Kerala HC Quashes GST Demand on ITC Head Misclassification

The Kerala High Court, by its judgment dated 19 May 2026, allowed the writ petition filed by M. Elvana Ramesh Kumar, Proprietor of Smart Enterprises, and quashed an assessment order passed under Section 73 of the Kerala State Goods and Services Tax Act, 2017. 

The Court held that the demand raised solely on account of the taxpayer's incorrect adjustment of eligible IGST credit against CGST and SGST liabilities was no longer sustainable in view of the binding Division Bench decision in Rejimon Padikapparambil Alex v. Union of India. 

The Court also observed that any inter-governmental settlement arising from such adjustment should be resolved through the GST Council mechanism.