Dated 12th July, 2019
With diverse pronouncement made by High Courts in respect of inherent powers given to GST officers under the Central Goods and Services Tax Act, 2017 (here-in-after referred to as “CGST”) towards powers to arrest, Hon’ble Supreme Court finally settles the divergent views. This article discusses about relevant GST provisions, interpretation made by Courts and conclusion drawn by the Apex Court.
Many cases or situations are observed where there is difference in Input Tax Credit (ITC) claimed in GSTR 3b and ITC available in GSTR-2a. This is due to the reason – Taxes are paid by the recipient to the supplier but not deposited by the supplier to the government. On Combined reading of the following Sections 16(2)(c), 37, 38, 73 of Central GST Act (CGST),2017, a buyer who avails ITC for amount paid to his seller (both invoice amount and tax) will be denied for the credit, if the seller does not deposit tax with the appropriate Government authorities and disclosed in his GSTR-1 return. Recently, the Hon’ble Supreme Court in the case of Commissioner of Trade & Taxes, Delhi and others Vs. Arise India Limited and others [TS-2-SC-2018- VAT], has dismissed the Special Leave Petition filed by the Revenue against the decision of the Hon’ble High Court of Delhi in the case of Arise India Limited and others Vs. Commissioner of Trade & Taxes, Delhi and others [TS314-HC-2017(Del)-VAT] (“Arise India case”). The Hon’ble High Court of Delhi held Section 9(2)(g) of Delhi VAT Act to the extent it disallows Input tax credit(“ITC”) to purchaser due to default of selling dealer in depositing tax, as violative of Articles 14 and 19(1)(g) of the Constitution of India.
Denying the credit of ITC of the tax paid by recipient, it will go against article 14 of the Constitution. It says, "Equality before law – The State shall not deny to any person equality before the law or the equal protection of the laws within the territory of India Prohibition of discrimination on grounds of religion, race, caste, sex or place of birth." Such credit denial is also against Article 19(1)(g) of Constitution of India. It says "All citizens shall have the right (g) to practise any profession, or to carry on any occupation, trade or business." This measure against the purchasing dealer is arbitrary, irrational and duly harsh and, therefore violative of Article 14 and 19(1)(g)of the Constitution;
Department urge that arbitrariness cannot be a ground for challenging the statute as being violative of Article 14 of the Constitution. Further, mere hardship caused by the impossibility of compliance of the provisions cannot be a ground for striking down a statue; Where a fiscal statue was being challenged, a greater leeway had to be given to the legislature and there had to be a presumption of soundness of the legislative policy. It was argued, the court is not to question legislative wisdom in such matters. The Department referred to the note prepared for consideration of the cabinet prior to the insertion of Section 9(2)(g) of the DVAT Act.
Where a fiscal statue was being challenged, a greater leeway had to be given to the legislature and there had to be a presumption of soundness of the legislative policy. It was argued, the court is not to question legislative wisdom in such matters. The Department referred to the note prepared for consideration of the cabinet prior to the insertion of Section 9(2)(g) of the DVAT Act.
The Department is not allowed to invoke the provisions of Section 9(2)(g) of the DVAT Act to deny ITC to a purchasing dealer who has bona fide entered into a purchase transaction with a registered selling dealer who has issued a tax invoice reflecting the TIN number.
In the event that selling dealer fails to deposit the tax collected by him from the purchasing dealer, the remedy for the department would be to proceed against the selling dealer for recovery of such tax. Further, in cases where the department is satisfied that there is collusion of purchasing and selling dealer then proceeding under Section 40A of the DVAT Act can be initiated.
Why the non-guilty buyer gets cut up for the GST Input Tax Credit (ITC) for the reason of non-payment of tax by the defaulting seller. There are many sections or instances which should allows the buyer to take ITC of the GST paid.
BT Associates is a premier indirect tax consultant in kolkata, delivering high quality services to client in the area of indirect taxation.GST idea is a unit of BT Associates formed to share knowledge on stakeholders. We cover entire gamut from technical papers to recent development including IT under GST
BT Associates is a premier indirect tax consultant in kolkata, delivering high quality services to client in the area of indirect taxation.GST idea is a unit of BT Associates formed to share knowledge on stakeholders. We cover entire gamut from technical papers to recent development including IT under GST
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