Navigating the Evolving Landscape of Indian GST: Key Updates, Judgments, and Procedural Nuances

For tax professionals, the Goods and Services Tax (GST) regime remains a dynamic landscape. Recent judicial pronouncements and amendments have settled debates while opening new compliance avenues. This article synthesises the legal position on Input Tax Credit (ITC), dispute resolution, and procedural compliance for those familiar with Indian GST.

1. The sanctity of Input Tax Credit (ITC)

ITC remains the lifeline of the GST ecosystem, yet it is often the subject of the most intense litigation.

• Supplier Non-Compliance & The Buyer’s Burden: A major relief has come from the courts regarding the denial of ITC due to a supplier’s default (e.g., non-payment of tax). Judgments like Suncraft Energy (Calcutta HC) and Ecom Gill Coffee (SC) have reinforced that ITC cannot be denied to a bona fide purchaser solely because the supplier failed to pay the tax, provided the purchaser has verified the supplier's active status. Procedural Aspect: While the law supports the purchaser, the burden of proof lies on you. Ensure you maintain a robust "Vendor Due Diligence" trail. If a notice arises, referencing GSTR-2A status at the time of purchase is vital.

• Blocked Credit & Immovable Property: Section 17(5) blocks ITC for construction of immovable property. However, the Safari Retreats (Orissa HC) judgment created a significant exception, allowing ITC if the property is used for letting out (renting), treating it as a "plant" vital for business. Note: This matter is pending final settlement, so take a conservative position or litigate with caution.

• Time Bar on ITC (Section 16(4)): The time limit (30th November) for claiming ITC is generally deemed mandatory. However, for the initial years (FY 2017-21), amnesty schemes have allowed claims notwithstanding Section 16(4). Procedural Tip: Ensure any delayed claims for these periods are backed by the specific Amnesty notifications and filed in GSTR-3B.

2. Rectification and the "Human Error" Doctrine

The rigid architecture of the GSTN portal often clashes with the substantive rights of taxpayers.

• Rectification of Returns: The Supreme Court in Bharti Airtel emphasised procedural discipline but acknowledged that software limitations shouldn't override justice. You have a right to correct bona fide clerical errors in GSTR-1 or GSTR-3B. Procedural Aspect: If the portal does not allow rectification for past periods, taxpayers are increasingly approaching High Courts. For current periods, ensure errors are rectified in the subsequent month's return (Table 9 of GSTR-1) before the November deadline.

• E-Way Bill Detention: Minor typographical errors (like a digit in a vehicle number) should not lead to the seizure of goods under Section 129. The authorities are instructed to levy a nominal penalty (Form MOV-09) rather than confiscate goods, provided there is no fraudulent intent.

3. Financial Management: Interest and Levies

• Interest on Net Liability: It is now settled (retrospectively from 01.07.2017) that interest under Section 50 is payable only on the Net Cash Liability (tax paid via Electronic Cash Ledger), not on the gross liability offset by ITC. Procedural Aspect: If you receive a notice for gross interest, refer to the retrospective amendment. However, interest on "Ineligible ITC" applies only if that ITC was both availed and utilised.

• The "Secondment" Controversy: Following the Northern Operating Systems judgment, secondment of employees from foreign parents to Indian entities is treated as a "manpower supply" service liable to GST under RCM. Procedural Aspect: Review your inter-company agreements. However, rely on Instruction No. 05/2023-GST, which clarifies that Section 74(1) (fraud/extended period) cannot be invoked mechanically without evidence of intent to evade.

4. Dispute Resolution and Amnesty Schemes

The government has introduced measures to declog the litigation pipeline.

• Section 128A Amnesty (FY 2017-18 to 2019-20): A golden opportunity exists for waiving interest and penalties on Section 73 demands (non-fraud cases) for the initial years. Procedural Action:

  1. Pay the full tax demand by the notified deadline (31.03.2025).

  2. Withdraw Appeals: If you have an appeal pending, you must withdraw it to avail this benefit.

  3. Forms: Watch out for the specific forms SPL-01 and SPL-02 to apply for this waiver, and use DRC-03A for payments where required.

• Pre-deposit for Appeals: Can you use the Electronic Credit Ledger (ECRL) for the mandatory 10% pre-deposit? While some authorities insisted on Cash Ledger payments, recent circulars and judgments accept the use of ECRL for paying the tax component of the pre-deposit. Form: This is processed via APL-01.

• Unified Tax Determination (Section 74A): A major procedural shift is the introduction of Section 74A. For FY 2024-25 onwards, the distinction between Section 73 (non-fraud) and Section 74 (fraud) timelines is being merged into a unified procedure for tax determination. This simplifies the SCN process but may tighten limitation periods.

5. Enforcement Safeguards

• Recovery During Search: A critical protection for taxpayers is that tax cannot be recovered during a search or inspection without an adjudication order. 

• Procedural Warning: Do not be coerced into paying tax via DRC-03 during a search ("Voluntary Payment"). If paid under duress, courts have ordered refunds. Retracted statements cannot be the sole basis for recovery.

• Bunching of SCNs: Authorities often issue a single SCN bunching multiple financial years. The courts have held this impermissible if it bypasses the limitation period for any specific year. Ensure you challenge the validity of such notices on jurisdictional grounds.

Conclusion 

As we move towards a more mature GST regime, the focus is shifting from "implementation" to "assessment and dispute resolution". Leveraging these judicial precedents and procedural relaxations (like the Amnesty Scheme) is crucial for safeguarding your business against undue liabilities. Always ensure that your procedural filings—from GSTR-1 rectifications to DRC-03 payments—are aligned with the latest legal positions to avoid future litigation.

Supreme court itc to be given to the purchaser even if tax is not deposited by seller | Matching reversal and reclaim of ITC | DRC-01 format | Powers of GST officers | GSTR 3B table 5