Kerala High Court rules input tax credit cannot be rejected solely for mismatch

The Kerala High Court directed tax authorities to conduct a fresh reassessment regarding Input Tax Credit, ruling that credit cannot be denied solely due to a mismatch with Form GSTR-2A. The court addressed the common dispute where recipient claims differ from the automated return mirroring their purchases. Input Tax Credit permits businesses to reduce the tax paid on inputs from the tax payable on output supplies, functioning as a mechanism to avoid the cascading effect of taxes.

In practice, authorities previously disallowed credits automatically when purchase registers failed to match government portal auto-drafted statements, shifting the compliance burden entirely onto the buyer despite genuine transactions. Tax professionals and businesses must review ongoing litigation and pending assessment orders matching this issue for potential relief. Practitioners should advise clients to maintain robust documentary proof, including invoices and payment records, to substantiate claims during reassessment proceedings.

Bottom line: Ensure robust purchase reconciliations and challenge automated disallowances to protect working capital.