banner_ad

What actually happens when a buyer claims ITC from a cancelled supplier? (Practical experience neede

Others 540 views 3 replies

I'm researching GST compliance risks. I've found a Belagavi-based manufacturer whose GSTIN was cancelled — Nile Agro Foods, a food processor, cancelled in Feb 2024

Simple question for practitioners:

If your client unknowingly claimed ITC on an invoice from a cancelled supplier, what actually happened next?

Specifically did they get a DRC-01 notice? How long after filing? Did they fight it? What did it cost them in money and time?

I'm not selling anything. Just a student trying to understand if this is a real operational headache or just a paper risk. Any real example (anonymised) would help a lot. Thank you.

Replies (3)
Quick Summary
Claiming ITC from a cancelled GST supplier can trigger scrutiny, ASMT-10 or DRC-01 notices. Buyers usually defend claims using proof of genuine transactions, payments, and court rulings. Litigation may involve interest, legal costs, and long timelines.

  • What happens: The GST department flags the ITC mismatch because the supplier's GSTIN is cancelled, viewing it as an inadmissible claim.

  • The Process: A formal Show Cause Notice (DRC-01) is issued, typically preceded by scrutiny notices (ASMT-10). This can arrive anywhere from months to years after the filing.

  • The Defense: Businesses fight it using comprehensive proof of transaction (e-way bills, bank payment records, stock registers) and leverage High Court precedents (Suncraft Energy, D.Y. Beathel) protecting honest buyers.

  • The Cost: It involves significant operational pain—requiring 18% annual interest on disputed amounts, legal fees, mandatory 10% pre-deposits for appeals, and litigation timelines stretching across 1 to 3 years.

Thank you this is incredibly helpful. One last question if you don't mind: In your practice, roughly what percentage of mid-size manufacturer clients have faced at least one DRC-01 notice due to a cancelled supplier GSTIN in the last 3 years? Is this something you see regularly, or is it rare? I'm trying to gauge how widespread this pain is.

It can not be measured with numbers to form a generalised view yet unless we hva e govt backed data. Businesses generally defend their position by leveraging High Court precedents such as Suncraft Energy and D.Y. Beathel. The argument centers on proving that the transaction was genuine, the payment was made to the supplier, and the buyer acted in good faith, shifting the responsibility away from the buyer for the supplier's post-transaction cancellation.


CCI Pro

Leave a Reply

Your are not logged in . Please login to post replies

Click here to Login / Register  

Company
16 May 2026
Audit clerk

mgirt & co

Bengaluru

CA Inter

View Details
Company
19 May 2026
Article, CA & Paid Assistant Positions

Aggarwal Sarawagi and Co

New Delhi

CA

View Details
Company
ARTICLESHIP 23 May 2026
Article Assistants

Acupro Consulting

Gurgaon

CA Inter

View Details
Company
Featured 27 May 2026
Lead Conversion Executive / Sales Closing Executive

SMJ global advisors pvt ltd

New Delhi

B.Com

View Details
Company
19 May 2026
Accountant

ca kunjan

Mumbai

CA Inter

View Details
Company
27 May 2026
Audit Assitant

Virender K Gupta and Co

New Delhi

B.Com

View Details
Company
ARTICLESHIP 09 June 2026
Article Trainee

Numbertree LLP

Mumbai

CA Inter

View Details
Company
ARTICLESHIP 15 May 2026
Audit Assistant / Article Trainee / Intern

SSGS and Associates

Chennai

CA Inter

View Details