GST Update No 156 on ITC cannot be denied due to technical issues

The process of digitalization picked up steam in India many years ago with the introduction of digital payments. Since then, India witnessed substantial digital transformation in business. The most revolutionary amongst them is digitalization in indirect tax regime. With the advent of GST w.e.f. 01st July 2017, the whole regime went under a major radical shift. The step of moving towards digitalization and paperless environment was no doubt an initiative towards ease of doing business. However, since the coin has its other side also, there were hurdles of different kinds as well. One such issue faced by taxpayer is related to technical glitches faced in the process of claiming input tax credit. The issue travelled upto Gujarat High Court in the case of EZZY ELECTRICALS VERSUS STATE OF GUJARAT. The conclusion arrived at by the Hon’ble Gujarat High Court is the subject matter of discussion of our present update. The petitioner is a proprietary concern and a small size taxpayer eligible for composition scheme u/s 10 of CGST Act, 2017. The applicant was registered under composition scheme till 31.03.2018 and decided to opt out from composition scheme w.e.f. 01.04.2018 by filing GST CMP-04 on 31.03.2018. Once the person ceases to be a composition taxpayer, he is entitled to claim Input Credit as per Section 18(1)(c) of CGST Act, 2017 by filing GST ITC-01 within a period of 30 days from date of becoming eligible to avail input tax credit. The petitioner contended that he was not able to operate GST portal due to technical glitches while filing form ITC-01 and an error report was generated on the portal. A screenshot in this regard was also submitted to the department. The petitioner further informed that the correspondences were being made by the department regarding the issue since 24.09.2018, however, no further action was taken by department in this regard. The Counsel of the Department argued that GSTN was examined as per details submitted by the petitioner regarding technical glitches. However, it was observed and concluded that there were no technical glitches. On the contrary, it was observed that petitioner used “wrong offline tool” for filing ITC-01 having version number 2.2.3 which was last updated on 10.04.2018. However, the current version of ITC-01 offline tool on GST portal is ITC_offline_v1.0 released on 12.01.2018. It is pertinent to mention that numbering of versions of offline tool is always incremental on GST portal. Since the current version is v1.0, the previous version cannot be greater than v1.0. As per the attached screenshots, offline tool used by petitioner was 2.2.3. Consequently, this represents that petitioner was using wrong utility for filing ITC-01. The Court held that even if contention of department is considered, can it be concluded that all the doors are closed for the taxpayer or is there some scope still left for the authority to permit the petitioner to take refund of input tax credit amounting to Rs. 5 Lakhs. Directions were given to department to find out some way so that refund can be sanctioned to assessee concerned. The department submitted that inquiry was made with E.D.P. Cell Gujarat regarding the subject matter. The Cell asked to inform the same to GSTN but nothing was processed further. The Court stated that even if it was fault of taxpayer i.e. wrong offline tool was being used to file ITC-01, refund should not be denied to him merely on the basis of technical glitch. The department should resolve the controversy and find any way out to settle the matter. The submissions of petitioner were considered wherein it was held that if department would have told the discrepancy to the petitioner on an earlier date, discrepancy could have been resolved. The court directed department to do the needful so that GST ITC-01 can be uploaded by petitioner and refund can be sanctioned at the earliest possible. The above judgment is a favoring judgment for the business houses which substantiates the fact that input credit is a vested right of the taxpayer which cannot be denied merely because of technical errors on the common portal. There are plethora of judgments by various courts wherein same view has been taken that procedural grounds can not supersede the provisions of legislations. In line of those judgments recently Hon’ble Kerala High Court in the matter of ST. JOSEPH TEA COMPANY LTD. V/S STATE TAX OFFICER held that ITC cannot be denied only on the ground that the transaction is not reflected in GSTR-2A. Time and again there are many more petitions in pipeline which will be goingto consume time, money and energy of both Government and assessees for denial of benefit on account of procedural lapses.

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GST Update No 156 on ITC cannot be denied due to technical issues

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