Kerala High Court: GST Input Tax Credit Cannot Be Denied Only Because It Is Missing from GSTR-2A

Many GST assessments deny input tax credit (ITC) for one reason only: the supplier’s invoice does not show up in the buyer’s GSTR-2A. The Kerala High Court addressed this in Praveen Bhaskaran v. Union of India (WP(C) No. 30538 of 2023, order dated 20 September 2023). It held that an ITC GSTR-2A mismatch does not by itself justify denying ITC. The officer must also look at the evidence the taxpayer holds.

Facts of the case

• The petitioner, Praveen Bhaskaran, is the proprietor of M/s Galaxy Traders.
• He challenged an assessment order that denied ITC of ₹1,04,342, made up of CGST of ₹52,171 and SGST of ₹52,171, for 2017-18.
• The reasons for denial were that the ITC was not reflected in his GSTR-2A, and that the supplier had not reported the supplies in GSTR-1.
• The assessing authority also recorded that he had not submitted proof of payment of the tax to the Government.
• He approached the High Court under Article 226 of the Constitution.

Issue before the Court

Can an assessing authority deny ITC purely because the purchase does not appear in GSTR-2A, without examining the documents the taxpayer produces to show a genuine purchase and payment of tax?

What the Court held

1. The burden stays on the person claiming ITC.
The Court referred to Section 155 of the GST Act, which places the burden of proof on the person who claims ITC. A claimant must support the claim with documentary evidence, including evidence that tax was paid. A missing GSTR-2A entry does not remove that burden.

2. A mismatch alone is not enough to deny the claim.
Relying on its earlier decision in Diya Agencies v. State Tax Officer (WP(C) No. 29769/2023, 12 September 2023), the Court said that where GSTR-2A and GSTR-3B differ, the assessing officer must give the taxpayer a chance to establish the claim. If the evidence satisfies the officer that the claim is bona fide and genuine, ITC should be allowed.

3. The officer must examine the evidence independently.
The Court said that the officer must independently look at the taxpayer’s evidence even where the tax is not reflected in GSTR-2A.

4. The matter was sent back.
The Court set aside the assessment order only to the extent of the ₹1,04,342 denial and remanded it for fresh examination. It directed that:

• the petitioner appears before the assessing authority with the judgment and all relevant documents within 15 days of the order, and
• the authority examines the evidence and passes a fresh order expeditiously.

Precedents the Court relied on

The Diya Agencies decision, on which the Court relied, itself drew on:

• Union of India v. Bharti Airtel Ltd. ((2022) 4 SCC 328, Supreme Court)
• State of Karnataka v. Ecom Gill Coffee Trading Pvt. Ltd. (2023 (3) TMI 533 (SC))
• Suncraft Energy Pvt. Ltd. v. Assistant Commissioner, State Tax, Ballygunge Charge (MAT 1218 of 2023, Calcutta High Court)

What this order does not do

• It does not grant the ITC. The Court did not decide whether the petitioner had proved his claim. It required the officer to examine the evidence and decide according to law.
• It does not dilute the burden of proof. The taxpayer must still show a genuine transaction and payment of tax.
• It concerns 2017-18. The GST law has changed since then, including provisions that tie ITC eligibility to details reported in the statutory returns (such as Section 16(2)(aa) for later periods). Which provision applies depends on the period involved, so check the law applicable to the relevant year.

Practical takeaways for taxpayers

1. Do not accept a mismatch alone as the end of the matter. Respond to the notice with a written reply and documents.
2. Keep a documentary trail for each purchase: tax invoice, purchase order, delivery challan or transport and e-way bill records, goods receipt or service completion proof, stock records, and payment proof through banking channels.
3. Prove payment of tax to the supplier. Bank statements and ledger confirmations help show you paid the invoice value including GST.
4. Check the supplier’s status. Registration status on the relevant dates and the supplier’s filing history help show that the transaction was genuine.
5. Reconcile regularly. Compare purchase registers with GSTR-2A/2B and follow up with suppliers before the due date for filing returns.
6. Reply within the time allowed. Ask for a personal hearing, and reach out to a professional early if the demand is large or the period is old.
7. If an order ignores your documents, a writ petition or appeal, depending on the facts and the remedy available, may be considered. This order and Diya Agencies can be cited in support.

Frequently asked questions

Q1. Can ITC be denied only because it is not reflected in GSTR-2A?
According to this order, no. The officer must examine the evidence the taxpayer produces before deciding.

Q2. Does the taxpayer still have to prove the claim?
Yes. The burden under Section 155 remains on the person claiming ITC, who must give documentary evidence of the supply and payment of tax.

Q3. Did the High Court allow the ITC of ₹1,04,342?
No. It set aside the denial and remanded the case for fresh examination. The final outcome depended on the assessing authority’s satisfaction after reviewing the evidence.

Q4. What time did the petitioner get to appear before the authority?
Fifteen days from the date of the order, 20 September 2023.

Q5. Does this apply to every year and every case?
It was decided on a case concerning 2017-18 and the law then applicable. It is a High Court decision and its use in other cases depends on the facts, the period and the provisions involved.

Conclusion

Praveen Bhaskaran reinforces that an assessment cannot rest only on a mismatch between returns. The tax authorities must look at the evidence, and taxpayers must still prove the transaction was genuine and the tax was paid.

Sagar S Gupta & Co, Chartered Accountants, Shivpur, Varanasi, assists with GST notices, ITC reconciliation, replies to show cause notices and demand orders, and appeals. This article summarises a judicial order for general information and is not legal advice for any specific case.