Important GST Case Law: L&T-IHI Consortium Eligible for ITC on Advance Received for Atal Setu Project

Case: Bombay High Court – L&T IHI Consortium vs. Union of India & Ors.
Writ Petition: No. 2980 of 2019

Key Highlights:

1. ITC Allowed Despite Non-Compliance with Section 16(2)(b):
   The Bombay High Court allowed the L&T IHI Consortium to claim Input Tax Credit (ITC) on GST paid for advances received from MMRDA for the Atal Setu project. Although the consortium did not comply with Section 16(2)(b) (receipt of goods/services), the Court ruled in favor of ITC entitlement. It emphasized that GST principles should align with legislative intent, supporting ITC claims in such scenarios.
2. Receipt Voucher as a Valid Tax Document:
   The Court also ruled that the Receipt Voucher issued by L&T qualifies as a valid tax document under Section 31. This ruling enables the consortium to claim ITC under Section 16 for services intended for business purposes.
3. Advances in Government Contracts as Consideration:
   The Court clarified that advances received under government contracts, even for deferred supplies, count as “consideration” under Sections 7, 12, and 13. Therefore, they attract GST liability. The Court rejected arguments claiming that deferred supplies fall outside the GST scope.
4. Revenue Authorities Directed to Consider Peculiarities:
   The Court directed revenue authorities to take transaction-specific nuances into account. It stressed that denying ITC despite GST payment contradicts both the GST framework and its legislative intent. Authorities must carefully evaluate such cases.
5. Challenges to GST Provisions Dismissed:
   The Court dismissed challenges to the constitutionality of Sections 7, 12, 13, and 16(2)(b) of the GST Act. It clarified that receiving an advance payment creates a supply obligation under the GST framework, regardless of the timing of the supply.

Key Takeaway:
This judgment highlights the need for GST practices to align with the legislative scheme, ensuring businesses can claim ITC for legitimate transactions, even in complex contractual arrangements.