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Kerala HC Accepts Taxpayer’s Plea Against Denial of ITC

In a crisp judgment[1], the Kerala High Court has held that Input Tax Credit (‘ITC’) cannot be denied to a taxpayer merely because the tax paid is not reflected in GSTR-2A. The Kerala High Court’s conclusion aligns with a recent judgment pronounced by the Calcutta High Court where the taxpayer was provided a similar relief. 

Facts and Arguments 

The issue in this case was that the taxpayer was denied ITC by the Revenue Department on the ground that the amount of ITC claimed did not match the amount mentioned in GSTR-2A. The taxpayer relied on Section 16, CGST Act, 2017 and stated that the provision contained a non obstante clause implying that if the conditions prescribed under the provision were fulfilled by the taxpayer, ITC cannot be denied. 

The taxpayer, as in Suncraft Energy Pvt Ltd case, stated that GSTR-2A is for the purpose of taxpayer facilitation and does not/should not impact the ability of a taxpayer to claim ITC. Taxpayer in this case too stated that CBIC’s press release dated 18.10.2018 clarified that GSTR-2A does not impact a taxpayer’s ability to claim ITC on self-assessment basis under Section 16, CGST Act, 2017. Reliance was placed on Bharti Airtel case[2] for similar purposes.

High Court Provides Relief to Taxpayer 

The Kerala High Court essentially accepted all the arguments of the taxpayer, and interestingly, placed reliance on M/S Ecom Gill Trading Pvt Co Ltd case[3] to state that if the taxpayer has paid the tax amount to the dealer and said tax has not been remitted by the dealer, then the burden of proof as regards remittance of tax is on the taxpayer. However, while in M/S Ecom Gill Trading Pvt Co Ltd case the Supreme Court had held that the taxpayer needs ‘to prove beyond doubt’ the genuineness of the transaction, but, in the impugned judgment the Kerala High Court did not use a similar phrase and instead remanded back the matter to Assessing Officer to examine the taxpayer’s claim of ITC and concluded that: 

If on examination of the evidence submitted by the petitioner, the assessing officer is satisfied that the claim is bonafide and genuine, the petitioner should be given input tax credit. Merely on the ground that in Form GSTR-2A the said tax is not reflected should not be a sufficient ground to deny the assessee the claim of the input tax credit. (para 8)

The Kerala High Court’s judgment is a welcome development on the heels of the Calcutta High Court’s judgment in the Suncraft Energy Pvt Ltd case and ensures that the ITC claims of the taxpayers are not denied on whimsical grounds. Instead, the nature of GST returns are respected to facilitate taxpayer claims. Hopefully, this will provide momentum to a more coherent jurisprudence on this issue in the near future. 

[1] Diya Agencies v State Tax Officer 2023 (9) TMI 955. 

[2] Union of India v Bharti Airtel Ltd and Ors 2021 SCC OnLine 1006. 

[3] State of Karnataka v M/s Ecom Gill Trading Pvt Co Ltd 2023 SCC OnLine SC 248.