Kolkata HC proposes solution to deal with admissibility of ITC for genuine taxpayers facing menace of fake invoices

The Kolkata High Court has proposed a blueprint for grievance redressal for GST payers facing problems on account of input tax credit (ITC) denial due to fake invoices or cancellation of supplier registration with retrospective effect. The decision has been appreciated among the industry experts while they believe its implementation will involve too much subjectivity.

Disposing of a bunch of petitions, a single judge bench of Kolkata High Court directed Tax Department to consider afresh the cases of petitioners on the issue of their entitlement of benefit of ITC in question. The consideration should be made for entitlement of benefit of ITC by looking into the documents presented by the petitioners in support of their claim of genuineness of the transactions in question, the court said.

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The Tax Department will also be required to consider as to whether payments on purchases in question along with GST were actually paid or not to the suppliers. It needs to examine whether the transactions and purchases were made before or after the cancellation of registration of the suppliers and also consider as to compliance of statutory obligation by the petitioners in verification of identity of the suppliers.

“If it is found upon considering the relevant documents that all the purchases and transactions in question are genuine and supported by valid documents and transactions in question were made before the cancellation of registration of those suppliers and after taking into consideration the judgments of the Supreme Court and various High Courts which have been referred in this order and in that event the petitioners shall be given the benefit of ITC in question,” the bench said.

Further it directed that cases should be disposed in accordance with the law and after giving enough opportunity of hearing. This should be done within eight weeks, it said.

Relief for taxpayers

According to Aditya Singhania, Founder at Singhania’s GST Consultancy & Co, since these cases largely pertains to the initial few years of the GST implementation wherein even the functionality to check GSTR 2A or matching exercise was absent, the said judgment of Court would bring a sigh of relief for genuine taxpayers wherein they are given an opportunity to establish the genuineness of the transaction through documentary evidence, statutory obligations and by relying on the judgments of the Apex Court and High Courts, where registration of suppliers from whom procurements have been made is cancelled with retrospective effect i.e. after the execution of the transaction.

“Though the judgment pragmatically addresses the concerns of the genuine taxpayers but at the same time seems to be really subjective and it appears that taxpayers will have to go extra mile to establish the genuineness of the transactions in complete co-operation with the Revenue Officers,” he said.

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