Under GST, the burden of proof falls on the recipient mainly when they claim input tax credit (ITC); this is codified in section 155 and refined by recent court rulings that also protect bona fide buyers from impossible burdens.
1. Statutory basis – when does burden fall on the recipient?
Section 155 – specific rule for ITC
Section 155 of the CGST Act states: “Where any person claims that he is eligible for input tax credit under this Act, the burden of proving such claim shall lie on such person.”
This makes it clear that whenever a registered person claims ITC, they must be able to substantiate that claim with evidence.
Read with Section 16 & 17
Section 16 lays down positive conditions for ITC (invoice, receipt of goods/services, tax charged, use in business, returns filed).
Section 17 (including 17(5)) restricts or blocks ITC in specified cases (exempt/non‑business use, motor vehicles, construction etc.).
In disputes about ITC, authorities invoke section 155 to say: “You claimed credit, so you must prove all section 16 conditions and that none of the section 17(5) blocks apply.”
Link with Evidence Act principles
Commentary explains that section 155 mirrors section 101 and 106 of the Evidence Act: the person asserting a fact, or having special knowledge of it, must prove it.
ITC eligibility depends on facts especially within the recipient’s knowledge – invoices, payments, contracts, receipt of goods, internal accounts – so the law places primary onus on the recipient.
2. What exactly must a bona fide recipient prove?
Courts and professional literature outline a reasonable standard of proof for ITC:
Genuineness of supplier and transaction:
Supplier was registered at the time, GSTIN valid on portal.
There is a tax invoice fulfilling section 31 requirements.
Movement / receipt of goods or provision of services:
E‑way bills, transport documents, weighbridge slips, delivery challans, GRNs.
Work orders, completion certificates, emails/agreements for services.
Payment trail:
Payment of invoice value including tax through banking channels.
Reconciliation of invoice, books, GSTR‑2A/2B and GSTR‑3B to the extent possible.
Business nexus:
Evidence that the goods/services are used in furtherance of business (stock records, fixed‑asset register, production/turnover linkage).
Authors caution that mere production of invoice and bank proof may not always suffice; facts like non‑existent suppliers or bogus companies can still defeat ITC if the recipient cannot prove genuine movement and use.
3. When the burden cannot be pushed too far – protection of bona fide buyers
Recent decisions have drawn an important line: the recipient must prove what is reasonably within their control, but cannot be punished for supplier’s hidden default if they acted bona fide.
(A) Supreme Court – bona fide purchaser vs seller’s tax default
In a landmark post‑VAT judgment (often cited for GST, following Arise India line), the Supreme Court held that a bona fide purchasing dealer who has paid tax to a registered selling dealer cannot be denied ITC merely because the seller did not deposit tax with the Government.
The Court affirmed that:
Remedy of the department is against the defaulting seller,
Denying ITC to a genuine buyer amounts to shifting the consequences of the seller’s default to an innocent party.
Commentators and later courts treat this principle as guidance for GST: ITC denial cannot be automatic just because the supplier failed to file GSTR‑3B or pay tax, if the buyer’s bona fides and documentation are sound.
(B) High Courts reading down harsh conditions in GST
Gauhati High Court – Section 16(2) (aa) and GSTR‑2A/2B reflection
Gauhati HC held that ITC cannot be denied to a bona fide purchaser merely because the supplier failed to upload invoices or file returns, and thus the credit did not reflect in GSTR‑2A/2B.
The Court refused to strike down section 16(2) (aa) but read it down to mean:
Before denying ITC, authorities must give the buyer an opportunity to prove bona fides with invoices and records.
A mere mismatch in auto‑drafted statements is not sufficient; shifting the entire risk of supplier default to the buyer is arbitrary.
Other High Court trends
Recent GST cases (following earlier VAT jurisprudence and Arise India) stress that:
Section 16(2)(c)/(aa) cannot be applied mechanically;
Demand against a recipient solely on the ground that the supplier’s return/tax payment is deficient is unfair if the buyer shows reasonable due diligence – such as checking GSTIN validity and retaining full documentation.
These decisions recognise that an “impossible burden” cannot be cast on the recipient to track actual tax deposit by each supplier when no statutory mechanism allows real‑time verification.
4. How Section 155 and case law together allocate burden of proof
Putting the law and judgments together:
Initial onus on recipient
Whenever ITC is claimed, section 155 places the initial burden on the recipient to establish:
Existence and genuineness of the supply,
Compliance with section 16 conditions, and
That the case does not fall within section 17(5).
Shift back to department once prima facie case shown
Once the recipient produces robust evidence (registration check, invoices, movement of goods, bank payments, reconciliations), the burden shifts back to the department to prove fraud, collusion, or specific statutory disqualification.
A show‑cause notice that merely alleges “supplier did not pay GST” or “GSTR‑2A mismatch” is not enough to sustain ITC denial if the buyer’s documentation and conduct are bona fide.
Courts strike a balance
Courts uphold the validity of conditions like section 16(2) and the concept of section 155 (ITC is not a fundamental right, it is statutory and conditional).
But they also insist on reasonableness: the State cannot impose an unworkable or impossible burden that leads to double‑taxation of genuine buyers.
5. Practical guidance for bona fide recipients (for article conclusion)
For practitioners advising honest taxpayers, the article can end with a practical checklist:
Maintain full documentary trail: tax invoices, contracts, delivery/transport proofs, e‑way bills, GRNs, proof of use in business.
Perform reasonable due diligence on suppliers:
Verify GST registration status at time of purchase,
Capture screenshots / records of portal status where possible.
Do periodic reconciliations between books, GSTR‑2A/2B and GSTR‑3B; follow up with suppliers where gaps appear.
In litigation:
Plead section 155 honestly – accept that primary onus is yours, but show how you discharged it.
Cite Supreme Court and High Court authorities (Supreme Court on bona fide purchasers, Gauhati HC, and similar rulings) to argue that you cannot be denied ITC solely because of supplier default once bona fides are proved.
This framework makes clear that burden of proof does apply to the recipient, but in a way that is bounded by reasonableness and by the courts’ strong protection of bona fide buyers against being punished for someone else’s non‑compliance.
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