11 Jun Kerala High Court Verdict: CGST/SGST Act Constitutional Validity
Introduction:
In the case of M/s. M. Trade Links v. Union of India [W.P. (C) NO. 31559 of 2019], the Hon’ble Kerala High Court addressed the constitutional validity of Section 16(2)(c) and Section 16(4) of the CGST/SGST Act. Additionally, the Court considered the retrospective amendment regarding the due date for availing input tax credit (ITC) from September to November 30, starting from the fiscal year 2017-18.
Facts of the Case:
M/s. M. Trade Links and other petitioners contested the legality of Section 16(2)(c) and Section 16(4) of the CGST/SGST Act. They argued that despite meeting the conditions specified under Section 16, they were being denied ITC for various reasons, including technical issues with GSTR-2A, non-remittance of tax by suppliers, and lack of clear proof of payment for inward supplies.
The petitioners emphasized that GSTR-2A serves as a facilitator for self-assessment, and the unavailability of tax payment details in it should not hinder the entitlement of taxpayers to claim ITC. They also argued against the imposition of onerous conditions on bona fide purchasers due to default by supplier dealers, contending that it violates Article 14 and Article 19(1)(g) of the Constitution.
Additionally, they challenged the retrospective amendments to Rule 61 and Rule 61(5) of the CGST Rules, asserting that they are unconstitutional.
Issue:
The main issue revolved around whether Section 16(2)(c) and Section 16(4) of the CGST/SGST Act violate various articles and fundamental rights as guaranteed by the Constitution of India.
Held:
The Kerala High Court upheld the constitutional validity of Section 16(2)(c) and Section 16(4) of the CGST/SGST Act. It ruled that the conditions for availing ITC are not absolute rights but concessions subject to statutory conditions. The Court reasoned that these conditions are essential for the functioning of the GST regime, especially concerning inter-state supplies and tax collection.
Regarding the retrospective amendment changing the due date for availing ITC to November 30, the Court accepted it as a procedural measure aimed at easing initial implementation difficulties. It directed that the amended provision should apply retrospectively from July 01, 2017, granting relief to taxpayers who filed their returns for September before November 30.
Furthermore, the Court granted liberty to petitioners to claim benefits under relevant circulars within one month before the appropriate authority for examination and processing of their claims.
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