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ITC cannot be granted solely on Tax Invoice: Apex Court

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In order to counter the growing menace of fake invoicing the country’s supreme court has issued an important clarification that mandates taxpayers to submit a series of documentation to take ITC benefit.

Every taxpayer under the GST regime, is eligible to avail the credit of taxes (ITC) paid on the purchases made from the suppliers. 

ITC is the heart & soul of the GST implementation in the Country.

In terms of the16(2) of GST Act, 2017 for availing the Input Tax Credit, the taxpayer/claimant must prove that his supplier has paid the tax on such purchase to the Government Account and goods or services procured must have been received by the taxpayer/claimant.

There are numerous petitions/cases pending before various High Courts on the very same issue. The GST Department denied the ITC to various taxpayers on the ground that the supplier has not paid the tax to the Government exchequer on such transaction or the taxpayer/claimant has not received goods or services from his suppliers & it is a fake or mere paper transaction not genuine.   

In the State of Andhra Pradesh, many taxpayers are facing the same proceedings from the DGGST/Anti-Evasion department of the Central GST Department/State GST Enforcement wings. This issue is a burning issue in the present days of GST implementation across the Country. 

In this background, the recent judgment of the Hon’ble Supreme Court in the case of The state of Karnataka vs M/s. Eom Gill Coffee Trading Private Limited 2023 (3) TMI 533 – SUPREME COURT is a paramount importance.

Hon’ble Supreme Court in the context of ITC under the VAT Act, 2005 held that to claim the ITC, the buyer has to prove the genuineness of the transaction by submitting a series of documents (See box).

Therefore taxpayers who are facing these cases, can collate & collect the above documents now & be ready to minimize their tax liabilities by optimising their Input Tax Credits.

(The writer is a CA and advocate practising in Andhra Pradesh High Court. His specialization is GST, Customs, Foreign Trade Policy, Corporate & and other Business Laws.)


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