Delhi High Court issues Notice on challenge to constitutional validity of Section 16(2)(aa) of the CGST Act [Represented by NITYA Tax Associates]

by | May 9, 2023 | Outlook

This is to apprise you, in the case of NGKA & Associates LLP v. UOI, W.P. No. 5908/2023, the Delhi High Court has issued Notice to the revenue on challenge to Section 16(2)(aa) of the CGST Act. Section 16(2)(aa) (as effective from January 2022) mandates reporting of Invoices and Debit Notes by supplier in GSTR-1 (which is communicated to recipient in GSTR-2B) as an essential condition for claiming ITC. This is first challenge to this provision before the Delhi High Court. Similar challenges are also pending before the Gauhati and Calcutta High Courts in the cases of McLeod Russel India Limited v. UOI, W.P. No. 5725/2022 and W.P.A No. 20186/2022, respectively.

Notable that the Petitioner has also challenged constitutional validity of Section 16(2)(c) (which mandates payment of tax by supplier as an essential condition to avail ITC).

The matter is now tagged along with batch of petitions pending in the Delhi High Court dealing with constitutional challenges to Section 16(2)(c).

NITYA Comments: The above challenge is basis the premise that a bona fide recipient who has paid GST to its supplier, is entitled to avail ITC despite non-compliance by its supplier. In essence, Section 16(2)(aa) and 16(2)(c) fail to distinguish genuine and bona-fide taxpayers vis-à-vis colluding or defrauding purchasers and tends to deny ITC to both classes of buyers by treating them alike. Even after changes on GST Portal towards identification of non-compliant taxpayers, this provision is still incapable of compliance as a recipient has no control over supplier’s action. 

The matter assumes significance being first challenge to Section 16(2)(aa) before the Delhi High Court and first one post amendment to Section 16(2)(c).

 

We are pleased to share that NITYA Tax Associates represented the Petitioner before the Delhi High Court.

 

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