Kerala HC: Extra Credit Claimed in R-3B Not Reflected in R-2A, Can’t Be a Valid Reason for Disallowing the Claim of ITC

In a recent legal case, the Kerala High Court ruled in favour of the petitioner, Goparaj Gopalakrishnan Pillai, by stating that the excess Input Tax Credit (ITC) claimed in Form GST-3B, which was not reflected in GSTR-2A, should not be a reason for denying the right to claim Input Tax Credit (ITC).

Mr Pillai, a registered dealer under the GST Act of 2017, filed a writ petition due to the disallowance of excess ITC claimed in his GSTR-3B return for the fiscal year 2017-2018. The petitioner allegedly utilized an extra input tax credit of Rs. 33,05,038.

Upon comparing Forms GSTR-2A and 3B, it became apparent that the petitioner had accessed an additional input tax credit of Rs. 33,05,038. Form GSTR-2A indicated an ITC of Rs. 65,39,776, while Form GSTR-3B showed an availed and utilized ITC of Rs. 98,44,815.

In response to a notice from the department, the petitioner explained that they had mistakenly entered SGST as Rs. 36,47,624.24 instead of Rs. 3,64,764.24 in their GSTR-3B for December 2017. They also claimed that no ITC had been used until that point. In August 2018, an excess input tax credit of Rs. 22,922.22 was deducted from the GSTR-3B.

The assessing officer argued that taxpayers should be entitled to claim input tax credit only when the tax on such supplies has been remitted to the Government by the counterparty.

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Following Circular No. 7/2021 dated November 7, 2021, issued by the Commissioner of the State Goods and Services Tax Department, Kerala, it was determined that the petitioner was entitled to utilize an Input Tax Credit (ITC) amounting to Rs. 65,61,906 for the fiscal year 2017-2018, resulting in an excess ITC of Rs. 19,830 being availed and utilized.

Citing the precedent set by the case of Diya Agencies v. State Tax Officer, the court observed that the mere absence of this tax in Form GSTR-2A should not be considered sufficient grounds to deny the taxpayer’s right to claim an input tax credit.

Following a review of the arguments presented by both parties, the single bench presided by Dinesh Kumar Singh granted the writ petition and established that excess Input Tax Credit claimed in Form GST-3B, but not reflected in GSTR-2A, should not be a basis for rejecting the GST ITC claim.

As a result, the case has been referred back to the Assessing Office, providing the petitioner with an opportunity to submit evidence and documentation in support of their input tax credit claim, which was previously denied. The legal representatives, K. Latha and Jomton F. Payankan, represented the petitioner in this matter.