BRIEF FACTS OF THE CASE
- The Appellant, a registered GST dealer, had received both, interstate and intra-state, inward supplies of goods during FY 2017-18. For the inter-state supplies, where IGST was paid by the supplier, the Appellant was required to avail ITC in the manner prescribed under the GST Act. However, instead of showing the IGST component separately in Form GSTR-3B, the Appellant mistakenly showed it as NIL and bifurcated the IGST input tax credit into CGST and SGST components and utilized it against intra-State outward tax liability.
- The Assessing Authority upon noticing a mismatch between the GSTR-2A and GSTR-3B forms, issued a notice for recovery of CGST/SGST amounts, alleging that the Appellant had utilized "unavailable credit" for outward supplies, which later culminated into a confirmed demand order for the excess credit.
- The Appellant challenged this order in a writ petition, claiming that there was no revenue loss, and that the error was merely procedural without any excess credit being availed
KERALA HIGH COURT'S RULING
- The Kerala High Court quashed the demand order and held that there was no wrong availment of credit. The Court noticed that the only mistake was the technical error in failing to separately show the IGST in the GSTR-3B, which did not affect the actual tax liability as there was no outward supply attracting IGST.
- The High Court observed that the mistake made by the Appellant was procedural / minimal and did not result in any revenue loss. The Court clarified that the provisions under Section 73 of the GST Act, which deal with the recovery of unpaid or excess credit, were not applicable in this case.
- The Court also emphasized that such swift actions at lower adjudication levels are essential in reducing litigation, addressing backlog of cases, and ensuring fairness and certainty in tax administration, especially during procedural matters.
AURTUS COMMENTS
- The said Ruling is based on the well-settled principle that input tax credits shall not be denied to taxpayers on account of mere procedural errors / technical grounds when it does not result into any financial harm for the revenue, and should be treated leniently, with a focus on rectification rather than punishment. The said principle is also emphasized by the Board vide its Circular No. 192/04/2023-GST dated 17th July, 2023.
- The Court has rightly on this basis permitted the utilization of credits as CGST/SGST as Integrated Tax (IGST) credits are completely fungible and permissible for utilization against outward intra-State liabilities in terms of the utilization order defined in section 49(5). Here, it would be apposite to mention that in a converse situation, where CGST/SGST input tax credits are inadvertently availed as IGST, it could result into revenue loss for the State as the CGST/SGST credits are not completely fungible against outward intra-State liabilities, and it may be contrary to the legal framework of utilization of ITC.
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