GST Composition Scheme Exit: Small Taxpayer Seeks Relief After Missing ITC-01 Filing Deadline Due to Technical Issues Under Section 18(1)(c)

The HC addressed a writ application from a small taxpayer who opted out of the GST composition scheme but failed to file Form GST ITC-01 within the stipulated time due to alleged technical issues. While the respondent argued the applicant used the wrong offline tool (version 2.2.3 instead of ITC_Offline_v1.0), the court questioned whether the taxpayer should be denied the substantial refund amount (approximately Rs. 5 Lakh) due to this procedural error. The court directed the respondents to explore solutions allowing the applicant to refile Form ITC-01, emphasizing the need for fairness while upholding procedural requirements under Section 18(1)(c) of the GST Act.

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Issues:
Claim of Input Tax Credit under Section 18(1)(c) of the G.S.T. Act for a taxpayer opting out of the composition scheme and facing technical issues in filing Form GST ITC-01.

Analysis:
The judgment concerns a writ applicant, a small size taxpayer, who opted out of the composition scheme under Section 10 of the G.S.T. Act and sought to claim Input Tax Credit under Section 18(1)(c) of the Act. The applicant filed Form GST CMP-04 on 31st March 2018 to opt out of the composition scheme. However, facing technical issues, the applicant failed to file Form GST ITC-01 within the stipulated time frame as required by Rule 40 of the Central / Gujarat Goods and Services Tax Rules, 2017.

The respondent, through an affidavit-in-reply, contended that the applicant used the wrong offline tool for filing ITC-01 and did not face any technical glitches on the GST portal. The respondent highlighted that the applicant was an active taxpayer on the GST Portal from 1st July 2017 and opted out of the composition scheme on 31st March 2018. The respondent argued that the applicant's use of the incorrect offline tool, version 2.2.3, instead of the correct version, ITC_Offline_v1.0, led to the filing error.

The court acknowledged the respondent's stance but questioned whether all avenues for the applicant to claim the refund were closed. The court expressed that considering the substantial refund amount of approximately Rs. 5 Lakh, it would be unjust to deny the applicant the opportunity to rectify the filing error. The court urged the respondents, particularly respondent No.5, to explore solutions to allow the applicant to refile Form ITC-01. The court directed the learned A.G.P. to communicate with the respondents to find a resolution and scheduled the next hearing for 16th February 2022.

In conclusion, the judgment delves into the technicalities of claiming Input Tax Credit under the GST regime, emphasizing the importance of adherence to procedural requirements while also recognizing the need for fairness and flexibility in exceptional circumstances to ensure taxpayers' rights are upheld.

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