THE JUDGMENT/ORDER OF KERALA HIGH COURT

In a recent legal milestone, the Kerala High Court issued a pivotal judgment addressing the intricacies of input tax credit (ITC) claims under the Central Goods and Services Tax (CGST) and State Goods and Services Tax (SGST) Acts. This article delves into the core aspects of the judgment, shedding light on its significance and implications for businesses navigating the complex terrain of tax regulations.

 

Background:

The judgment in question pertains to a registered dealer contesting orders dated 14.06.2023 and 16.06.2023 (Exts. P5 and P5(a)), challenging the denial of input tax credit based on disparities between Form GSTR 2A and Form GSTR 3B for the tax period 2017-18.

 

Government Circular:

Central to the petitioner's case was the reference to Circular No.183/15/2022-GST, a directive from the Government of India. This circular addresses challenges faced by taxpayers concerning variations in input tax availed in Form GSTR 3B and Form GSTR 2A for the financial years 2017-18 and 2018-19. The circular provides a comprehensive framework for proper officers to scrutinize input tax credit conditions.

 

Legal Precedent:

The petitioner's legal representative also cited a noteworthy precedent, Diya Agencies v. State of Kerala, highlighting the court's stance that denying input tax credit solely based on GSTR-2A not reflecting the tax is untenable. The court mandated that assessing officers must provide an opportunity for the petitioner to substantiate their claims.

 

Key Provisions of the Circular:

This article explores the critical provisions outlined in the Circular, specifically in paragraph 4. This includes the meticulous procedure for proper officers to seek details, the requisite conditions under Section 16 of the CGST Act, and the actions to be taken based on differences between ITC claimed in GSTR-3B and that available in GSTR 2A.

 

Applicability and Clarifications:

Paragraph 5 of the Circular clarifies that its applicability extends to bona fide errors committed during financial years 2017-18 and 2018-19. It underscores that the guidelines for reconciling input tax credit claimed in Form GSTR-3B and Form GSTR-2, as mirrored in Form GSTR-2A, are clarificatory in nature.

 

High Court Decision:

Taking into account the Circular and the legal precedent, the Kerala High Court, in a noteworthy decision, allowed the writ petition, thereby setting aside the contested orders. The matter has been remitted back to the Assessing Authority for a fresh evaluation of the petitioner's input tax credit claim for the financial year 2017-18, irrespective of GSTR 2A.

 

Implications for Businesses:

This judgment underscores the significance of adhering to government-issued circulars and the principles of natural justice in the realm of tax assessments. It urges businesses to scrutinize their ITC claims, aligning them with the clarified procedures, and engage proactively with assessing authorities to substantiate their claims.

 

the recent ruling by the Kerala High Court provides a nuanced perspective on the complexities surrounding input tax credit claims. It reinforces the necessity for a fair and thorough assessment process, aligning with statutory provisions and government-issued guidelines. Businesses should remain vigilant and well-informed about such legal developments to navigate the intricate landscape of GST regulations effectively.

 

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