ITC cannot be denied to Bona Fide Buyers for Supplier's Lapse

Replies (4)
Quick Summary
Input Tax Credit (ITC) generally cannot be denied to a genuine buyer solely because of a supplier's non-compliance. A buyer's responsibility is fulfilled upon payment and adherence to regulations. The tax department should pursue action against the supplier first. Denial of ITC is typically only allowed in cases of fraud or collusion, as supported by legal precedents and official instructions. While GSTR-2A/2B are often used, a buyer's ITC should not be blocked if they have a valid invoice, have paid the supplier, and both parties are registered, unless specific fraud is proven.

  • ITC cannot be denied to a bona fide buyer for supplier’s lapse

  • Buyer’s obligation ends with payment + compliance

  • Department must act against supplier first

  • Denial possible only in fraud/collusion cases

  • Supported by Supreme Court, multiple High Courts, and CBIC instructions

Valid tax invoice , sale to a registered buyer and both seller and buyer are registrred under the act. 

No denial of INPUT TAX CREDIT .

THERE ARE OTHER CONDITIONS.

Job work under construction contact in case it's under the purview of gst act.

There may be various press releases available on this topic; however, in practice, the department often relies heavily on GSTR-2A/GSTR-2B auto-populated statements to determine eligible ITC. If an invoice is not reported by the supplier in their GSTR-1 return, the department may consider it ineligible and drag recipient into litigation.
Merely due to non-compliance by the supplier, the department may question why the recipient failed to ensure their own compliance, suggesting that the recipient should have followed up with the supplier. Generally, to avoid this, recepient makes the payment only after the invoice gets reported by the supplier in their GSTR-1 Return. In such cases, the department may require the recipient to furnish supporting documents, such as copies of invoices, e-way bills, proof of payment, return acknowledgments, and ledger confirmations from the supplier.

Leave a Reply

Your are not logged in . Please login to post replies

Click here to Login / Register