Category: Input Tax Credit

Based upon specific intelligence, the officers of the Anti Evasion branch of Central Goods and Service Tax (CGST) Commissionerate, Delhi (West) have unearthed a case of availment/utilization and passing on of inadmissible input tax credit (ITC) through goods less invoices of Rs 91 crore (approx). The modus operandi involved floating of multiple firms with the intent to avail/utilize & passing on of inadmissible credit.

The firms involved in this network are M/s Girdhar Enterprises, M/s Arun Sales, M/s Akshay Traders, M/s Shree Padmavati Enterprises and 19 others. These 23 firms were floated in order to generate goods-less invoices with an intent to pass on fraudulent ITC without paying actual GST to the government. Late Shri Dinesh Gupta, Shri Shubham Gupta, Shri Vinod Jain and Shri Yogesh Goel were associated in the said business of generating/selling fake invoices. These entities are dealing in various commodities and involved in generation of goods-less invoices worth Rs. 551 croreand passing inadmissible ITC amounting to Rs. 91crore(approx.). All the three accused tendered their voluntary statement admitting their guilt.

Therefore, Shri Shubham Gupta, Shri Vinod Jain and Shri Yogesh Goel knowingly committed offences under Section 132(1)(b) and 132(1)(c) of the CGST Act, 2017 which are cognizable and non-bailable offences as per the provisions of Section 132(5) and are punishable under clause (i) of the sub section (1) of Section 132 of the Act ibid. Accordingly, they were arrested under Section 132 of the CGST Act on 10.07.2021 and remanded to judicial custody by the duty Metropolitan Magistrate for 14 days. Further Investigations are in progress.

Delhi Zone has been making sustained efforts to check evasion of GST, leading to detection of Rs. 91.256 crore in the present FY and 3 persons have been arrested in these matters.

The gross GST revenue collected in the month of June’ 2021 is₹92,849 crore of which CGST is ₹16,424 crore, SGST is ₹20,397, IGST is ₹49,079 crore (including ₹25,762 crore collected on import of goods) and Cess is ₹6,949 crore (including ₹809 crore collected on import of goods).The above figure includes GST collection from domestic transactions between 5^thJune to 5^th July’2021 since taxpayers were given various relief measures in the form of waiver/reduction in interest on delayed return filing for 15 days for the return filing month June’21 for the taxpayers with the aggregate turnover uptoRs. 5 crore in the wake of covid pandemic second wave.

During this month the government has settled ₹ 19,286 crore to CGST and ₹ 16,939 crore to SGST from IGST as regular settlement.

The revenues for the month of June 2021 are 2% higher than the GST revenues in the same month last year.

GST collection after posting above Rs. 1 lakh crore mark for eight months in a row, the collection in June’2021 dropped below Rs. 1 lakh crore. The GST collection for June’2021 is related to the business transactions made during May’2021. During May’2021, most of the States/UTs were under either complete or partial lock down due to COVID. The e-way bill data for the month of May 2021 shows that during the month, 3.99 crore e-way bills were generated as compared to 5.88 crore in the month of April 2021, down by more than 30%.

However, with reduction in caseload and easing of lockdowns, the e-way bills generated during June 2021 is 5.5 crore which indicates recovery of trade and business. The daily average generation of e-way bill for the first two weeks of April 2021 was 20 lakh, which came down to 16 lakh in last week of April 2021 and further to 12 lakh in the two weeks between 9^th to 22^nd May. Thereafter, the average generation of e-way bills has been increasing and has reached again to 20 lakh level since week beginning 20^th June. Therefore, it is expected that while the GST revenues have dipped during the month of June, the revenues will see an increase again from July 2021 onwards.

Ever received a Notice for the reversal of Input Tax Credit even when you had availed it after paying the amount to the Seller?

Heard of such scenarios and wondering what to do in such cases?

Read the article to know why this is an unfair practice, and you can protect yourself by citing the appropriate rules and documents.

We are sharing a Court Ruling and a Press Release by CBIC that clearly explains the processes.

Understanding the Court Case

The case we discuss is 2021-VIL-308-MAD, IN THE HIGH COURT OF JUDICATURE AT MADRAS.

In this particular case, the buyer had paid the due amount of Tax to the Seller, but the Seller did not deposit the same amount to the Govt.

The buyer availed Input Tax Credit on the said amount, thinking that the Seller has paid the amount, but that was not the case. The Department then made efforts to recover the ITC amount directly from the buyer.

The Court ruled against the order asking for the Tax recovery from the buyer stating the Department’s approach was wrong and that the Department should have initiated action against the Seller.

The Press Release by the CBIC

In a Press Release dated 4th of May, 2018, CBIC clearly talked about No automatic reversal of credit.

The fourth point of the Press Release stated that there shall not be any automatic reversal of input tax credit from buyer on non-payment of Tax by the Seller.

The recovery shall be made from the Seller. However, the authorities do have the power to demand the Tax from the buyer but only in exceptional situations like missing dealer, closure of business by supplier or supplier not having adequate assets etc.

The first approach should always be to demand and collect the Tax from the Seller of goods/services.

But I still face such issues; what to do?

It has been seen in numerous cases that the Department issues a notice directly to the buyer without trying to collect the Tax from the Seller.

If you also face such a situation, you can counter question the Officer about the proper procedure and request the Department to issue the notice to the Seller instead.

But make sure that you do this politely and professionally, as the biggest reasons for litigation and Tax problems are actually the wrong ways of communicating and presenting yourself in front of the Officer.

With the proper citing of the appropriate Court Rulings and Press Releases like the ones we discussed, the complete process of getting the notice reversed becomes way easier!

CBIC Press Release Notifications

Judgements