In another breakthrough, The Madras High Court has recently passed a ruling that shall be a lesson for those sellers who escape from paying that tax which buyer has paid, but the seller has not deposited in government exchequer. It is a relief for genuine buyers also.
As per the contemporary GST law, buyers can claim input credit that is based on the tax invoice wherein details are given related to the amount of tax charged, the total value of supply of goods or services, GSTIN of the supplier, description of goods or services, and recipient, etc.
- The High court Commented that
- Tax Department’s Approach Is Flawed.
How the Series of Events Occurred?
17 traders of raw rubber sheets approached the High Court of Madras against the department of GST’s decision to deny buyers the benefit of the input tax credit. The GST department had sought to take back the input tax credit that has been availed by the traders. The reason being, the seller did not deposit the tax to the government.
Nevertheless, The GST department put forth the argument that the traders have been able to avail input credit on the assumption that the tax had already been paid to the exchequer of the government by sellers of 17 traders.
However, in reality, sellers had not paid any tax and 17 traders were not able to prove the above-mentioned truth.
In response, the department contended that 17 traders could not prove the above-mentioned truth. And so the department had justification to recover tax from them. And consequently, the GST department cannot be claimed as a defaulter for reversing input credit already availed by the traders.
Madras HC Dismissed the Contentions of the GST Department
The Honourable court pinpointed a fundamental flaw in the approach followed by the revenue department — no inquiry has been made by the revenue department against the default of sellers and also no initiative of recovery action against them. Once the department comes to know that the sellers have gathered tax from the 17 traders and not deposited it, stringent action must have been taken against the former by the department.
The Judgement is crucial for giving a lesson that the revenue authorities must have caught and punished the seller if he was convicted of not submitting tax to the revenue department
“There are many cases where the buyer genuinely buys goods or services and makes the payment for the same along with GST to the supplier. In such cases, if the supplier has not paid GST to the government, the ask of the buyers is that instead of denying input credit to them, the authorities should catch the suppliers and recover tax from them,” said Abhishek Jain, Partner, EY
