Now a days, GST department making tax assessment of initial years of GST from 2017-18 to 2020-21.
In these years, one common issue is allowability of input tax credit.
Some common questions relating to claim of input tax credit is flowing in every one minds likes:-
If buyer has tax invoice in his possession, and has made the payment to suppliers through banking channel, but supplier did no pay such tax to the Government, whether, input tax credit can be denied to buyer.
If buyer has rightly claimed the input tax credit in his GSTR-3B, but some invoice are not reflecting in GSTR-2A, whether department can demand the difference amount from buyer.
If buyer has paid the the amount to supplier, but supplier did not pay it to the government, whether such tax can be demanded from the buyer without taking any action against the supplier or without making any effort for recovery of such tax from the defaulting supplier.
Whether it is the duty of buyer to regulate his supplier as regard to payment of tax and filing of correct returns
Whether it is a settled law that input tax credit, shall be allowed, only in those cases where such input tax credit is reflecting in GSTR-2A
Whether department can determine the tax liability merely on the ground that input tax credit as claimed in the GSTR-3B exceed the the input tax credit shown in GSTR-2A without giving an opportunity of being heard.
If buyer has purchased the good, and made the payment of tax to the supplier, but could not claimed input tax credit of such goods in his GSTR-3B with in the time as prescribed in section 16(4), whether, he can claim such ITC after the prescribed time limit, whether claim of ITC is his constitutional right which can be availed at any time. whether restriction of such time limit is constitutionally valid.
These Issues are mainly in initial years when GSTR-2A was not in picture, and buyer was not able to identify the suppliers who does not pay tax to the government or who does not file their correcr returns in time.
After the introduction of GSTR-2A, problem relating to such mismatch of input tax credit between GSTR-3B and GSTR-2A has been resolved to a great extent, and now buyer can identify in each tax period about such mismatch, and he also has sufficient time to get rectify it from the supplier, hence, we can hope that after introduction of GSTR-2A, such cases shall not be very common.
Through this article, we try to understand the latest position of law on claim of input tax credit. We will also discuss the government's view on availment of input tax credit, and the rulings made by courts on this issue. We will conclude by sharing few precautions which a taxpayer should take to protect his right of input tax credit.
Section 16 to 21 of CGST Act 2017 deals with the matter relating to input tax credit.
Section 16 of this act deals with the conditions and restrictions for input tax credit.
It say that a registered person shall be eligible to claim and avail input tax credit, if he satisfy all the following conditions:-
He must have a valid tax invoice in his possession (section 16(2)(a);
With effect from 01-01-2022, ITC shall be allowed, if detail of such tax invoice has been furnished by the supplier in his GSTR-1 and such invoice is reflecting in GSTR-2A (section 16(2)(aa);
He has received the actual supply of goods or service (section 16(2(b);
Input tax credit is not restricted as per section 38 (section 16(2)(ba); Note:- This provision is applicable from 01-10-2022, as per section 38, each recipient is given two information on portal, first: in form GSTR-2A, which contain the detail of tax invoice furnished by his suppliers in his GSTR-1 and Second in form GSTR-2B which contain the detail of tax invoice in respect of which supplier has duly paid the tax to the Government and has made all the due compliance and now whose input credit can be availed by the recipient.
Supplier has paid tax of such tax invoice to the Government (section 16(2)(c); Such provision is subject to section 41. Section 41 says that if suppliers has not paid tax, recipient may claim and avail the input tax credit on provisional basis, but if supplier does not pay tax in respect of such supply till 30th September of next financial year, recipient shall reverse such input tax form his e-credit ledger till 30th November of next financial year, if he does not do so he shall be liable for interest from 1st December of nexy financial year.
