In a recent landmark decision, the Madras High Court protected a company’s claim for Input Tax Credit (ITC) even though the supplier’s GST registration was canceled retrospectively. In this case, Tvl. Engineering Tools Corporation vs The Assistant Commissioner (ST), Chennai (Writ Petition No. 3505 of 2024 And W.M.P. Nos. 3758 & 3759 of 2024), highlights the importance of proper documentation and record-keeping for businesses claiming ITC under the Goods and Services Tax (GST) regime.
The company’s ITC claim was initially denied by the tax authorities because the supplier’s GST registration was canceled with retrospective effect. However, the Madras High Court ruled that this cancellation cannot be the sole reason for denying ITC. The Court directed the Proper Officer to re-evaluate the ITC claim based on the following documents provided by the company:
- Tax Invoice
- E-way Bills
- Transport Documents
- Proof of Payments to Supplier through Banking Channels
The Court emphasized that a genuine business transaction cannot be deemed fraudulent simply because the supplier’s registration was canceled later. The focus should be on verifying the legitimacy of the purchase using proper documentation.
Key Takeaways for Businesses
This case offers valuable insights for businesses claiming ITC under GST:
- Maintain meticulous records: Always retain valid documents like tax invoices, e-way bills, transport documents, and proof of bank payments for all purchases.
- Verify supplier registration: While not a foolproof method, ensure your suppliers have valid GST registrations at the time of purchase.
- Seek legal advice: If you face issues with ITC claims due to supplier registration cancellations, consult a tax professional or lawyer for guidance.
By following these guidelines and staying updated on relevant court rulings, businesses can ensure they claim their rightful ITC benefits under GST.
Disclaimer: This blog post is for informational purposes only and should not be construed as legal advice. Always consult with a qualified tax professional for specific guidance on your situation.