Judicial Pronouncement on GST

No input tax credit if GST returns not filed,; and Interest payable on gross GST liability; says High Court of Telangana—

In the case of M/s.Megha Engineering & Infrastructures Ltd. (Writ Petition Number 44517 of 2018), the High Court of Telangana has ruled that no input tax credit (ITC) is available unless GST returns are filed and a taxpayer is liable to pay penalty on the entire liability. Accordingly, the court held that interest was payable on the gross amount of the goods and services tax (GST) liability.

“In other words until a return is filed as self-assessed, no entitlement to credit and no actual entry in the electronic credit ledger takes place. As a consequence, no payment can be made from out of such a credit entry,” Justices V Ramasubramanian and P Keshava Rao. “…….the claim made by the respondents for interest on the ITC portion of the tax cannot be found fault with. Hence, the Writ Petition is dismissed,” the court said.

Because of the taxpayer‘s delay in filing the return in this instance, the payment of the tax liability—partly in cash and partly in the form of a claimed input tax credit—was made beyond the period prescribed, and thus the liability to pay interest on the gross amount arose automatically. The taxpayer was thus liable for interest on the gross GST liability.