[Opinion] 2B or Not to be 2B – The Mysterious Ocean of ITC

CA Hemant Singhal – [2023] 157 taxmann.com 515 (Article)

It is a settled judicial position that Input Tax credit is a concession/rebate/benefit under GST law and is not a statutory right granted under the statue. It is in the domain of the legislature as to how much tax credit is to be given under what circumstances. Thus, the concession of Input tax credit can only be claimed on satisfaction of the eligibility conditions as envisaged by Section 16 of CGST Act, 2017. It is trite law that whenever concession is given by statute or notification etc. the conditions thereof are to be strictly complied with in order to avail such concession.

Legislature has contemplated following eligibility conditions in Section 16 of the CGST Act, 2017 for availing Input tax credit:

(a) buyer/recipient is in possession of Tax invoice,

(b) he has received good or services,

(c) subject to Sec 41 tax charged on such supply has been actually paid by the supplier to the government,

(d) buyer/recipient has furnished return in Section 39;

Further, one more eligibility condition has been added by the legislature for availing ITC with effect from 1 Jan 2022:

(aa) such Input tax credit has been communicated to the recipient in FORM GSTR 2B;

Further, another eligibility condition has been inserted in Section 16 with effect from 1 Oct 2022:

(ba) ITC communicated in FORM GSTR2B is not restricted under section 38.

GSTR2A/2B SAGA

As a corollary, Law is well settled that the person who claims exemption or concessional rate, must obey and fulfill the mandatory requirements exactly. Unless there is strict compliance with the provisions of the statute, the registered Dealer is not entitled to claim “Input Tax Credit”. For the period 1 July 2017 to 31 Dec 2021 when the condition of GSTR2A was not promulgated by the legislature for availing Input Tax credit and taxpayer has availed Input tax credit satisfying all the contemporary existing tests of section 16. ITC had became a vested right on satisfaction of conditions mentioned in section 16 and cannot be taken away. Section 16 does not empower authorities to take away such right.

Reliance is placed on the Apex Court judgement in the case of Eicher Motors Ltd. v. Union of India 1999 taxmann.com 1769 (SC) right of assessee to utilise credit of duty taken in respect of inputs, for payment of duty on further products (final products), which accrued when credit was taken, to continue until facility gets worked out or until those goods existed – Section 37 does not empower respondents to frame rule to taken away such right. Once a benefit has been accrued on satisfaction of all the statutory conditions then same is a vested right of the taxpayer and can not be taken away by a subsequent amendment in this regard.

Though Circular No. 183/15/2022 and 193/05/2023 has provided much awaited relief to the taxpayers for the invoices not reflected in GSTR2A for the period 1 July 2017 to 31 Dec 2021. However in light of the judicial precedents even in absence of such circular ITC availed on satisfaction of all the conditions as mentioned in section 16 becomes a vested right and can not be denied for GSTR2A.

Reliance is placed on Honorable supreme court of India in the case of Union of India v. Bharti Airtel Ltd. [2021] 131 taxmann.com 319/2021 (54) G.S.T.L. 257/[2022] 89 GST 1 has observed that

“We need not multiply the authorities referred to in the concerned judgments, and cited before us, as in our opinion, these decisions have not dealt with the cardinal aspect of statutory obligation fastened upon the registered person to maintain books of accounts and record within the meaning of Chapter VII of the 2017 Rules, which are primary documents and source material on the basis of which self-assessment is done by the registered person including about his eligibility and entitlement to get ITC and of OTL. Form GSTR-2A is only a facilitator for taking an informed decision while doing such self-assessment. Non-performance or non-operability of Form GSTR-2A or for that matter, other forms, will be of no avail because the dispensation stipulated at the relevant time obliged the registered person to submit returns on the basis of such self-assessment in Form GSTR-3B manually on electronic platform. The provision contained in Section 39(9) of the 2017 Act and Rule 61 of the Rules framed there under, as applicable at the relevant time, applies with full vigor to the returns filed by the registered person in Form GSTR-3B.”

Hon’ble Apex Court has clearly stated that information available on Portal in GSTR2A is only a Facilitator and not Primary Source.

The same view was taken by various High courts in a number recent decisions. In the matter of Divya Agencies v. State Tax officer Honorable Kerala HC held as under:

“Where petitioner’s claim for input tax credit of Rs. 44,51,943.08 for CGST and SGST was restricted to Rs. 1,04,376.05 each due to discrepancies in GSTR 2A, however, said denial based solely on GSTR 2A discrepancies was not justified and directed revenue to provide petitioner with an opportunity to prove genuineness of transaction and remittance of tax to seller; Input tax credit should not be denied without proof of collusion between assessee and seller”

“16(2)(aa) the details of the invoice or debit note referred to in clause (a) has been furnished by the supplier in the statement of outward supplies and such details have been communicated to the recipient of such invoice or debit note in the manner specified under section 37;”

• Inserted vide THE FINANCE ACT, 2021 dated 28-03-2021 w.e.f. 01-01-2022 For the period 1 Jan 2022 onwards the mandatory condition in clause aa) of section 16 of reflection in GSTR2B shall be complied with before availing ITC in the monthly return. Thus, ITC will now not become a vested right till all the following four conditions are satisfied namely:
• Possession of tax invoice,
• receipt of goods or services,
• Subject to Sec 41 tax charged has been actually paid by the supplier to the government,
• ITC is communicated in FORM GSTR2B

Now, what if the ITC so availed based on the communication in GSTR2B is later amended and/or removed from GSTR2B by the supplier though the supply has actually been made?

Such an act of the supplier will reduce available ITC in GSTR2B in the month of the amendment and force the recipient to reverse the genuine ITC availed satisfying all the mandatory conditions. This is one of the practical problems still being faced by the taxpayers which remains unattended by the government.

In my personal opinion once at the time of availment of ITC all the section 16 conditions are satisfied and all the contemporary evidences for actual receipt of goods and services are available with the recipient, ITC shall not be denied for mala fide intentions of the supplier. However, such a claim will not go unchallenged by the department.

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