I want to take your valuable opinion on GST ITC question based on the below case study:
An GST Registered Entrepreneur purchased some Interstate goods from Registered Supplier in FY17-18 and paid respected IGST on the purchased. For this all the relevant documents Like Invoice, Bank Payments etc is available with Entrepreneur. These goods are exported and ITC Taken on this Export.
But in FY 19-20 it is observed that the supplier didn't show the relevant sales while filing GSTR1 and not visible in Entrepreneur 2A. We are in doubt that supplier even not paid the GST Collected above to the authorities. Further it is come to notice the supplier also cancelled his Old GST Registration and taken new one in the same Jurisdiction.
My Question is:
1. So whether this ITC is valid or it needs to be reversed?
2. Do the Entrepreneur needs to take any action? He is Bonafide and have all supporting documents to prove that he actually purchased goods but his supplier didn't show the sales?
3. Entrepreneur is exporter and has to submit all the information related to itc under circular 131 so this needs to told in circular?
4. Is there any circular or notifications to support this action?
28 April 2020
First check whether the supplier has filed his GSTR-3B for that month. If yes take a certificate from him that he had paid the taxes related to your invoice in his return even though he failed to show it in his GSTR-1. If no the only option is to reverse the credits and claim damages from the supplier. For any further problem regarding this matter you can send it in private chat.
30 April 2020
Dear Manjeet Ji, As per Section 16(2), in order to claim ITC, following must be complied:- a) He has Tax Invoice/Debit Note b) Goods or service has been received or deemed received c) Tax has been paid by supplier to Government d) Return has been furnished by supplier u/s 39
In your case, you are complying 16(2)(a) & 16(2)(b) but since vendor has not paid taxes to government and has not furnished return, it leads to non-compliance to section 16(2), causing ineligibility of ITC.
But, there are some judgements like M/s TVS Motor Company Ltd. v/s state of Tamil Nadu in which Supreme Court said that ITC can not be denied to buyer if supplier has failed to pay taxes to governement or failed to file return.
Another, Government has introduced Rule 36(4) against a directive of Supreme Court and limited allowance of max. 120% of ITC visible in GSTR2A wef. 09.10.2019. So it can be inferred that prior to this period, even if ITC is not visible in GSTR2A, it can be claimed.
So, as per my view, 1.) You should not reverse the ITC and if any notice is being served, let the matter be litigated. 2.) Since you are a bonafide buyer, you need not to worry rather ask supplier to comply the rules. Send him written intimations and request to take necessary action. 3.) Submit all relevant documents to authorities related to ITC. But i doubt that it asks for GSTR2A copy. 4.) As per my view, there is no other specific circular/notification for supporting your claim.
CAclubindia
