The Chhattisgarh High Court, in its recent ruling the case of Bharat Aluminium Company Ltd vs. Union of India Ors. has granted stay on Recovery Order passed by the Revenue Deptt, denying Input Tax Credit to the Company due to mis-match in two return forms i.e. Form GSTR-2A and Form GSTR-3B, on a condition of deposit of 5% of the demand by the Company.
Facts of the case:
- This writ petition has been filed by the petitioner M/s Bharat Aluminium Company (BALCO) against a notice dated 1st July 2020 and Recovery Order dated 22nd January 2021 passed by the Revenue Deptt. (“Respondent”) denying ITC to the Petitioner, on the basis of mis-matching of ITC availed in Form GSTR-3B with the details furnished by suppliers in Form GSTR-2A for the period 2018-19.
- The Petitioner contended that, there shall not be any automatic reversal of ITC of buyer on non-payment of tax by the seller and in case the seller has not paid the tax, a recovery has to be made from the seller. The Petitioner has come out with the purchases made, but did not tally/match with Form GSTR-2A ITC shown by the seller meaning thereby the seller may not have filed return. When the physical verification was offered to be made by the Petitioner it was not accepted.
- The issue raised in appeal before Chattisgarh High Court was as to whether the ITC was correctly denied to the Petitioner on the basis of mis-matching of ITC availed in Form GSTR-3B with the details furnished by suppliers in Form GSTR-2A?
Order of High Court: Deliberation and Order
The Hon’ble Chhattisgarh High Court in vide its order dated 24th June 2021 held as under:
- Noted that, a perusal of the notice and Recovery Order would show that the issue raised by the Petitioner needs consideration.
- Directed the Respondent not to take any coercive steps pursuant to the Recovery Order passed, on depositing 5% of demand within 15 days by the Petitioner.
- Further directed the Respondent to file a reply within 4 weeks.
Our Comments:
The availibility of ITC on basis of Form GSTR-2A / GSTR-2B has been a debatable issue since long. Currently the Govt, has only allowed a 5% grace over and above the eligible credit as per GSTR-2B that can be availed as ITC as per Rule 36(4) of the CGST Rules, 2021. However vide Finance Act, 2021 a new sub-clause (aa) has been inserted to Section 16(2) (not yet operative) which will restrict ITC to extent of that reflecting in GSTR-2B on basis of filing of GSTR-1 / IFF by the supplier.
Though Rule 36(4) as well as Section 16(2)(aa) of the CGST Act is / will be subject to judicial scrutiny.
Relevant Statutory Provisions:
Section 42 of the CGST Act
“Matching, reversal and reclaim of input tax credit-
42. (1) The details of every inward supply furnished by a registered person (hereafter in this section referred to as the “recipient”) for a tax period shall, in such manner and within such time as may be prescribed, be matched––
(a) with the corresponding details of outward supply furnished by the corresponding registered person (hereafter in this section referred to as the “supplier”) in his valid return for the same tax period or any preceding tax period;
(b) with the integrated goods and services tax paid under section 3 of the Customs Tariff Act, 1975 in respect of goods imported by him; and
(c) for duplication of claims of input tax credit.
(2) The claim of input tax credit in respect of invoices or debit notes relating to inward supply that match with the details of corresponding outward supply or with the integrated goods and services tax paid under section 3 of the Customs Tariff Act, 1975 in respect of goods imported by him shall be finally accepted and such acceptance shall be communicated, in such manner as may be prescribed, to the recipient.
(3) Where the input tax credit claimed by a recipient in respect of an inward supply is in excess of the tax declared by the supplier for the same supply or the outward supply is not declared by the supplier in his valid returns, the discrepancy shall be communicated to both such persons in such manner as may be prescribed.
(4) The duplication of claims of input tax credit shall be communicated to the recipient in such manner as may be prescribed.
(5) The amount in respect of which any discrepancy is communicated under sub-section (3) and which is not rectified by the supplier in his valid return for the month in which discrepancy is communicated shall be added to the output tax liability of the recipient, in such manner as may be prescribed, in his return for the month succeeding the month in which the discrepancy is communicated.
(6) The amount claimed as input tax credit that is found to be in excess on account of duplication of claims shall be added to the output tax liability of the recipient in his return for the month in which the duplication is communicated.
(7) The recipient shall be eligible to reduce, from his output tax liability, the amount added under sub-section (5), if the supplier declares the details of the invoice or debit note in his valid return within the time specified in sub-section (9) of section 39.
(8) A recipient in whose output tax liability any amount has been added under sub-section (5) or sub-section (6), shall be liable to pay interest at the rate specified under sub-section (1) of section 50 on the amount so added from the date of availing of credit till the corresponding additions are made under the said sub-sections.
(9) Where any reduction in output tax liability is accepted under sub-section (7), the interest paid under sub-section (8) shall be refunded to the recipient by crediting the amount in the corresponding head of his electronic cash ledger in such manner as may be prescribed:
Provided that the amount of interest to be credited in any case shall not exceed the amount of interest paid by the supplier.
(10) The amount reduced from the output tax liability in contravention of the provisions of sub-section (7) shall be added to the output tax liability of the recipient in his return for the month in which such contravention takes place and such recipient shall be liable to pay interest on the amount so added at the rate specified in sub-section (3) of section 50.”
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Frah Saeed is a law graduate specializing in the core field of indirect taxes and is the Co-founder of taxwallah.com. She has authored many publications on GST and is into full-time consultancy on GST to big corporates. She as a part of taxwallah.com heads a team comprising of Chartered Accountants and Advocates and plays a key role in our mission to disseminate GST knowledge to all.
