Panel discussion at National Conference on GST, by ICAI,

at Kandivali East, Mumbai, on 13 Jan 2024

Subject: “Tax Clinic on Controversies in ITC”

Panellists: (1) CA Shailendra Saxena (SS); (2) CA Avinash Poddar (AP);

(3) CA Amitabh Khemka (AK); (4) CA Jigar Doshi (JD);
Moderator: CA Deepak Thakkar

Questions for Panel discussion:

Q. 1] ITC eligibility provisions u/s 16 of CGST Act, uses different terms like, entitled to,
eligible for, taking credit, admissible credit, claiming credit, availing credit, utilisation of
credit, etc.
How to co-ordinate & understand meanings of these terms & apply to each transaction
& overall, to claim ITC?

Q. 2] GST regime is implemented, merging the levy of different taxes & setoffs
available under the Earlier Tax laws of Centre & States, to have same impact on net
level, on businesses & citizens. Value added principles have also been imbibed to
avoid cascading effect of tax on tax. Applying principles of Value Added Tax (VAT)
the Govt had two options: Either to give deduction for costs called as “Deduction
Method” & levy tax on Net value OR to give Tax credit on inward supplies called as
“ITC/ Setoff Method”. Govt chose 2nd option of “ITC/ Setoff Method” while
implementing GST Regime, amending the Constitution & framing the GST Laws.
Thus, whether ITC become the “legal/ constitutional right” rather than as “statutory
right” based on mercy of the GST Laws?

Q. 3] ITC is the heart of the GST levy, in the transaction chain. Deferring its eligibility
or claim-ability, till the transaction is reflected in outward statement GSTR-1 by
Supplier or Tax actually paid by Supplier, is in fact improper/ illegal as said amt

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becomes liability to pay, with interest, by Supplier, for which the authority is empowered
by recovery actions under GST Law. Even when said tax is paid late by supplier or
recovered late by Authority, it relates back to the relevant supply transaction, where
the Recipient’s eligibility relates back to the date of said transaction. Then why defer
the availability of ITC to Recipient?

Q. 4] In absence of power/ mechanism for recovery of tax by Recipient over defaulting

Supplier, under the GST Law, how ITC can be denied legally, as impossible
performance can’t be expected from any person?

Q. 5] “To err is human”. Rectification of mistake in returns/ statement must be granted

under the GST law. It will reduce unnecessary liability & litigations. Recently, Bombay
Court has directed the Govt / GST Council to provide for rectification.
[Assessee’s request to amend/rectify Form GSTR-1 could not be rejected if wrong
GSTIN mentioned inadvertently: HC Star Engineers (I) (P.) Ltd. v. Union of India [2023]
157 taxmann.com 285 (Bombay)]

What about rectification of ITC claim vide GSTR-3B?

Q. 6] When there is allegation that the GST registration of the supplier is cancelled
retrospectively, ab initio, whether the ITC is required to be reduced by Recipient?

Q.7a] ⁠Leasehold Rights is being transferred by MIDC to Mr A. MIDC has charged GST.
Mr A claimed ITC for the same. Department is denying. Kindly advise.

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Q.7b] ⁠Whether answer would be different to above question in case MIDC has forfeited
the rights from Mr B, to whom it was allocated earlier, on the ground of non-
compliance.
Q.7c] What would be your answer if third party transfer is made of leasehold rights
and GST charged. Pls clarify from the context of its taxability as well as ITC?

Q.8] ⁠GSTR 2A / GSTR 2B reflects the transactions but the department alleges that the
supplier has denied any transaction being made? Whether credit is reversible?

Q.9] ⁠Patna HC in Aastha Enterprises (vs State of Bihar-CWJ # 10395 of 2023 dt 18

Aug 2023), upheld the constitutional validity of CGST Section 16(2)(c), whereby if
Supplier fails to pay tax to Govt then Recipient is ineligible for ITC. vs Bihar-CWJ #
10395 of 2023 dt Aug 2023.
a) Pls explain above, in view of ruling in case of Suncraft Energy Pvt Ltd by Cal HC dt
2 Aug 2023 & SC dt 14 Dec 2023.

b) Whether Suncraft Ruling applicable post insertion & effective of clause (aa) u/s
16(2) from 1 Jan 2022 w.r.t ITC entitlement only when Invoice/DN is seen in GSTR-
2B?

c) Whether Suncraft Ruling applicable post insertion & effective of clause (ba) u/s
16(2) from 1 Oct 2022 w.r.t ITC entitlement only when Invoice/DN is seen in GSTR-2B
and it is not restricted as provided u/s 38?

Q.10] Sec. 16(4) w.r.t ITC claim, becoming time barring after 30th November, is upheld
as Constitutional by various High Courts.
How to handle such notices/ orders? Is there a way out or whether the ITC to be
reversed compulsorily?

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Q.11] Reversal of ITC- A foreign company has incorporated a new company for India
and Indian operations. Distributors are appointed across India. Distributors manage
the service centres & take ITC on the expenses incurred for service centre. Distributors
had not billed to the main Indian company.
Department alleging that ITC needs to be reversed as the output has not been
charged. Whether any reversal required?

Q.12] ⁠Mr A to pay to Mr B. Now Mr C was to recover from Mr B. Whereas Mr A was to

recover from Mr C. A has marked the amount to be recovered as discount in books &
settled the account with Mr C.
Department saying that since the payment has not been made within 180 days, ITC
to be reversed as per 2nd proviso to sec. 16(2). Pls advise.

Q.13] ⁠CGST & SGST was to be collected on a transaction but instead, IGST was
collected. Now Department asking to pay IGST and take refund of wrongly paid CGST
& SGST credit.
Recipient has already availed the ITC of C & S charged earlier.
a) Whether said ITC to be reversed & new ITC of IGST to be taken?

b) Whether 16(4) limitation will apply or not, for newly paid IGST. Pls advise.

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