The GST Appellate Tribunal (GSTAT), Division Bench, Court No. II, has remanded a dispute involving alleged excess Input Tax Credit (ITC) availment arising from a mismatch between ITC claimed in FORM GSTR-3B and ITC reflected in FORM GSTR-2A.
The bench of Narendra Kumar (Judicial Member) and Alok Chopra (Technical Member) has observed that while the burden of establishing ITC eligibility continues to rest upon the taxpayer under Section 155 of the CGST Act, the entire difference between GSTR-3B and GSTR-2A cannot automatically be treated as ineligible ITC without examining the taxpayer’s reconciliation and supporting evidence.
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The principal issue was an alleged excess availment of ITC based on the difference between ITC claimed in GSTR-3B and ITC reflected in GSTR-2A. The demand under Section 73 involved tax of approximately ₹6.35 lakh, comprising CGST of ₹3,17,644.27 and SGST of ₹3,17,644.27.
Before the Tribunal, the taxpayer argued that the authorities had treated the difference between GSTR-3B and GSTR-2A as excess or ineligible ITC without examining the underlying transactions.
According to the taxpayer, the difference consisted of several identifiable components and could not be regarded as wrongful ITC merely because corresponding amounts were not appearing in GSTR-2A.
The taxpayer specifically pointed to:
- ITC relating to Reverse Charge Mechanism (RCM);
- supplier-side reporting errors;
- transactions incorrectly reported as B2C instead of B2B;
- tax reported under IGST instead of CGST and SGST;
- ITC available in GSTR-2A but not actually claimed in GSTR-3B; and
- ITC subsequently reversed in FY 2018-19.
The taxpayer also relied upon CBIC Circular No. 183/15/2022-GST dated December 27, 2022, which specifically deals with discrepancies between ITC availed in GSTR-3B and ITC reflected in GSTR-2A for FY 2017-18 and FY 2018-19.
The taxpayer stated that total ITC claimed in GSTR-3B was ₹15,05,849.12, comprising CGST of ₹7,52,924.56 and SGST of ₹7,52,924.56.
Out of this, RCM-related ITC was identified at ₹1,61,012, comprising ₹80,506 each under CGST and SGST. After excluding the RCM component, the taxpayer arrived at net ITC relating to inward supplies of ₹13,44,837.12.
The taxpayer further provided a category-wise explanation for the difference. This included supplier reporting errors, incorrect reporting under IGST instead of CGST/SGST, B2C instead of B2B reporting, ITC available but not claimed, RCM credit and subsequent reversal.
The taxpayer specifically pointed out B2C reporting differences of ₹4,67,094, comprising ₹2,33,547 each under CGST and SGST. It also identified ITC of ₹1,33,584.22 which was available but not claimed and ₹20,344 which was subsequently reversed in FY 2018-19.
Apart from the merits of the ITC dispute, the taxpayer challenged the manner in which the proceedings had been completed.
It was submitted that the taxpayer did not receive an effective opportunity to present its case and that the proceedings therefore suffered from violation of principles of natural justice.
The taxpayer explained that the partners had been facing serious personal difficulties following a fire incident at the premises of a sister concern in September 2022. One of the partners was stated to have remained in judicial custody for around three months, which, according to the taxpayer, disrupted the functioning of the business and monitoring of GST portal communications and departmental proceedings.
The departmental representative opposed the taxpayer’s contentions.
The Revenue maintained that the taxpayer had availed ITC in GSTR-3B in excess of the amount reflected in GSTR-2A and that the resulting difference was recoverable under Section 73.
The Department also objected to the certificates subsequently produced before the Tribunal, contending that they had been issued after the order of the First Appellate Authority and therefore should not be admitted for consideration.
The Department further submitted that several opportunities had already been granted by the First Appellate Authority. Notices were issued on multiple dates between April and December 2024, followed by a final opportunity on December 30, 2024. According to the Revenue, the taxpayer nevertheless failed to appear.
After examining the record, the Division Bench comprising Narendra Kumar, Member (Judicial), and Alok Chopra, Member (Technical) found sufficient grounds to remand the matter.
The Tribunal noted that the taxpayer had not properly appeared before the adjudicating authority and the First Appellate Authority. It also considered the circumstances relating to the partner’s judicial custody and the disruption caused to the business.
At the same time, the Tribunal recorded that the First Appellate Authority had granted several opportunities to the taxpayer. Despite those opportunities, the taxpayer did not appear even on the final date fixed for hearing.
The Tribunal nevertheless observed that, considering the circumstances and the fact that the taxpayer had been unable to effectively present its case before the lower authorities, an opportunity to present the case before the adjudicating authority was warranted in the interest of natural justice.
