ITC claimed in Legal Heir GSTN but the invoice was reflecting in Deceased proprietor GSTN

[Bhavik Sankhla]

That there was death of the proprietor in the month of December 2021. That the New Registration was taken in the name of the proprietor's son being the legal heir and business was transfered to son. That Old registration in the name of father was cancelled wef December 2021.

But the issue was in the month of February 2021.The supplier uploaded the invoice in the old GSTN of deceased father. The ITC was claimed in Legal Heir Son's New GSTN, but the ITC was reflecting GSTR 2A of deceased father's old GSTN.

The Assessee asked supplier to correct the GSTN in the GSTR-1 in February 2021 itself but the supplier was government department did not made the necessary amendments in his GSTR-1.

Department has issued Notice and asking to reverse ITC.

Is the ITC claimed in the legal heir's New GSTN liable to be reversed ?

Thanks in Advance.

[Sadanand Bulbule]

Refer the following Section 18[3] :

(3) Where there is a change in the constitution of a registered person on account of sale, merger, demerger, amalgamation, lease or transfer of the business with the specific provisions for transfer of liabilities, the said registered person shall be allowed to transfer the input tax credit which remains unutilised in his electronic credit ledger to such sold, merged, demerged, amalgamated, leased or transferred business in such manner as may be prescribed.

So find out whether transfer of business to you falls under the above highlighted specific situation?

If not, then ITC is not available to the new GSTIN and needs to be reversed.

[KASTURI SETHI]

Dear Querist,

Also go through the following circular :-

Input Tax Credit (ITC) — Transfer of ITC in case of death of sole proprietor — Clarification

Circular No. 96/15/2019-GST, dated 28-3-2019

 

[Bhavik Sankhla]

Thanks for Response,

That Deceased proprietor's Registration got cancelled in December 2021. And then New Registration taken in the name of Deceased Proprietor's Son being the legal heir. That also in month of December 2021 Utilised ITC was also transferred to New GSTN through Form ITC 02 procedure as prescribed u/s 18(3) and Circular No. 96/15/2019-GST, dated 28-3-2019 and Old GSTN of Deceased proprietor was also cancelled in December 2021 itself.

But Later in the month of February 2022, one supplier uploaded the purchase invoice on the old GSTN of Deceased proprietor which was cancelled in December 2021 which resulted in reflection of ITC on the GSTR 2B/2A of the old GSTN instead of GSTR 2A/2B of New Active GSTN.

That now Department has issued notice under new active GSTN that excess ITC has been claimed in new GSTN which is not reflecting in GSTR 2A/2B of New GSTN. But the fact is Excess ITC claimed in New GSTN which the department is asking to reverse is the ITC which has been reflecting in the GSTR 2A/2B of the old GSTN in the month of February 2022.

Now the whole issue is Excess ITC (reflecting in old GSTN) has been claimed under New GSTN.

My Question is whether is

Whether this ITC can be allowed or is to be reversed or we can argue that

1. This ITC cannot be denied merely due to minor procedural lapses.

2. This ITC cannot be denied because it is bona fide transaction and tax has been paid to the government by the supplier and ITC has not been claimed in old GSTN. Although the GSTN has been changed due to death of the deceased proprietor but the business is the same. Therefore, ITC should be allowed.

Thanks in Advance.

[KASTURI SETHI]

 Your views are  full of substance but SCN will be issued by the department. It is only a technical dispute.. Relief (justice)  is  possible only  through litigation.  

   You need case-law (s)  in support of your defence. 

  

[Shilpi Jain]

Whether ITC-02 was filed for transferring of ITC from father to son GSTIN?

If not file that to trfr such ITC since law does not prescribe any time limit to trfr thru ITC-02.

If father GSTIN has not availed this credit then take a stand in litigation that this is only a procedural error and show the communications with the vendor.

Though you will have to consider the amount of ITC involved and the cost involved to take a final decision on this issue.

[Shilpi Jain]

This is for the reason that these kind of disputes will not settle in the initial stages of litigation and may require to travel up to GSTAT (Tribunal)

[Ved Gupta]

Hello Bhavik,

I have a similar case, currently pending before the apellate authority. Did you happen to find any relevant case-laws and/or rulings in favour of the case.

If so, please do share. It will be a huge help.

Thanks.

AI Summary

ITC Claim Under New GST Registration Challenged Due to Invoice with Old GST Number A business transferred following the death of the original proprietor, with the legal heir obtaining a new GST registration and the old registration cancelled. However, a supplier, a government department, uploaded an invoice under the deceased proprietor's old GST number before the transfer date. The legal heir claimed input tax credit (ITC) under the new GST number, but the ITC appeared in the old GST number's records. Despite requests, the supplier did not amend the invoice details. The tax department issued a notice demanding reversal of the ITC claimed. The key issue is whether the ITC claimed under the legal heir's new GST registration is liable for reversal due to the invoice reflecting the old GST number of the deceased proprietor.