Karnataka High Court sets aside GST demand for unreconciled ITC in GSTR-3B and GSTR-2A

The Karnataka High Court has permitted a company to reconcile the mismatches between the ITC claimed in its GSTR-3B returns and the data shown in GSTR-2A.

The company, Ganges International Pvt. Ltd, had challenged a tax authority’s order that raised a demand for a wrongfully claimed Input Tax Credit (ITC) under GST.

The tax authority had cited several issues, such as excess ITC claimed, ITC claimed on invoices from non-existent suppliers, and non-payment of GST under the Reverse Charge Mechanism (RCM). Based on these findings, the authority had issued a demand, stating that the company had claimed ineligible ITC.

The company argued that if there were mismatches between the ITC claimed in Form GSTR-3B and the details in Form GSTR-2A, the authority should follow the specific procedure mentioned in Circular No.183/15/2022-GST issued on 27th December 2022. This circular gives clarification for the situation where there are mismatches between the ITC claimed in their GSTR-3B returns and the data reflected in GSTR-2A.

The High Court agreed with the company that this procedure had not been followed. The Court observed that all mismatches between the ITC claimed in Form GSTR-3B and the details in Form GSTR-2A should be allowed to be reconciled according to the circular.

Therefore, the Court set aside the order and sent the matter back to the tax authorities for fresh consideration.