Can buyer claim ITC if supplier has not paid his tax ???
As per Section 16(2)(c) of CGST Act, the recipient of goods and services can avail ITC only if supplier has deposited the tax with government either in cash or through utilisation of input tax credit.
After reading this section we can say that if supplier has not paid the taxes then recipient/buyer can not take Input tax credit.
But, I want to ask an question from you… Can, this section is practical ???
Let’s do analysis of this issue, first of all I want to discuss with you the ITC provisions at the time of VAT Scenario
At the time of VAT there was also an provision which says input can’t be claimed if supplier has not paid the taxes.
On that provision certain court judgements are also available let’s discuss those judgements one by one
⇒ Arise India limited :- in this case honorable delhi high court has held that Input can’t be denied if tax has not been paid by supplier.
⇒ Kay kay industries :- in this case honorable supreme court has held that input can’t be denied if tax has not been paid by supplier.
The above judgements are in favour of Recipient but one contrary judgement is also available
Madras high court In one of his judgement says that credit can be denied and in that judgement court says that we have to follow the law and we can’t challenge the section provided in law.
Now, we are going to discuss this situation in GST Scenario….
Writ petition has already been filed in delhi high court in case of bharti telemedia limited regarding validity and legality of provisions of section 16(2)(c) of CGST Act,2017.
Also writ petition has been filed on the same issue in punjab and Haryana high court , rajasthan high court and gujrat high court, notices has already been issued to the revenue…
Let’s wait for the decisions
LEGAL ARGUMENTS :- IN MY OPINION CREDIT SHOULD BE AVAILABLE
Now, let’s we are going to discuss the grounds on which basis we can Say that credit should be available…
⇒ Article 14 of Indian constitution talks about fundamental rights.. in our issues supplier has defaulted but there is no default at the end of recipient hence bonafied recipient can’t be punished by denying credit.
⇒ There is an legal term called “ LEX NON COGIT AD IMPOSSIBILIA” Meaning of this legal term is that law can not compel a men to do something he can not possibly perform
EXAMPLE :- The court cannot possibly ask a men to get the moon for his wife because he promised it.
Let’s understand the relevance of this provision here…
At the time when GST was implemented (i.e. on 1/07/2017) govt. has said that there is an auto mated process for GST return filing on which match and mis match tools will be available for Input.
But govt. him self gives the facility of GSTR- 2A in the year 2019 and at that time data populated in GSTR-2A was not fully correct also GSTR-2/3 also has not been introduced then how buyer can check his ITC and how he can check that supplier has filed his return..
Also on the reading of section 37/38/39/41/42 of CGST act we found that ITC matching was the back bone of Automated GST Returns.
On the basis of above discussion we can say that it was impossible for the buyer to check that whether supplier has paid taxes or not then how law can to do something which was impossible.
⇒ As per section 73 and 74 of CGST act notices can be issued only to the person chargeable to tax (i.e. supplier)
Then how govt. can issue notices to the receipt…..
From the above discussion we can understand the legal arguments on that issue lets‘s wait for court decisions