The Rule of Law is that ‘No Innocent person should be punished’. Under GST Regime as we feel that this rule is not being followed by the GST Officers all over India. Even sending a notice to the innocent registered person is one of the punishments. The GST Authority, now-a-days, are sending notices to every one without doing any home work in regard to case in hand. Therefore, so many honest persons are being harassed by receiving such notices.

The main section to claim the input tax credit is section 16 of the CGST Act. Section 16(2) says about provisions in regard to entitlement of the input tax credit.

(a) – Tax Invoice in possession

(b) – Goods/services must have been received

(c) – Tax has actually been paid in respect to tax invoice of which input tax credit is being availed.

(d) – Return has been furnished by the Recipient

Following provisions are yet to be notified:

(aa) – the details of the invoice or debit note referred to in clause (a) has been furnished by the supplier in the statement of outward supplies and such details have been communicated to the recipient of such invoice or debit note in the manner specified under section 37

Matching Mechanism

1. Till date there is no full proof mechanism available to the Recipient to match the input tax credit before availing. After a lapse of time now the Department is providing GSTR-2A and GSTR-2B on the portal, informing the recipients about tax invoices which have been uploaded by their suppliers. It is a good step that the recipient can match and take further action if any invoice has not been uploaded by his supplier.

2. But there is no such mechanism available to the Recipient that he can check whether tax had been paid by his supplier pertaining to the tax invoice issued to him till date.

3. Section 42 of CGST Act providing the matching procedure but the tool of matching to be prescribed under section 42 has not been prescribed and implemented till date.

Section 42(2) read with rule 70 – Matched transactions shall be made available electronically to the registered persons in form GST MIS-1

Section 42(3) read with rule 71 – Any discrepancy shall be communicated to both persons (supplier and recipient) electronically in form GST MIS-2

Section 42(4) read with rule 72 – Duplication claim of input tax credit shall be communicated to the registered person electronically in form GST MIS-1

It is unfortunate that more than four years elapsed no such matching/unmatching tool available to the registered persons who can use before claiming the input tax credit.

Court Judgements

It is our Hon,ble courts who always try the utmost best that no innocent person must be punished. This can be seen and judge by following judgements.

M/S D.Y. Beathel Enterprise case decided by the Hon’ble Madras Court. (Latest case pertain to GST Law)

Observations of the court are as under:

If the tax had not reached the kitty of the Government, then the liability may have to be eventually borne by one party, either the seller or the buyer. In the case on hand, the respondent does not appear to have taken any recovery action against the seller.

I am unable to appreciate the approach of the authorities. When it has come out that the seller has collected tax from the purchasing dealers, the omission on the part of the seller to remit the tax in question must have been viewed very seriously and strict action ought to have been initiated against him.

Thus, the impugned orders suffer from certain fundamental flaws. It has to be quashed for more reasons than one.

a) Non-examination of Charles (supplier) in the enquiry

b) Non-initiation of recovery action against Charles (supplier) in the first place


“Once the law defines the registered dealer and tax-paid goods, the assessee, i.e., purchasing dealer, produced the bill issued by the registered dealer then his burden is discharged and he cannot be held responsible or he cannot be forced to go around from pillar to post to collect the material in order to get the rebate. To conclude, no liability can be fastened on the purchasing registered dealer on account of non-payment of tax by the selling registered unless it is fraudulent, or collusion or connivance with the registered selling dealer or its predecessors with the purchasing registered dealer is established.”


The Department is precluded from invoking Section 9 (2) (g) of the DVAT to deny ITC to a purchasing dealer who has bona fide entered into a purchase transaction with a registered selling dealer who has issued a tax invoice reflecting the TIN number. In the event that the selling dealer has failed to deposit the tax collected by him from the purchasing dealer, the remedy for the Department would be to proceed against the defaulting selling dealer to recover such tax and not deny the purchasing dealer the ITC. Where, however, the Department is able to come across material to show that the purchasing dealer and the selling dealer acted in collusion then the Department can proceed under Section 40A of the DVAT Act.

Press Release Dated 04-05-2018

No automatic reversal of credit: There shall not be any automatic reversal of input tax credit from buyer on non-payment of tax by the seller. In case of default in payment of tax by the seller, recovery shall be made from the seller however reversal of credit from buyer shall also be an option available with the revenue authorities to address exceptional situations like missing dealer, closure of business by supplier or supplier not having adequate assets etc.


There is no automatic recovery from the recipient if:

1. There is a valid tax invoice in possession;

2. The goods had been received by the recipient;

3. The payment towards the tax invoice had been made by the recipient to the supplier;

4. The Tax Invoice had been uploaded by the supplier in GSTR-1 and that invoice is being appeared in GSTR-2A and GSTR-2B.

5. The Supplier is also traceable.

6. Last but not least there is no collusion between the supplier and recipient to cheat the law.

To reach to me for any suggestions, rectifications, amendments and/or further clarifications in regard of this article my email address is [email protected]

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June 2021