ITC cannot be claimed until tax will be deposited to government from seller end: HC

The Patna high court, in a recent judgement that favoured the GST authorities, decided that input tax credit (ITC) is a luxury or concession rather than an inherent right guaranteed by the GST framework. The buyer’s ability to claim ITC is dependent not only on the amount collected by the seller (dealer) via the invoice raised, but also on the seller’s prompt return of this sum to the government. The buyer is responsible for showing that the tax collected has been remitted to the government.

In the case, the High Court stated that ITC, by definition, assumes a credit being available to the buyer in its credit ledger as a result of the supplier paying tax to the government. The assertion of double taxation does not impress us, especially when the claim is dismissed only when the supplier who received tax from the consumer fails to pay it to the government.

Points to be noted:

Input Tax Credit (ITC) is in the nature of a benefit/concession and not a Statutory Right. [ALD. Automotive Pvt. Ltd. v. The Commercial Tax Officer & Ors. (Civil Appeal Nos. 10412-10413 of 2018)]

Authority can provide restrictions at time of giving benefit/ concession in form of ITC. Necessarily, the conditions for such availment of credit has to be scrupulously followed failing which there can be no benefit conferred on the assessee. The benefit is one conferred by the statute and if the conditions prescribed in the statute are not complied; no benefit flows to the claimant. [ALD. Automotive Pvt. Ltd. v. The Commercial Tax Officer & Ors. (Civil Appeal Nos. 10412-10413 of 2018)]

Burden of Proof of ITC lies with Claimant of ITC: The dealer who claims Input Tax Credit has to prove beyond doubt, the actual transaction by furnishing the name and address of the selling dealer, details of the vehicle delivering the goods, payment of freight charges, acknowledgment of taking delivery of goods, tax invoices and payment particulars etc. To sustain a claim of Input Tax Credit on purchases, the purchasing dealer would have to prove and establish the actual physical movement of the goods & genuineness of transactions, by furnishing the details referred to above and mere production of tax invoices would not be sufficient to claim ITC. [Hon’ble Supreme Court in The State of Karnataka v. M/s Ecom Gill Coffee Trading Private Limited]

The conditions for enabling ITC benefit, are available in Clauses (a) (b) and (c) of Section 16(2) which are in seriatim; the existence of a tax invoice or debit note issued by the supplier, proof of receipt of goods or services or both and the tax charged in respect of such supply having been actually paid to the Government, either in cash or through utilization of Input Tax Credit admissible in respect of the said supply.

The said conditions for availing ITC are to be satisfied together and not separately or in isolation, and these are the conditions and restrictions which would regulate the availment of Input Tax Credit. Input Tax Credit by the very nomenclature contemplates a credit being available for the purchasing dealer in its credit ledger by way of payment of tax by the supplier to the Government.

Producing invoices, account details and the documents evidencing transportation of goods does not absolve the assessee from the rigor provided under sub-clause (c) of Section 16(2) of the BGST Act, which requires the credit of tax, collected from the purchasing dealer; either in cash or through utilization of admissible Input Tax Credit, being available in the context of the supplier having actually paid tax to the Government.

This in effect is a burden of proof cast on the purchasing dealer who claims Input Tax Credit, which is a right created under statute; sustained only under the specific terms of the statute.

The Recipient Purchaser cannot content for double taxation since the claim of ITC is denied only when the supplier who collected tax from the purchaser fails to pay it to the Government.

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