Two recent GST case law developments have significantly favored the assessee in matters concerning Input Tax Credit (ITC). These cases highlight crucial interpretations of the GST Act provisions and are pivotal for understanding the treatment of ITC discrepancies.
Case 1: Allahabad High Court Ruling on ITC Discrepancies (Shree Krishna Traders v. State of U.P. [WRIT TAX NO. 1106 OF 2023])
In this case, the petitioner challenged the proceedings under section 74 of the Uttar Pradesh GST Act, which pertained to the non-payment or underpayment of tax due to differences in ITC reported in Forms GSTR-3B and GSTR-2A. The petitioner’s argument hinged on a circular dated January 2, 2023, specifically focusing on paragraph 3(d), which addresses the handling of discrepancies caused by suppliers incorrectly declaring the recipient’s GSTIN in Form GSTR-1. The circular outlines a process wherein the actual recipient’s officer should inform the tax authority of the registered person with the erroneously stated GSTIN.
Despite the order acknowledging this circular, it failed to apply the provisions favorably to the petitioner. The petitioner, therefore, sought to quash this order and requested a re-evaluation by the concerned authority. The Allahabad High Court agreed, quashing the order under Section 74 of the CGST/UP GST Act, 2017, and remanded the matter for a fresh decision, with the revenue expressing no objection to this resolution.
Case 2: Madras High Court’s Directive on Reflecting Transitioned ITC (Stanley Engineered Fastening India (P.) Ltd. v. State Tax Officer [W.P. NO. 28044 OF 2023])
This case centered on the petitioner’s right to utilize transitioned input tax credit under Section 140 of the CGST Act, 2017. The petitioner was granted this credit, but it was not reflected in their electronic credit ledger. Drawing upon the Supreme Court’s ruling in Union of India v. Filco Trade Centre (P.) Ltd., the petitioner submitted a revised TRAN-1 form to address this oversight.
The Madras High Court ruled in favor of the petitioner, instructing the revenue to update the petitioner’s electronic credit ledger to reflect the credited amount accurately. This update would enable the petitioner to use the credit for offsetting their tax liabilities under the GST laws, particularly under Section 140 of the CGST Act, 2017, and the Tamil Nadu GST Act, 2017.
These rulings are instrumental in clarifying the treatment of ITC discrepancies and the reflection of transitioned credits in electronic ledgers, providing essential guidance for taxpayers and authorities alike in handling similar issues under the GST framework.
Summary of Rulings Both the GST cases
In a significant development for Indian GST jurisprudence, two landmark 2023 rulings from the Allahabad and Madras High Courts have provided clarity on Input Tax Credit (ITC) discrepancies. The Allahabad High Court’s decision in ‘Shree Krishna Traders v. State of U.P. [WRIT TAX NO. 1106 OF 2023]’ revolved around resolving ITC differences between Forms GSTR-3B and GSTR-2A, offering relief to taxpayers facing similar discrepancies due to supplier errors. Meanwhile, the Madras High Court, in ‘Stanley Engineered Fastening India (P.) Ltd. v. State Tax Officer [W.P. NO. 28044 OF 2023]’, directed the revenue to accurately reflect transitioned ITC in the petitioner’s electronic ledger, following the precedent set by the Supreme Court. These rulings are pivotal in guiding the accurate application and reflection of ITC, reinforcing taxpayers’ rights under the GST framework.
