Kerala HC Overturns Tax Credit Disallowance Due to Initial GST Implementation Challenges

The issue faced by the small-scale dealers at the initial time of GST execution in learning the provisions of the GST act, Kerala High Court addressed.

The orders of the assessing authority have been set aside by Justice Dinesh Kumar Singh disallowing the ITC claims of the petitioners and followed accordingly,

The period involved is 2017-18 when the GST regime was rolled out. There may be some substance in the submission of the learned Counsel for the petitioner that the petitioner faced enormous difficulty in understanding the provisions of the GST Act.

The petitioners submitted their monthly GSTR 3B returns for the Assessment Year 2017-18. Upon detecting certain discrepancies, the respondents issued notices to the petitioners, instructing them to explain within thirty days. Subsequently, show cause notices were issued to the petitioners due to their failure to present evidence demonstrating the remittance of taxes and interest. As no explanation was received, the assessing authority denied their input tax credit claims, imposing substantial amounts, encompassing taxes, interest, and penalties.

The petitioner’s counsel argued that small-scale dealers, like the petitioner, encountered numerous challenges during the initial stages of GST implementation. They contended that the petitioner possessed documents substantiating their eligibility for input tax credit.

Conversely, the respondents’ counsel contended that the petitioner had been duly notified and given opportunities to substantiate their claims. They asserted that the assessing authorities had adhered to the legal provisions and principles of natural justice.

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The Court then directed the State Tax Officer to reevaluate the claims by thoroughly examining the evidence provided by the petitioners and allowing them to present their case in a hearing.

The petitioner is directed to appear before the State Tax Officer, Kayamkulam, with all the relevant documents in his possession to support his claim for the input tax credit of an amount for the Assessment Year 2017-18. The State Tax Officer, Kayamkulam, will, after examining the documents and hearing the petitioner, pass fresh orders in accordance with the law within a period of two weeks thereafter.

On the aforesaid observations, the writ petitions are been disposed of by the court.