The Supreme Court (SC) has ruled that invoices, cheque payments, and value-added tax (VAT) do not provide enough evidence for a company to claim input tax credit (ITC). The decision was made in response to an appeal by an Indian company, which had been denied ITC by the tax authorities.
The company had purchased goods and services worth over Rs. 1.8 crore from various suppliers and claimed ITC for the tax paid on these purchases. The tax authorities rejected the ITC claim, stating that the company had failed to provide adequate proof of the transactions.
The company appealed the decision, arguing that the invoices, cheque payments and VAT paid were sufficient to prove the transactions. However, the SC dismissed the appeal, stating that these documents did not provide enough evidence to establish the authenticity of the transactions.
According to the SC, the ITC claimant must provide evidence that the goods and services were actually received, and that the transactions were genuine. Invoices, cheque payments, and VAT paid do not establish the genuineness of the transactions as they can be easily manipulated.
The Court also noted that the company had not provided any additional evidence to support its claim, such as delivery challans or receipts. The absence of such documents raised doubts about the authenticity of the transactions.
This decision by the SC has significant implications for businesses claiming ITC. It highlights the need for businesses to maintain proper documentation, including delivery challans and receipts, to support their ITC claims.
The ruling also underscores the importance of ensuring that transactions are genuine and that goods and services have actually been received. Obtaining fake invoices, cheque payments or VAT receipts for transactions that have not taken place is a serious offence and can result in severe penalties.
The SC decision is in line with the recent amendments made to the Goods and Services Tax (GST) laws, which aim to curb tax evasion and ensure greater compliance. The amendments require businesses to provide additional information, such as the recipient’s GST identification number and the nature of the goods and services supplied, to claim ITC.
The amendments also allow tax authorities to block ITC claims if the supplier has defaulted in filing GST returns. This provision is aimed at ensuring that only genuine transactions qualify for ITC, and that businesses do not claim credit for purchases made from non-compliant suppliers.
In conclusion, the SC ruling reinforces the need for businesses to maintain proper documentation and ensure that their transactions are genuine. It underscores the importance of compliance with tax laws and highlights the dangers of attempting to evade taxes by obtaining fake invoices, cheque payments or VAT receipts.
Businesses must be diligent in claiming ITC and ensure that all transactions are properly documented, to avoid being denied ITC by tax authorities. The GST amendments have made it easier for tax authorities to detect tax evasion and non-compliance, and businesses must be aware of these changes and comply with them to avoid penalties and legal action.