The Chhattisgarh High Court stayed an order denying input tax credit to Bharat Aluminium Company (BALCO) due to mismatch in two return forms GSTR 2A and GSTR 3B.

GSTR 3B shows how much amount does a taxpayer has to pay in cash after deducting input tax credit from gross tax liability. GSTR 2A is an auto-populated form that shows details uploaded by the sellers. A business is required to reconcile the input tax credit claimed in GSTR 3B and GSTR 2A. A mismatch can attract demand from GST authorities.

Also read: No reversal of Input Tax Credit on manufacturing process losses, says Madras HC

In the case of BALCO, a bench of the High Court noted the submission made by its lawyer saying that the company claimed input tax credit amounting to ₹95,464.59 lakh while 2A Form was showing an input tax credit of ₹86,606.67 lakh. A demand for difference of over ₹8,850 crore was made along with interest.

It was submitted that in case the seller has not paid the tax, a recovery has to be made. In this case, the petitioner came out with the purchases made, but it did not tally/match with 2A input tax credit shown by the seller, meaning, the seller may not have filed return to remove the same.

“Recovery in exceptional situation”

The petitioner recalled a decision by the GST Council in its 27th meeting on May 04, 2018 which said, “There shall not be any automatic reversal of input tax credit from buyer on non-payment of tax by the seller. In case of default in payment of tax by the seller, recovery shall be made from the seller; however, reversal of credit from buyer shall also be an option available with the revenue authorities to address exceptional situations like missing dealer, closure of business by supplier or supplier not having adequate assets etc.”

The petitioner argued that recovery from the buyer on the basis of mismatch can be made only in exceptional situations. Relying on the proposition laid down by the Madras High Court in DY Beathel Enterprises vs. State Tax Officer (2021), it was also argued that the input tax credit, claimed by the petitioner cannot be denied for the reason that the seller has not uploaded their invoices on time.

After hearing all the arguments, the bench said: “It is directed that on petitioner's depositing 5 per cent amount of ₹14,93,79,211/- demanded vide order dated January 22, 2021, within a period of 15 days, no coercive steps shall be taken pursuant to the said order.”

According to Aditya Singhania, partner at Singhania's GST Consultancy & Co, a lot has been debated on denial of input tax credit basis comparison between GSTR 2A & GSTR 3B to the recipient on account of the mistakes done by the suppliers. “It would be interesting to see whether the judiciary endorses the views of genuine recipients in the absence of appropriate legal machinery for issuing such notices especially in the wake of clause (aa) of section 16(2) inserted vide Finance Act, 2021 which is not yet effective, and an impossible condition imposed under clause (c) of section 16(2) to ensure actual payment of taxes by the suppliers,” he said.

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