Accordingly, the Tribunal held that the grounds raised by the taxpayer were sufficient to warrant remand and accepted the prayer for fresh adjudication.
A key observation of the Tribunal concerned the substantive ITC dispute.
The Bench made it clear that Section 155 places the burden of proving entitlement to ITC upon the claimant. Therefore, ITC cannot be allowed merely because an invoice exists or merely because the mismatch is attributable to the supplier.
However, the Tribunal simultaneously held that the entire difference between GSTR-3B and GSTR-2A cannot be treated as ineligible ITC without examining the taxpayer’s reconciliation and supporting evidence.
The adjudicating authority was consequently directed to undertake a category-wise and invoice-wise verification of the documents and evidence furnished by the taxpayer.
The eligibility of ITC is to be determined in accordance with Sections 16 and 155 of the CGST Act, 2017 and the corresponding provisions of the Uttar Pradesh GST Act.
This observation draws an important distinction between two propositions: a taxpayer cannot establish ITC entitlement merely by pointing to supplier error, but a mismatch by itself also does not conclusively establish that the entire disputed credit is ineligible.
The taxpayer had produced transaction-wise documents, including certificates from suppliers.
The Tribunal noted that some of the certificates had been issued after the First Appellate Authority had passed its order. Nevertheless, the underlying invoices related to FY 2017-18, the disputed financial year.
The documents covered transactions involving parties including Zenevo Technologies Private Limited, Anita Srivastava, Otis Elevator Company India Limited, Ankur Talwar, Radha Bhargava, Kanika Agarwal, M.S. Associates and Vijaytrade Path Link Private Limited.
The Tribunal held that the subsequently issued certificates did not necessarily constitute additional grounds of appeal. Instead, they were documents capable of being considered in the context of CBIC Circular No. 183/15/2022-GST.
One of the significant components involved invoices issued by Vijaytrade Path Link Private Limited.
The taxpayer had availed ITC under CGST and SGST, whereas the supplier had inadvertently reported the tax under IGST.
The Tribunal examined the nature of the underlying transaction, which involved renting of immovable property. It noted that, under Section 12(3) of the IGST Act, the place of supply in respect of services relating to immovable property is the location of the property.
Since both the supplier and the property were situated in the same State, the Tribunal noted that the supply was intra-State under Section 8(2), attracting CGST and SGST. The tax had admittedly been paid to the Government, and the discrepancy related to the tax heads under which the supplier reported the transaction.
On this factual basis, the Tribunal observed that the taxpayer’s availment of ITC under CGST and SGST was lawful and that the error lay with the supplier in reporting the tax under IGST.
The Tribunal considered Circular No. 183/15/2022-GST, which was issued to address discrepancies between ITC claimed in GSTR-3B and ITC appearing in GSTR-2A for FY 2017-18 and FY 2018-19.
The circular recognised that during the initial implementation period of GST, suppliers had in several cases failed to correctly furnish outward-supply details in GSTR-1. Such supplier-side errors could consequently result in deficiencies or discrepancies in recipients’ GSTR-2A even where the recipient had availed ITC in GSTR-3B.
The circular prescribed different verification mechanisms depending upon the amount of discrepancy attributable to a particular supplier.
Where the difference exceeded ₹5 lakh for a supplier, the proper officer was required to seek a certificate from a Chartered Accountant or Cost Accountant confirming that the relevant supplies had actually been made and that the supplier had paid the tax through GSTR-3B.
Where the difference was up to ₹5 lakh, the circular contemplated a certificate from the concerned supplier confirming the supplies and payment of tax.
The Tribunal also noted that the circular’s clarification was specific to bona fide reporting errors during FY 2017-18 and FY 2018-19 and was intended to be applied according to the actual facts and circumstances of each case.
The Tribunal separately dealt with the taxpayer’s claim of ₹1,61,012 as RCM ITC.
It observed that transactions liable to reverse charge operate through a different mechanism of tax payment and are not dependent upon ordinary supplier reporting in a B2B return.
Consequently, the RCM component could not be examined merely by reference to a GSTR-2A mismatch. The relevant RCM liability, payment of tax, supporting documents and corresponding availment of ITC were required to be independently verified.
The GSTAT’s approach therefore required the adjudicating authority to undertake a fresh examination rather than sustain the demand solely on the basis of the numerical difference between GSTR-3B and GSTR-2A.
The remand requires consideration of the taxpayer’s reconciliation and documentary evidence, including supplier reporting discrepancies, B2B/B2C classification issues, tax-head errors, RCM credit and subsequent reversal of ITC.
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