Telangana High Court Validates Section 161 Rectification Route for ITC Denial Stemming from GSTR-2A and GSTR-3B Discrepancies

The Complex Landscape of Input Tax Credit Mismatches

Since the inception of the Goods and Services Tax (GST) regime, the seamless flow of Input Tax Credit (ITC) has been a foundational promise. However, the practical implementation has frequently resulted in administrative bottlenecks, primarily due to discrepancies between the credit claimed by the recipient and the outward supplies declared by the vendor. The mismatch between Form GSTR-2A (the auto-populated read-only document) and Form GSTR-3B (the summary return) remains one of the most heavily litigated domains in indirect taxation.

An assessee often finds themselves facing severe tax demands, interest, and penalties not due to their own fraudulent actions, but because a supplier failed to upload invoices punctually or remitted the collected taxes belatedly. Addressing this persistent grievance, the Telangana High Court recently delivered a pragmatic judicial order in the matter of Vishist Business Solutions Private Limited Vs Appellate Joint Commissioner of State Tax (ST). The ruling establishes a crucial precedent for resolving historical ITC disputes, specifically for the initial years of GST implementation, by emphasizing the utility of statutory rectification mechanisms when post-facto evidence of tax payment is procured.

Factual Matrix of the Dispute

The controversy in the present writ petition pertained to the Assessment Year (AY) 2018-19, a period characterized by widespread confusion regarding return filing procedures and system glitches on the GST portal.

Initial Assessment and Appellate Proceedings

The jurisdictional tax authorities initiated scrutiny against the assessee for the aforementioned period. The primary allegation was the availment of excess Input Tax Credit, which was flagged due to a non-reconciliation of data declared in the annual return (Form GSTR-09) compared to the auto-populated Form GSTR-2A.

Relying strictly on the statutory conditions for credit availment, the adjudicating authority passed an Order-in-Original on 18.04.2024, confirming the tax demand. The authority cited a violation of Section 16(2)(c) of the Telangana Goods and Services Tax Act, 2017, asserting that the tax charged in respect of the inward supplies had not been actually paid to the Government account.

Aggrieved by the initial assessment, the assessee escalated the matter to the appellate forum. However, the appellate authority upheld the demand via an order dated 19.11.2025. The dismissal at the appellate stage was primarily rooted in a procedural lapse by the assessee: the failure to furnish the requisite Chartered Accountant (CA) certificates or supplier declarations as mandated by the remedial guidelines issued by the Central Board of Indirect Taxes and Customs (CBIC).

The Core Issue: Delayed Supplier Compliance

The crux of the litigation lay in the erratic compliance behavior of the assessee's vendor (Respondent No. 5). The underlying transactions involved two specific invoices dated 29.03.2019 and 31.03.2019, encompassing a total tax implication of Rs. 7,20,000.

Initially, the supplier had filed NIL returns for the month of March 2019, submitting Form GSTR-3B on 31.07.2019 and Form GSTR-1 on 13.11.2019. Consequently, the invoices did not populate in the assessee's Form GSTR-2A, triggering the departmental red flags.