ITC reversal in case of supplier found bogus or non existent

Even after completing 5 years, one gets the feeling that GST is still an evolving law. Lot many changes are taking place with almost every GST council meeting. There are still some burning issues which are yet to be ironed out and decisively settled. These burning issues have been a bone of contention between department and the tax payers.

One such burning issue is non existence of the supplier in departmental enquiry or verification. In other words the supplier who passed on the input tax credit to other registered persons, was found to be bogus/non existent or not conducting business from his registered business place. In such cases rule 86A envisages blocking of e credit ledger of the recipient by the proper officer. meaning thereby that if supplier found non existent or bogus post verification when such verification took place in later period that is after a considerable period of time from the purchase transaction.

The officers in such cases, in exercise of their powers under rule 86A have been blocking the e credit ledger of the recipient without going into the merits and facts and circumstances of the case in one sided manner. No opportunity of being heard is provided to the tax payer and even the rule itself does not make any provision for it.

Now the question arises whether input tax credit may be denied in the hands of the bonafide purchaser where the purchase is bonafide and genuine, the purchaser is in possession of valid tax invoices and actual supply of goods also took place. Moreover when the purchase was made, the supplier was active on the portal and the purchaser by no means could have ascertained that the supplier is bogus or would become non existence at a later date, when there is no connivance between the two.

In such circumstances, what defence is available to the bona fide buyer? What should be the arguments to be put forth before the GST officers? are there any judgments favoring the buyers in such cases?

For answers to these questions and detailed discussion on this vital aspect, one can visit the youtube video posted on the tax express channel. The link is provided hereinbelow: