ITC cannot be claimed without payment of GST to Government as registration of Supplier cancelled prior to date of supply: Madras HC

Jai Balaji Paper Cones Vs Assistant Commissioner (Madras High Court)

In a recent ruling, the Madras High Court addressed the issue of Input Tax Credit (ITC) and its eligibility for a registered person if the tax hasn’t been paid to the government. The case involved a company purchasing goods from a supplier with a cancelled GST registration. Despite having paid the amount to the supplier, the court decided that the company was not entitled to claim ITC. This article delves into the court’s reasoning, analysis, and the implications this ruling has on businesses dealing with similar situations.

Analysis: The court based its decision on Section 16(2)(c) of the Central Goods and Service Tax Act, which requires that the tax charged for a supply of goods or services must be actually paid to the government for a registered person to claim ITC. In this case, the supplier’s GST registration was cancelled before supplying the goods, making it evident that the supplier couldn’t have paid the tax to the government.

The ruling serves as a significant precedent for businesses dealing with suppliers who have cancelled GST registrations. It clarifies that even if a registered person has paid the amount to the supplier, they cannot claim ITC if the supplier hasn’t paid the tax to the government.

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