Registered person who wants to take the benefit of input tax credit has claimed such input tax in his GSTR-3B(section 16(2)(d);
No input tax credit of fixed assets shall be allowed, if registered person has claimed the depreciation on tax components of the cost of fixed assets(section 16(3):
Input tax credit of an invoice pertaining to a financial year can be claimed in any GSTR-3B till the 30th November after the end of financial year to which such invoice pertains (section 16(4):
If any tax invoice is not reflecting in GSTR-2A, buyer can claim and also avails the input tax credit of such invoice on provisional basis, But if such tax invoice does not reflect in GSTR-2A till 30th September of next financial year, then he is required to reverse input tax credit of such invoice in his GSTR -3B till 30th November of next financial year, if he does not such reversal, he shall be liable for interest, and interest liability shall commence from 1st December of next Financial year(Section 41 wef 01-10-2022). For example a tax invoice dated 14-04-2023, is not reflecting in GSTR-2A, buyer can claim and avail input tax credit of such invoice till 30-9-2024, but if such invoice does not reflect in GSTR-2A till 30-09-2024, buyer shall reverse it by 30-11-2024, if he does not do so, he shall be liable for interest from 01-012-2024.
Recipient must have tax invoice or debit note issued by the supplier in his possession; (Rule-36).
If input tax credit of an invoice has been availed, recipient must have paid the amount of such invoice to the supplier (not third party) with in 180 from the date of invoice, if not paid, amount equal to input tax so availed, shall be reversed or paid in the month in which 6 months expires ;(Rule-37)
If supplier has issued tax invoice, but he does pay tax of such invoice, recipient may claim input tax credit of such invoice on provisional basis, but, if suppliers does not pay tax of such invoice till 30th September of next financial after the end of relevant financial year to which such tax invoice pertain, recipient shall reverse such input tax credit in his GSTR-3B till the 30th November of next financial year after the end of relevant financial year to which such tax invoice pertain, if he does not do so, he shall be liable for interest, However if in subsequent period, supplier has paid such tax, recipient may reclaim such input tax in his GSTR-3B. There is no time limit for such reclaim; (Rule-37A) this new rule has been inserted on 26-12-2022.
Present scheme of law relating to claim or availment of Input tax credit is as under:-
If a supplier declare a tax invoice in his GSTR-1, he compulsorily shall pay tax of such invoice, otherwise he cannot file his GSTR-3B Return because portal does not accept GSTR-3B return without payment of tax liability as declared in GSTR-1.
As per Rule 59(6), GSTR-1 of a month cannot be filed, if a person has not filed his GSTR-3B for preceding tax period. Thus as per this this rule, a supplier, is bound to pay tax as declared by him, otherwise he cannot remains in picture on GSTN portal. It can be happened only in those cases, where supplier has closed his business, or his registration has been cancelled.
Now GSTR-2A and GSTR-2B is made available to each registered person every month, wherefrom, he can easily verify that which tax invoices are not reflecting in GSTR-2A and GSTR-2B, and accordingly, he can follow up this matter with the concerned supplier regarding non reflection of tax invoice in his GSTR-2A and GSTR-2B. For such corrections law permits sufficient time. As per section 41 and rule 37A, such correction can be made by the supplier till the 30th September of next financial year. Meanwhile law also does not impose any restriction on buyer to claim and avail input tax credit of such omvoices on provisional basis.
Thus on perusal of this present scheme of law, there is no dispute that problem as regard to mismatch of ITC has been resolved to a reasonable extent.
Problem of mismatch of ITC was in initial years when GSTR-2A was not in picture, therefore most the disputes are in these initial years.
For these initial years also i.e till the period from 01-07-2017 to 31-12-2021, CBIC board has clarified in its circular No 183 and 193 that claim of input tax credit shall not be denied merely for the reasons that tax invoices are not reflecting in GSTR-2A, If, tax invoices are not reflecting in GSTR-2A it is the duty of proper officer to examine the claim of registered person by taking physical copy of tax invoice, and ig his claim is gound genuine and satisfy all the condition, he shall be given input tax credit.
Thus now no one can say, that Government is not concernt with the problem og genuine tax payer.
From Overall latest judhement of courts, view of the courts are as under:-
Benefit of Input tax credit is not a vested right of tax payer. It becomes a vested right when he has satisfied all the conditions for claiming input tax credit, in which one of them is supplier has paid the tax.
Benefit of input tax credit is not a vested right, it is concession or benefit, and in case of concession or benefit Government has power to impose certain conditions and restrictions, hence, such conditions and restrictions does not violate any article of the constitution.
Claim of input tax credit cannot be denied merely for the reasons that tax invoice are not reflecting in GSTR-2A, GSTR-2A is only a facility to registered person to assess the tax liability.
