Calcutta High Court issues notices to Central & State over Rule 36(4).

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Calcutta High Court issues notices to Central & State over Rule 36(4).

The Calcutta High Court has issued the notices to the Central and State Government over Input Tax Credit (ITC) Effect of GSTR-1 Return Subject to 10% ITC for Purchase.

The petitioner, LGW Industries Limited has challenged the constitutional validity and vires of Rule 36(4) of the CGST Rules/WBGST Rules and Section 43A(4) of the CGST Act/WBGST Act.

The Rule 36(4) of the CGST Rules/WBGST Rules drawing its power from Section 43A(4) of the CGST Act/WBGST Act, which is yet to be notified, restricts ITC available to a buyer of goods or services to a maximum of 10% on the basis of the details of outward supplies furnished by the supplier of goods or services on the common portal i.e. filing of GSTR 1 return by the supplier.

The Counsel for the petitioner on the ground that Section 43A(4) and Rule 36(4) puts an onerous and impossible burden on the buyer of goods and services to somehow ensure that the supplier of goods or services does in fact uploads the details of outward supplies on the common portal and if the supplier fails to do so, it undergoes the risk of being denied the benefit of ITC.

This is violative of Article 14 of the Constitution inasmuch as it treats both the innocent purchasers and the guilty purchasers alike.

Restricting the benefit of ITC to a bona fide purchaser, only because of the default of the supplier or services to upload the details of outward supplies on the common portal, over which it has no control whatsoever, is arbitrary and irrational.

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