GST ITC in GSTR 2A Higher Than Reflected in GSTR 3B, Madras HC Gives Relief to L&T

The Madras High Court in a ruling granted relief to Larsen & Toubro by overturning the Goods and Services Tax ( GST ) order and remanding the case for reconsideration. Allegations emerge for the higher Input Tax Credit ( ITC ) shown in the Goods and Services Tax Returns ( GSTR-2A ) compared to what was claimed and reflected in GSTR-3B.

The applicant, Larsen and Toubro ( L & T ) contested an order in Original on 30.12.2023, associating to the assessment period 2017-18, and the following rejection of a rectification petition.

On 30.12.2023 the impugned order in original, issued, followed a series of communications, including an intimation and a subsequent Show Cause Notice ( SCN ).

Even after the reply of the applicant dated 04.10.2023 addressing numerous issues raised, the order validated the tax demands based on the differences between the applicant GSTR 3B and auto-populated GSTR 2A returns, imposition of cess, treatment of scrips, and corporate social responsibility obligations.

At the time of proceedings, the applicant’s counsel addressed each problem raised in the impugned order. The difference between GSTR 3B and GSTR 2A returns, levied the cess even after the prior payment, treatment of scrips, and taxation related to corporate social responsibility activities were challenged.

The absence of opportunity to show the matter on the specific cases, certainly the treatment of scrips, was underscored, raising questions regarding the fairness of the assessment process.

Counsel of the Respondent Mr. C. Harsha Raj, Additional Government Pleader, recognized that multiple issues raised in the SCN were dropped after regarding the response of the applicant. He proposed that the SCN is related to nearly 26 issues.

On consideration of the reply of the applicant, he submitted that nearly 21 issues were dropped. In such cases, he argued that interference is not warranted under Article 226 concerning the problems decided against the applicant.

A Single bench of Justice Senthilkumar Ramamoorthy witnessed that out of the total tax obligation, around Rs. 5.17 crores, derives from differences between the GSTR 3B and GSTR 2A returns.

It was clear from the intimation issued dated 31.05.2023, that the amount shown in the auto-populated GSTR 2A return surpassed the ITC claimed and reported in the GSTR 3B returns of the applicant. Provided such cases the levy of GST on the surplus amount shown in the GSTR 2A return seems prima facie unsustainable.

Regarding the cess problem, the court noted that the applicant mentioned that the cess was filed in May 2018 by showing the pertinent GSTR 3B return. The impugned order levied an obligation for cess.

Towards the levied liability for scrips, a Show cause notice requires the applicant to justify why the ITC must not be reversed towards the duty credit scrips. However, the impugned order deemed the amount as turnover from scrips without allowing the applicant a chance to explain, generating the findings on this case unsustainable.

Read Also: Mismatch GSTR 3B & 2A: Madras HC Overturns the Decision of GST ITC Denial Due to Incorrect GSTIN

The High Court on the precise consideration of the claim and evidence shown revealed that the impugned order on 30.12.2023 was unsustainable certainly for the problems comprising the subject of the writ petitions.

The order is set aside by the court and remanded the case to the respondent for reconsideration. The court after acknowledging the right of the applicant to be heard granted a 2 week window for the applicant to file a response, rendering the respondent to furnish a reasonable chance for the personal hearing and provide a new order within 2 months. The writ petitions shall be disposed of by the High Court.