Fraudulent ITC Claims Severely Harm GST System, Writ Jurisdiction to Be Used Sparingly: Delhi HC [Read Order]

Delhi HC: Curbing Fraudulent ITC Claims is Crucial for GST Stability

The Delhi High Court has recently issued a stern warning regarding the increasing instances of fraudulent Input Tax Credit (ITC) claims, highlighting the significant damage they inflict on the Goods and Services Tax (GST) system. The court emphasized that such cases must be addressed through the established appeal mechanisms within the GST framework.

Writ Jurisdiction to Be Applied Judiciously

The High Court clarified that writ jurisdiction, a discretionary power of the court, should be invoked sparingly in matters related to GST fraud. It stated that taxpayers should primarily pursue remedies through the prescribed appellate channels provided under the GST Act, unless there are compelling reasons to bypass them.

The Menace of Bogus ITC

Fraudulent ITC claims represent a substantial threat to the integrity of the GST regime. These claims, often based on fictitious invoices and shell companies, allow unscrupulous businesses to evade taxes and unfairly compete with legitimate enterprises. The court recognized the urgency of addressing this issue effectively.

• The court observed that permitting widespread recourse to writ petitions in GST fraud cases would overwhelm the judicial system and undermine the authority of the GST appellate bodies.
• The Delhi HC reiterated that the primary avenue for challenging GST assessments and demands should be through the established appeal process.

Impact on the Indian Economy

GST, being a cornerstone of India’s economic structure, relies on honest compliance and timely revenue collection. Fraudulent ITC claims disrupt this equilibrium, impacting government revenue and hindering economic growth. The Delhi High Court’s stance underscores the need for robust enforcement measures to combat tax evasion and maintain the stability of the GST system.