GST Input Tax Credit Post Supreme Court Judgement
GST Input Tax credit (ITC) is the cornerstone of the indirect taxation, as GST is destination-based tax. ITC restricts the cascading effect of tax and ensures that the tax is collected in the consuming state. In this article, let us first revisit the nuances of ITC provisions and then let us discuss the persuasive value of the recent Supreme Court Judgement in Commissioner of Trade & Tax Vs M/s Shanti Kiran India Pvt Ltd in Civil Appeal No(s). 2042-2047/2015 dated October, 9, 2025, as below:
Documentary Requirements for claiming ITC:
Rule 36 of CGST and SGST Rule, 2017 requires that ITC can be claimed on the basis of following documents:
- Invoice of supplier of goods or services or both
- Invoice in case of tax paid on reverse charge mechanism
- Debit Note
- Bill of entry of similar documents
- Invoice or credit note issued by Input Service Distributor
Conditions for availing ITC:
Section 16 (2) of CGST Act provides that registered taxable person is entitled to the credit of ITC if all the following conditions are satisfied:
- The registered taxable person has a tax invoice or debit note issued by the supplier or any prescribed tax paying document and details of invoice or debit note have been furnished by the supplier in the statement of outward supplies and communication has been made to the recipient and
- He has received the goods or services or both and the details of ITC is not restricted
- Subject to Section 41 of CGST Act, the tax has been actually paid to the credit of the appropriate government either through cash or through utilization of input tax credit. Section 41 allows taking ITC in electronic credit ledger on self-assessment basis (Section 16 (2) (,c) and
- He has furnished monthly return
On perusal of the existing ITC provisions under GST, it appears that the onus of ensuring compliance of tax payment by the supplier can be interpreted in a way where the ITC claim by the recipient can be denied by the department, if there is default of non-payment by the supplier.
Judgement of the Supreme Court in the case of Commissioner of Trade & Tax Vs M/s Shanti Kiran India Pvt Ltd in Civil Appeal No(s). 2042-2047/2015 dated October, 9, 2025:
- This case pertains to the Delhi Value Added Tax Act, 2004
Facts: The registered supplier collected tax but did not deposit tax, otherwise the transaction was genuine. Subsequently, the registration of the supplier dealer was cancelled. When the purchasing dealer claimed ITC, the department denied it, in spite of the transaction being genuine and other conditions were satisfied under the relevant law. Even the department conducted audit and verified the returns.
Appeal and Decision: Delhi High Court gave its decision in favour of assessee. The department went to the Supreme Court.
- The Supreme Court dismissed the department’s appeal and upheld the Delhi High Court’s order.
- Held that purchasers cannot be denied ITC if the sellers were registered and transactions were genuine, based on the enquiry into their veracity.
- A bona fide buyer who paid tax in good faith should not suffer due to the seller’s failure to deposit tax.
- The department’s action should be against the defaulting seller, not the honest purchaser.
- Denying ITC in such cases would result in double taxation and unfair treatment to genuine dealers.
The judgment of the Supreme Court pertains to the VAT regime but the logic resonates with GST ecosystem as well. The verdict will have persuasive value while examining constitutional validity of Section 16 (2) (,c) of CGST Act.
In case of any query and clarification regarding indirect taxation including GST and Customs, and require any support, you may like to connect with us.
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Abhinarayan Mishra FCA, FCS, LL.B, IP, RV; Partner, KPAM & Associates, Chartered Accountants, SAM Law Associates LLP. New Delhi ; +91 9910744992; ca.abhimishra@gmail.com; samlawassociates18@gmail.com
Author Bio
Sir,
Why the earlier Judgment of Supreme Court given in the year 2018 on the same lines on S,9, Delhi Vat Act in the case of Commissioner of Trade & Taxes v. Arise India Ltd. (2018) 29 J.K.Jain’s GST & VR 22 is not being followed under GST regime.
Has anybody/yourself moved contempt application In the Deptt/SC Court. If Not why?
CA Om Prakash Jain s/o J.K.Jain, Jaipur
Tel No.9414300730/9462749040/0141-3584043
ROn Delhi VAT Act,the supreme Court has already given Judgment in thr caseof