Ground-2: Excess Availment of Input Tax Credit under IGST Act (GSTR-2A vs. GSTR-3B)-3

[Shambhavi Nayak]

On Reliance on GSTR-2B vs. Statutory Restrictions: The Taxpayer's defence relying on Form GSTR-2B is factually and legally untenable for the period in dispute. While they contend that they relied on Form GSTR-2B, the verification reveals that their claim includes ineligible prior-period credits. Consequently, the Taxpayer has neither strictly adhered to GSTR-2B (for the current period data) nor have they furnished any month-wise reconciliation to demonstrate that the excess ITC was within the statutory tolerance limit of 5% prescribed under Rule 36(4) for the period up to December 2021. In the absence of such reconciliation, the excess claim remains unsubstantiated under any provision of the law.

b. Factual Error: A scrutiny of the GSTR-2B of April-2021 reveals that the GSTR-2B figures relied upon by the Taxpayer include ITC amounting to Rs. 4,65,418.49 which pertains to the previous financial year (2020-21). The Taxpayer has failed to provide any documentary evidence to substantiate the transition or eligibility of this prior period credit in the current year.

c. Legal Position: For the majority of FY 2021-22 (up to 31.12.2021), the availment of ITC was governed by Rule 36(4) of the CGST Rules, 2017. This rule explicitly restricted ITC on missing invoices to a maximum of 5% of the eligible credit found in GSTR-2A. The Taxpayer cannot bypass this statutory cap by selectively relying on GSTR-2B figures that contain ineligible prior-period data.

d. Submission of Books vs GSTR-2A:

[KASTURI SETHI]

Sh.Nayak Ji.

What is the purpose of this post ? Will you please specify ?

[Shambhavi Nayak]

Actually the query is of 7500 word bigger so couldn't post in a single query posted as 1,2,,& 3

Is there any option to attach pdf file or any email id so that i can in brief post the query.

[Sadanand Bulbule]

Query should be in one or two lines. Experts can undertand the intrinsic remedy.

[Shambhavi Nayak]

Query is during GST audit the officer has passed an order for ITC claim in GSTR 3B exceeding GSTR 2A auto populated figures for the year 21-22.

IGST excess Claimed for the extent of Rs. 217518.

His point is upto December 2021 we couldn't avail more than 5% on Auto populated GSTR 2A

We had excess amount in CGST and SGST.

What stand we have to take while filling Appeal before JC Appeal

[Sadanand Bulbule]

It is a settled position of law through various High Courts that ITC cannot be denied merely on the basis of mismatch with GSTR-2A without establishing ineligibility under Section 16 of the CGST Act, 2017 or without initiating action against the supplier. The impugned order, being based solely on such mismatch and that too on a tax head-wise comparison under Rule 36(4), is contrary to these settled principles.

So you have enough effective grounds to defend your case before the FAA and take the support of pleathora of judicial rulings on this issue. The Hon'ble Supreme Court in its judgement rendered in the case of E-Com Gill Coffee Trading Pvt Ltd Vs. Commissioner of Commercial Taxes, Karnataka - 2023 (3) TMI 533 - Supreme Court is of strong help to justify the entitlement of ITC which is in consonance with Section 16 of the CGST Act, 2017. Besides there were huge reliefs given by the Government of India for the taxpayers in view of the COVID-19. Explore them.

[Raam Srinivasan Swaminathan Kalpathi]

Foremost, I would urge the RTP to drill down the ITC availed to the identified suppliers who have not filed their respective GSTR-1 Returns. Only upon identifying the individual suppliers can one take any stand.

 

[Shilpi Jain]

Requires analysis of more facts and the allegation of the officer. Would not do justice this way to answer this question here

[Shilpi Jain]

Though you can note that there are high court decisions which has read down the provision 16(2)(c) of the CGST Act in case of a bona fide purchaser i.e. in case you are a bona fide person then credit should not be denied to you merely because the supplier has not paid GST.

[Shilpi Jain]

One of them is this

Input tax credit cannot be denied to bona fide recipients merely because the supplier failed to remit tax.

12. Case-Laws - HC : Section 16(2)(c) of the CGST/KGST Act and Rule 36(4) of the CGST/KGST Rules were read down, not struck down, so that input tax credit is not denied to a bona fide recipient who has satisfied the other statutory conditions merely because the supplier failed to remit tax to the Government. The High Court accepted that a purchaser cannot be required to ensure the supplier's tax payment, as that would impose an impossible burden and penalise the recipient for another's default. The provisions were therefore confined to non-bona fide, collusive or fraudulent transactions, and ITC remains available to genuine recipients affected only by supplier default.

AI Summary

Input tax credit mismatch under GST depends on reconciliation, supplier verification, and the Rule 36(4) tolerance limit. Excess input tax credit under the GST framework must be assessed against the statutory restrictions for the relevant period, including the 5% tolerance under Rule 36(4) up to December 2021. Reliance on GSTR-2B is insufficient where it contains prior-period or otherwise ineligible credits, and the taxpayer must provide month-wise reconciliation and documentary support to show that the claim remained within the permissible limit. In the absence of such reconciliation, the excess ITC claim remains unsubstantiated.