Patna High Court: Buyer cannot claim ITC if Supplier fails to remit GST to the Government
by Rein Heads | Sep 1, 2023
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Patna High Court: Buyer cannot claim ITC if Supplier fails to remit GST to the Government
- The Petitioner (‘the Buyer) procured goods from a supplier and paid the total amount of the invoice including GST through bank account
- The supplier collected the GST from the Buyer but failed to remit to the Government. Consequently, the Revenue Department issued assessment order, disallowing the Input Tax Credit (‘ITC’) claim of the Buyer on the ground that conditions stipulated under Section 16(2) of the CGST Act and Bihar GST Act, 2017 not being satisfied
- The Petitioner filed a Writ Petition before the Hon’ble Patna High Court contending that the ITC cannot be denied to the Buyer where the tax has been paid to the supplier and denying the benefit of the same would amount to double taxation in the hand of the Buyer
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| Issues before the Court |
- Whether the benefit of ITC can be denied to the Buyer in cases where the supplier has collected tax but failed to remit the same to the Government?
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| Discussion & Ruling |
The Hon’ble Patna High Court dismissed the Writ Petition of the Petitioner based on the following observations:
- Section 16(2) of the CGST Act and Bihar GST Act, 2017 provides for the conditions to claim the ITC which includes existence of tax invoice or debit note, proof of receipt of goods or services and the tax charged thereon is actually paid to the Government
- The aforesaid conditions must be satisfied together and not separately/ in isolation. The mere production of invoices, account records and transportation documents, although crucial, is insufficient to establish eligibility for ITC
- The burden of proof lies with the Buyer to substantiate that the tax collected has been paid to the Government by the supplier. Therefore, ITC can only be claimed when tax has been effectively paid to the Government by the supplier
- The contention of double taxation does not arise since the claim is denied only when the supplier who collected tax from the purchaser fails to pay it to the Government
- In light of the same, the High Court dismissed the Petition and held that when the supplier fails to comply with the statutory requirement of remitting the collected tax to the Government, the Buyer cannot claim ITC.
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*M/s Aastha Enterprises v. 1. The State of Bihar through the Commissioner of Commercial State Taxes, New Secretariat, Patna 2. The Joint Commissioner, State Taxes, Shahabad Circle, Bihar: W.P.(C) 10395 of 2023 dated 18.08.2023 |
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