The Madras High Court has upheld the validity of Rule 39(1)(a) of the CGST and Tamil Nadu GST Rules, which mandates that Input Service Distributors (ISD) distribute Input Tax Credit (ITC) in the same month that the input service invoice is received. This decision came in response to a petition filed by Reliance Jio Infocomm Ltd against the Union of India, the State of Tamil Nadu, and the Commissioner of Central Tax and Central Excise.
Reliance Jio Infocomm Ltd argued that in practical business operations, invoices are often received or processed late, making it challenging to comply with the rule requiring same-month ITC distribution. The company claimed that this requirement was arbitrary and violated Article 14 of the Constitution, as it hindered legitimate credit distribution within large organizations with multiple units. Consequently, they sought a declaration from the Madras High Court that the rule was unconstitutional and invalid.
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The Court, however, held that ITC is a statutory benefit, and the legislature has the authority to set conditions and procedures for its distribution. The rule was established to ensure proper tax credit flow and prevent the misuse or accumulation of credits. The Court noted that administrative or operational inconveniences do not render a statutory rule unconstitutional. Therefore, the Court upheld the validity of Rule 39(1)(a) and dismissed the petitioner's challenge.
Order Date - 03 February 2026
Parties: Reliance Jio Infocomm Ltd Vs Union of India, State of Tamilnadu snd Commissioner of Central Tax and Central Excise
Facts -
- Reliance Jio Infocomm Ltd, through its authorised representative, challenged Rule 39(1)(a) of the CGST and Tamil Nadu GST Rules, which requires an Input Service Distributor (ISD) to distribute ITC in the same month in which the input service invoice is received.
- The petitioner argued that in practical business operations, invoices are often received late or processed later, making same-month distribution of ITC difficult and operationally burdensome.
- According to the petitioner, this requirement was arbitrary and violative of Article 14 of the Constitution, as it restricted legitimate credit distribution within large organizations having multiple units.
- Therefore, the company approached the Madras High Court seeking a declaration that the rule is unconstitutional and invalid.
Issue -
- Whether Rule 39(1)(a) requiring ISD to distribute input tax credit in the same month as the invoice date is arbitrary and violative of Article 14 of the Constitution?
Order -
- The Court held that Input Tax Credit is a statutory benefit, and the legislature has the authority to prescribe conditions and procedures for its distribution.
- The requirement of same-month distribution by ISD was introduced to maintain proper tax credit flow and prevent misuse or accumulation of credits.
- The Court observed that administrative or operational inconvenience to taxpayers does not by itself make a statutory rule unconstitutional.
- Accordingly, the Court upheld the validity of Rule 39(1)(a) and dismissed the challenge made by the petitioner.
