[Opinion] Tax Compliance or Tax Terrorism? The Unjust Burden of Circular 212/6/2024

Adv. Virat Joneja – [2025] 171 taxmann.com 332 (Article)

Introduction

Good intention and poor implementation has been the story of GST, take for example Circular No. 212/6/2024-GST, dated June 26, 2024, which has sparked widespread concern among businesses due to its stringent compliance requirements, particularly regarding credit notes and Input Tax Credit (ITC) reversals. The circular mandates suppliers to obtain Chartered Accountant (CA)/Cost Accountant (CMA) certificates confirming ITC reversals for credit notes exceeding ₹5 lakh and self-certifications from recipients for smaller amounts. While the stated intent is to prevent revenue leakages, this compliance burden has raised significant legal and operational issues, exacerbated by its retrospective effect. The recent Delhi High Court ruling in JSW Steel Ltd. v. Directorate General of GST Intelligence [2024] 168 taxmann.com 16/[2025] 92 GSTL 530 has acknowledged these concerns, particularly in relation to the disproportionate burden on businesses.

Key Observations from the Delhi High Court Judgment

The Delhi High Court, in its order dated October 1, 2024, JSW Steel Ltd.’s case (supra) examined the validity of Circular 212/6/2024 and the corresponding Show Cause Notice (SCN) dated August 2, 2024, which sought to enforce these compliance requirements retrospectively for transactions from 2017-18 onwards. The court took note of several critical concerns raised by the petitioner. It observed that requiring businesses to procure CA/CMA certificates for every credit note and supply transaction from 2017-18 onwards is impractical and excessively burdensome. Acknowledging that no real-time verification mechanism exists on the GST portal, the court recognized that enforcing compliance without adequate digital infrastructure would lead to litigation and uncertainty. The court questioned the retrospective applicability of the circular, noting that businesses had legitimately relied on past tax provisions and cannot now be penalized for non-compliance with requirements introduced in 2024. The court specifically stayed proceedings on the issues of ITC reversals related to discounts under Section 15(3)(b) and guarantee commissions and the applicability of service tax liabilities. While allowing the tax authorities to continue proceedings on other aspects of the SCN, the court emphasized the need for further judicial scrutiny on these issues.

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