Remand of ITC Mismatch Case Extending Circular Relief to FY 2019-20 Based on Justice-Oriented Approach

Remand of ITC Mismatch Case Extending Circular Relief to FY 2019-20 Based on Justice-Oriented Approach

1. The Core Dispute: Denial of ITC Due to GSTR-2A Mismatch

The petitioner (Assessee) faced a denial of Input Tax Credit (ITC) for FY 2019-20 because the credit claimed in GSTR-3B was not reflected in GSTR-2A. This mismatch was due to bona fide errors in invoices (such as mentioning the wrong GSTIN of the recipient).

• Assessee’s Stand: They sought the benefit of Circular No. 183/15/2022, which allows rectification of such errors via certificates from suppliers or Chartered Accountants. They relied on a “justice-oriented approach” to argue that since the error was identical to those in earlier years, the relief should be extended to 2019-20.

• Revenue’s Stand: The State argued that Circular No. 183 was strictly limited to FY 2017-18 and 2018-19, while Circular No. 193 (which does cover up to 2021) was issued later and has specific sub-period conditions.

2. Legal Analysis: Extending Administrative Respite

The Court examined the interplay between the two circulars and the intent behind them.

I. Principle of Identical Errors

The Court held that the Circular No. 183/15/2022 was designed to address genuine difficulties in the initial implementation of GST. If an error in 2019-20 is identical to a “bona fide” mistake in 2017-18, the relief cannot be denied simply because the Circular’s text refers only to the earlier years.

II. Recognition of Circular No. 193/05/2023

While Circular 183 paved the way, Circular No. 193/05/2023 later formalized this extension. It explicitly provides a mechanism for the period April 1, 2019, to December 31, 2021.

• Key Condition: For the 2019-20 period, the relief is subject to Rule 36(4), meaning ITC can be claimed only up to the prescribed “tolerance” limit (e.g., 20%, 10%, or 5%) over and above the credit reflected in GSTR-2A.

3. Final Ruling: Matter Remanded

The High Court set aside the previous orders and directed the Revenue to take fresh steps.

• Verdict: The Revenue must apply the procedures laid down in both Circular No. 183 and Circular No. 193 for the assessee’s claims in FY 2019-20.

• Outcome: The matter was remanded back to the Assessing Officer for fresh consideration based on the certifications and documentary evidence provided by the petitioner. [In favor of Assessee]

Key Takeaways for Taxpayers

• Certification Route: For mismatches > ₹5 Lakhs (per supplier/FY), obtain a Chartered Accountant (CA/CMA) certificate from the supplier. For < ₹5 Lakhs, a Self-Certification from the supplier suffices.

• Tolerance Limits: Remember that for the FY 2019-20 period, your claim is restricted by the Rule 36(4) percentage buffer applicable at that time.

• Bona Fide Evidence: The “justice-oriented approach” means that if you can prove the tax was paid to the Government and the error was inadvertent, technical date restrictions in circulars may not bar your claim.