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Lex Non-Cogit Ad Impossibilia: Exploring the Implications for GST and the Ongoing ITC Matching Challenge

CA. Heet Shah , Last updated: 06 October 2023  

Today, I'd like to delve into a significant legal maxim, "Lex Non-Cogit Ad Impossibilia," which translates to "The law does not compel the impossible." This principle is deeply relevant in the context of India's Goods and Services Tax (GST) system, where the concept of Input Tax Credit (ITC) matching has been a persistent challenge.

When India introduced GST, it promised a seamless blend of taxation and technology, simplifying compliance for businesses and enhancing efficiency for the government. However, a critical issue has lingered - the absence of an ideal ITC matching mechanism, leaving taxpayers in a quandary.

Under Section 34 of the Central Goods and Services Tax Act, businesses can adjust excess tax payments by issuing GST credit notes. The essence of GST is that the output tax reported by the supplier should ideally align with the credit availed by the recipient. But, the practicality of this matching exercise has come into question.

Lex Non-Cogit Ad Impossibilia: Exploring the Implications for GST and the Ongoing ITC Matching Challenge

In the recent case of Hindustan Unilever Ltd. v. Union of India [2023 VIL 626], the petitioner raised a crucial concern - the workability of the GST matching exercise. The petitioner argued that without a proper mechanism to match credit notes with ITC reversals by the recipient, it becomes practically impossible for businesses to provide certificates as proof of ITC reversal. This poses a substantial compliance challenge.

The petitioner's stance is that it shouldn't be their responsibility to obtain certificates or proof from the recipient; instead, it should be the tax department's role to undertake the matching exercise and validate the claims. This raises vital questions about the feasibility and practicality of implementing certain GST provisions.

The heart of the issue seems to be the absence of a statutory obligation on the tax department to conduct the matching exercise. While the GST framework dictates that ITC availed by the recipient should be reversed, the petitioner argues that collecting such certificates from the recipient is cumbersome and leads to compliance difficulties.

The case highlights the delicate balance between ensuring compliance and the practicality of doing so. Requiring suppliers to collect certificates from recipients may lead to administrative inefficiencies and potential disputes. On the other hand, allowing businesses to claim reductions in tax liability without verification could lead to misuse of the system and revenue leakage.

Ideally, a functional matching system would allow suppliers to monitor recipient actions and adjust excess tax accordingly. However, in the absence of this, suppliers remain uncertain about recipient compliance, creating an untenable situation.


The case of On Quest Merchandising [TS-314-HC-2017(DEL)-VAT] further underscores this issue, questioning whether recipients can avail ITC if they cannot verify tax payment by the supplier. The Court noted the existence of matching provisions but highlighted the absence of a mechanism for genuine taxpayers to verify payments by their counterparts.

The landmark decision in BC Srinivasa Shetty [1981 (2) SCC 460] reinforces the importance of a functional machinery provision for taxation. If the matching system is practically non-existent, demanding tax for mismatch scenarios results in disputes and litigations.

The Court in the Hindustan Unilever Ltd. case has not ruled yet, but it raises significant questions about the GST framework. If the Court directs the tax department to undertake the matching exercise, it could simplify compliance but add to administrative burdens. Conversely, if it upholds the need for proof of ITC reversal, it may emphasize the importance of accurate documentation at the cost of complexity for businesses.


In conclusion, Lex Non-Cogit Ad Impossibilia brings into focus the GST ITC matching challenge. Striking the right balance between compliance and administrative burdens is crucial. Regardless of the outcome, it's an opportunity for stakeholders to reshape the GST framework for efficiency while preserving the tax system's integrity.

Let's engage in a dialogue on this critical issue. How can we refine the GST system to make it more efficient and business-friendly while ensuring compliance? Share your thoughts, and let's foster a productive conversation.

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Published by

CA. Heet Shah
(Tax Consultant & Practitioner)
Category GST   Report



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