Pune GST Tribunal Upholds ₹3.8 Lakh Interest on Trader Who Missed 180-Day Supplier Payment Deadline, Despite GSTR-2 Not Being Operational

The Appellant, a registered trader, challenged an appellate order upholding denial of ₹31,115 in IGST input tax credit (ITC) claimed on invoices issued by Shanmukh Traders, whose registration had been cancelled retrospectively, and confirming ₹3,80,408 in interest on ITC relating to supplies not paid for within 180 days.

The order also imposed a penalty of ₹20,000.

The Appellant had not produced supporting invoices or other evidence to establish the ITC conditions, and later paid the ₹31,115 tax by DRC-03 without interest.

It also argued that the non-operation of FORM GSTR-2 prevented compliance with the then-applicable Rule 37, and challenged the interest and penalty.

The DRC-07 summary, initially showing an incorrect tax amount, had been rectified by the time of the Tribunal hearing.

Section 155 of the CGST Act places on the claimant the burden of proving eligibility for ITC.

Under the second proviso to Section 16(2), as applicable to the period in dispute, a recipient who failed to pay the supplier the value and tax within 180 days was required to have an amount equal to the ITC added to output tax liability, with interest; the third proviso permitted the recipient to avail the credit again upon payment.

Rule 37, as then in force, prescribed the reporting and addition of the credit to output tax liability, and interest from the date of availing credit until payment of the amount added to that liability.

Section 50 governed interest, while Section 73(9) prescribed a penalty of 10% of tax or ₹10,000, whichever was higher; the fourth proviso to Section 20 of the IGST Act aggregated the penalties leviable under the CGST and SGST/UTGST Acts in IGST cases.

The Appellant provided no invoices, payment records, evidence of receipt or transport of goods, or supplier ledger to discharge its burden under Section 155; the Tribunal therefore upheld denial of the ₹31,115 ITC without deciding whether retrospective cancellation alone justified denial.

It held that the non-operation of FORM GSTR-2 affected the reporting mechanism, not the statutory liability under Section 16(2), and that payment or reversal could have been made through the available mechanisms.

The 180-day requirement was not displaced by a private agreement or pandemic-related hardship, and later payment to suppliers did not negate the prior failure to pay within the prescribed period.

The interest computation was not disputed.

The penalty was correctly determined at ₹20,000 by applying the statutory minimum of ₹10,000 under each of the CGST and SGST Acts and aggregating them under the IGST Act.

The DRC-07 ground no longer survived because the summary had been rectified.

It directed the proper officer to quantify the Section 50 interest on the ₹31,115 tax, adjust the ₹39,091 pre-deposit and the ₹31,115 DRC-03 payment against the demand, and communicate any balance payable.

No order as to costs was made.