The Supreme
Court (SC) has set aside a Karnataka High Court order that allowed dealers
to claim input tax credit (ITC) under the VAT regime by producing
invoices and cheque payments.
The SC allowed tax authorities' appeal against the
High Court judgment. It said a dealer claiming ITC has to prove beyond
doubt the occurrence of the actual transaction” and the “actual physical
movement of the goods".
It pronounced the order HC as “erroneous” and said
that, “for claiming ITC, genuineness of the transaction and actual physical
movement of the goods are the sine qua non and the aforesaid can be proved only
by furnishing the name and address of the selling dealer, details of the
vehicle which has delivered the goods, payment of freight charges,
acknowledgement of taking delivery of goods, tax invoices and payment
particulars etc.”
However, the SC added that while the tax invoice and
cheque can be said to be proving one of the documents, it is not sufficient to
prove the genuineness of the transaction.
It should be noted that e-way bills and e-invoicing
under the GST regime can come handy to claim ITC in this regard.
“Though the ruling is under VAT, GST authorities may
now ask for additional documents to substantiate input tax claims by placing
reliance on the principles laid down in the ruling. However, apart from invoice
and proof of payment, documents such as E-waybill and E-Invoice, could help in
substantiating the genuineness of the transaction under the GST regime,” said
Harpreet Singh, partner at KPMG India.