Supreme Court quashes GST department’s plea against High Court order on input tax credit
The Supreme Court has quashed a petition filed by the authorities against a Calcutta High Court ruling that said that input tax credit (ITC) to a buyer cannot be denied on the ground that a seller has not paid tax under the goods and services tax (GST) regime unless there was a proper investigation.
There’s a split among experts on whether this ruling will serve as a precedent in similar cases. The Supreme Court opted not to intervene due to the relatively small disputed tax amount.
“Considering the specifics of this case and the relatively low amount in question, we see no grounds to interfere,” stated the Supreme Court.
The Supreme Court dismissed the GST department’s appeal against the High Court’s decision in a case involving Suncraft Energy Ltd., concerning a tax amount of Rs 650,511, along with interest and penalty.
The case revolves around the department’s demand to reverse ITC claimed by the company, citing a discrepancy between the supplier’s tax payment and the company’s ITC claim.
The Calcutta High Court ruled that unless there’s a situation where the GST department cannot recover tax from the supplier, the company cannot be refused ITC based solely on the supplier’s tax remittance.
The High Court emphasized that before instructing the company to reverse ITC, the GST authorities should have taken action against the supplier.
The GST department had filed a special leave petition in the Supreme Court, which was dismissed.
An advocate handling similar petitions across various courts mentioned that the Supreme Court emphasized the need for authorities to investigate the defaulting party and not deny credit to the recipient of the supply. The outcomes of petitions similar to the one filed by the GST department will now hinge on factual and merit-based considerations.
However, one expert noted that the Supreme Court didn’t delve into the specifics of the case but dismissed the appeal due to the small disputed tax amount. “This narrows the scope of the judgment, granting ITC specifically to Suncraft Energy without setting a broader precedent for other businesses facing similar issues,” the expert remarked.