The Goods and Services Tax Appellate Tribunal (GSTAT), Hyderabad, has held that businesses cannot be denied input tax credit (ITC) merely because the credit claimed on purchases is higher than the amount reflected in records generated from suppliers' invoices.
A Bench of Judicial Member A.P. Ravi and Technical Member Duvvuri Krishna Srinivas observed that a mismatch between the credit claimed by a buyer and the details reported by suppliers may warrant verification, but cannot by itself establish that the credit was wrongly claimed.
Relying on a GSTAT Bengaluru bench's ruling, “We are in agreement the observation of the Bengaluru Bench that a difference between Form GSTR-2A and Form GSTR-3B may justify verification, but cannot, without more, be treated as conclusive proof that the ITC has been wrongly availed.”, it observed.
For clarity, Form GSTR-3B is the return in which a business reports the input tax credit it claims on its purchases. Form GSTR-2A is an automatically generated statement that reflects purchase invoices uploaded by its suppliers. A mismatch arises when the credit claimed by the buyer does not match the details reported by the suppliers.
The tribunal was hearing a plea by ValueLabs Services Private Limited against a GST demand of ₹41.10 lakh for 2017-18. The department had raised the demand after finding that the ITC claimed by the company was higher than the amount reflected in its suppliers' filings.
The company explained that some suppliers had reported invoices against its earlier GST registration. It also produced supplier certificates, invoices, and ledger records to substantiate its claim.
The tribunal held that the department had failed to follow the verification procedure prescribed under CBIC Circular No. 183/15/2022-GST. It also found that the appellate authority had rejected the certificates without giving reasons or undertaking the required verification.
It distinguished the Supreme Court's ruling in State of Karnataka v. Ecom Gill Coffee Trading Private Limited, noting that the genuineness of the transactions and the existence of the suppliers were not in dispute in the present case.
The tribunal further held that a mismatch alone could not establish fraud, wilful misstatement or suppression of facts to invoke Section 74 of the GST Act.
It set aside ₹40.90 lakh of the demand but upheld ₹20,430 for which the company had not produced evidence that the supplier had paid the tax to the government. The department was directed to calculate applicable interest and quantify the penalty on the surviving demand within four weeks.
For Appellant: Sreenivasa Reddy Yammanuru, K. Akshatha and Siri Reddy
For Respondent: S. Gouri Shanker and Benu Gopal Naidu