated tax shall stand reduced by an amount equal to the credit so utilised and shall be apportioned to the appropriate State Government and the Central Government shall transfer the amount so apportioned to the account of the appropriate State Government in such manner and within such time as may be prescribed.
Explanation.––For the purposes of this Chapter, “appropriate State” in relation to a taxable person, means the State or Union territory where he is registered or is liable to be registered under the provisions of the Central Goods and Services Tax Act.
89. Application for refund of tax, interest, penalty, fees or any other amount.-
(1A) Any person, claiming refund under section 77 of the Act of any tax paid by him, in respect of a transaction considered by him to be an intra-State supply, which is subsequently held to be an inter-State supply, may, before the expiry of a period of two years from the date of payment of the tax on the inter-State supply, file an application electronically in FORM GST RFD-01 through the common portal, either directly or through a Facilitation Centre notified by the Commissioner:
Provided that the said application may, as regard to any payment of tax on inter-State supply before coming into force of this sub-rule, be filed before the expiry of a period of two years from the date on which this sub-rule comes into force.
Conclusion: The Kerala High Court’s decision serves as a legal precedent emphasizing the importance of rectification applications when taxpayers mistakenly claim ITC under the wrong heads. The court’s directives provide clarity on the process and timelines for rectification, ensuring fair treatment for taxpayers.
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