SCRUTINY PARAMETERS CASE FOR 20-21

[SURYAKANT MITHBAVKAR]

GST Department sent Notice for intimation discrepancies in the return after scrutiny for 20-21 u/s 61 under Parameter-0074 (In-eligible ITC claimed from RC is cancelled suppliers.

We have availed credit after invoices are uploaded in GSTR-1 by party as per GSTR-2A in subsequent period. The party has not filed GSTR-3B hence tax officer's own intiative and cancelled (suo-moto) registration w.e.f. 31.07.2020 on May-21.

Pl advise what reply to submit to department on the above subjects.

[KASTURI SETHI]

Dear Querist,

(1) Pl. peruse Calcutta High Court Judgement in the case of Gargo Traders Vs. Joint Commissioner reported as 2023 (6) TMI.533-Cal.H.C. Date of order 12.6.23.

(2) Also go through an article on the issue written by Sh. Siddhant Pathak and displayed in TMI on 21.6.23.

(3) Also go through an article on the issue written By Sh. Bimal Jain C.A. and displayed in TMI on 22.6.23.

[Padmanathan KV]

This issue is highly contentious. There are many judgments in Pre-GST regime also that demand cannot be made on ITC passed on by a dealer before cancellation.

However, in your case the supplier has not filed GSTR-3B for the relevant period for which ITC has been passed on. Thus, one of the condition for taking ITC i.e., section 16(2)(c) is not satisfied.

In my opinion, this matter will have to travel up to Courts to get settled. You will have to take a stand based on the quantum involved, cost of litigation, litigation-apetite etc

[KASTURI SETHI]

Dear Querist,

The following points are worth consideration:-

(1) Your period involved is 20-21 and sub-sections of Section 16 (2) (aa) and (2) (ba) have been inserted w.e.f. 1.1.22 and 1.10.22respectively. This technical ground can help you.

(2) On the other hand, your availment of ITC is subject to fulfilment of the conditions laid down in Sections 38 and 37 of CGST Actalso. Section 38 stands amended w.e.f. 1.10.22 (but already chained even prior to 1.10.22 ) and Section 37 stands amended retrospectively w.e.f. 1.7.17. Both these Sections are legal bottlenecks in getting relief and the major legal hurdle is Section 155 of CGST Act.

(3) It is the duty of the Govt. to recover the tax not paid/deposited into Govt. account by the supplier.

(4) Practically and constitutionally, the buyer has neither control over the supplier nor can even supervise/ monitor his transactions/activities

There is no doubt that you will have to face litigation. You will have to fight a very long legal battle in this case. The Govt. has statutorily surrounded. the buyer who takes ITC with an aim to safeguard Govt. revenue.

Disclaimer :

My above views are my personal views and are not meant for legal and Court purpose. My views are for enrichment of knowledge of the querist and other visitors of TMI website.

[KASTURI SETHI]

Also read Rule 37 A of CGST Rules for taking re-credit after payment of tax by the supplier and filing GSTR 3 B return. Inserted w.e.f. 26.12.22

[Ganeshan Kalyani]

The latin maxim Lex non cogit ad impossibilia means ' law does not compel one to do that which cannot possibly be done. ' It is evident that the conditions prescribed by S. 16 (2) (c) of the Act cast a burden on a recipient of a taxable supply to ensure the supplier makes payment which is impossible to be discharged by him.

AI Summary

Ineligible input tax credit due to supplier non filing and cancellation, triggering reversal obligations under Section 16(2)(c). Dispute concerns availability of input tax credit where the supplier's registration was cancelled and the supplier failed to file required returns. The operative issue is whether a recipient can retain ITC taken after invoices were uploaded when the supplier did not file GSTR-3B and did not deposit tax, engaging the condition in Section 16(2)(c) and triggering reversal and recredit procedures alongside return reconciliation and recovery obligations.