Impact of GSTR-2A Non-Reflection on ITC Denial

Introduction

In a recent legal development, the High Court addressed a crucial issue regarding Input Tax Credit (ITC) under the Goods and Services Tax (GST) regime. The case of Diya Agencies v. The State Tax Officer & Others brings to light significant considerations for taxpayers regarding their ITC claims.

Facts of the Case

Diya Agencies contested an assessment order for the fiscal year 2017-18. The petitioner’s contention revolved around the denial of their ITC claim, which the tax authority based on the non-inclusion of invoices in the GSTR-2A form.

Issue

The central issue before the High Court was whether the denial of ITC solely on the grounds of invoices not reflecting in GSTR-2A is justified under the GST law.

Held

The High Court ruled in favor of Diya Agencies, emphasizing that the denial of ITC solely due to non-availability in GSTR-2A is unsustainable. The court highlighted that under Section 16(2) of the GST Act, ITC eligibility is contingent upon fulfilling specific conditions, including payment of tax to suppliers and possession of valid tax invoices. The court further referenced the stance of the Central Board of Indirect Taxes and Customs (CBIC), clarifying that GSTR-2A serves as a facilitative document and does not independently determine ITC eligibility under self-assessment.

Petitioner’s Argument

Diya Agencies argued that they fulfilled all statutory conditions required under Section 16(2) of the GST Act. They had paid the taxes to their suppliers and possessed valid invoices. The petitioner also cited precedents set by the Supreme Court and the Calcutta High Court, which upheld that the non-deposit of tax by suppliers does not warrant the denial of ITC, provided there is no collusion between the parties.

Court’s Decision and Directions

The High Court directed Diya Agencies to present all necessary evidence before the Assessing Officer within 15 days. Based on this evidence, the officer is instructed to re-evaluate the ITC claim and pass a fresh order accordingly. The writ petition was disposed of with these directives, ensuring fair consideration of the petitioner’s claims.

Conclusion

This ruling by the High Court provides clarity and reassurance to taxpayers regarding the process of claiming Input Tax Credit under GST. It underscores the importance of fulfilling substantive conditions laid down by law rather than relying solely on procedural documents like GSTR-2A for determining ITC eligibility.