Government first must try to his best for recovery of tax from the supplier, and in exceptional case, where recovery is not possible from supplier, then only, credit of ITC should be denied to recepient.
Input tax credit cannot be claimed merely on the basis, that buyer has tax invoice in his possession, and he has made the payment to supplier through banking channel. If buyer fails to prove the actual supply of goods beyond the doubts, input tax credit can be denied to him.
Benefit of Input tax credit is not a vested right of a buyer, hence, if not claimed within the time limit as prescribed in section 16(4), it shall not be allowed. Buyer cannot argue that such restriction of time limit is violation of article 14, 19(1)(g) and 300A of the constitution of India
Diya Agencies v/s State tax Officer (Kerla High court) Dated 12-09-23:-
Claim of input tax credit cannot be denied merely for the reasons that tax invoice are not reflecting in GSTR-2A.
GSTR-2A is only a facility to registered person to assess the tax liability.
If an invoice is not reflecting in GSTR-2A, tax officer is bound to examine the claim of taxpayer by other means, if buyer has satisfied all the conditions to claim input tax credit, such credit shall be allowed to him.
State of Karnatka v/s Ecom Gill coffee Trading Private limited (SC) dated 13-03-2023:-
It was held, that claim of input tax credit shall not be allowed merely for the reasons that registered person possess the original copy of Tax Invoice, and he has made the payment of such invoice to the supplier through banking channel.
If, in the view of department, actual delivery of goods is doubtful, then, it is the duty of registered person who want to avail the input tax credit, to prove the actual receipt of goods beyonds the doubts, if he does not do so, claim of ITC can be denied to him.
Actual delivery or receipt of goods can be established by furnishing the following details:-
Suncraft Energy Pvt Ltd v/s Assistant Commissioner (Calcutta High Court) Dated 02-08-2023:-
it was held that If Recepient has tax invoice in his possession, and payment has been made to supplier, and actual delivery of goods is not doubtful, claim of input tax credit cannot be denied merely for the reasons that it is no reflecting in GSTR-2A. Input tax credit can be denied only in some exceptional cases like, supplier is missing, there was a conspiracy between supplier and claimant of input tax credit, tax cannot be recovered from supplier even after selling his property. Note:- The Hon’ ble supreme court has upheld the view of Calcutta high court in this case and has dismiss the SLP of department in his recent judgement on 14-12-2023
Aastha Enterprises v/s Commissioner of Commercal tax Bihar (Patna HC) Dated 18-8-2023:-
It was held, if the supplier has collected tax from the buyer, and he has not deposited the tax to the government, but the buyer has copies of the original bills, and has also made the payment through banking channels, then also, the buyer can be denied to avail the credit of input tax.
Because, there is a clear provision in section 16(1)(c) of the CGST Act, that the buyer will get the right to claim the credit of input tax, only when the supplier has paid the tax of that invoice.
The benefit of input tax credit is not a “Vested Right” of the taxpayer. In the eyes of law, the “Benefit of Input Tax credit” is only a “Benefit and Exemption”, and such “Benefit and Exemption” only can be availed by the tax payer, when, he fulfills all the conditions laid down in the law for availing it, an important condition of which is, payment of tax by the supplier.
Under any law, for any exemption or benefit, the law making authority has the right to make certain conditions and rules for this exemption or benefit.
If the supplier has not paid the tax, then, it will be considered that all the conditions for taking credit of input tax have not been followed, hence, the buyer does not have the right to claim input tax, but this tax can be claimed from the the supplier by initiating legal proceedings.
Thirumalakonda Plywoods v/s Assistant Commissioner(A P High Court) Date of Order:- 18-07-2023:-
It was held, facility to file GSTR-3B with late fee is only for allowing late filing of GSTR-3B, and not for extension of deadline for availing input tax credit as prescribed in section 16(4).
Section 16 (2) of the CGST Act does not bypass the provisions of Section 16 (4), both the sections have independent existence, because purpose of both the sections is same.
Tax credit is not a vested right of any tax payer, but is only an exemption and benefit, the government can impose certain conditions for any exemption and benefit, hence, section 16 (4), does not violate the Article 14 (Right to Equality), Article 19(1)(g) (Right to free Trade), and Article 300A (No person shall be deprived of his property) of the Constitution.
CA Anil Goyal (Kotpuli)
Comment: