TaxTMI 
TaxTMI 
TaxTMI 
The Gauhati High Court on 09/12/2025 analysed this question in detail with reference to section 16(2)(aa) of the CGST Act in the matter of M/s. Mcleod Russel India Limited Versus The Union of India, The State of Assam, The Commissioner, Central Goods & Service Tax, Guwahati, The Commissioner of State Taxes, Assam - 2025 (12) TMI 756 - GAUHATI HIGH COURT. Though the court has examined this issue in depth and held that it is iniquitous to pass the burden on the purchasing dealer vide para 20 of the order, the High court failed to grant the required relief to the petitioner.
The important observations of the advocate of the petitioner and the referred case laws are summarized in this article to facilitate tax professionals to make use in appropriate situations. Tax officials, GST Council as well as CBIC may take up this issue in an appropriate manner and come out with a detailed circular in 2025 itself to ensure that honest tax payer is not harassed unnecessarily by imposing an artificial restriction on the buying dealer which is absolutely not in his control.
Para 3 : It is contended that the fulfilment of the conditions, stated above, cannot be done by the purchaser as Section 37 does not provide any mechanism for such communication to be made by the supplier to the recipient, namely, the purchaser. This provision restricts the ITC of a bona fide tax payer due to default of the supplier to file his return in GSTR-1.
Para 4 :Thus, in sum and substance, Section 16(2)(aa) of the CGST Act and AGST Act restricts the vested right of claiming ITC of a bona fide tax payer, namely, the recipient, due to the default of its supplier to furnish the details of invoices or debit notes of such supply in GSTR-1 return. The denial of the ITC to the genuine tax payers, irrespective of the fact that the recipient has already paid the tax to the supplier, is thus clearly arbitrary and irrational.
Para 5 : There could be myriad reasons/instances where the supplier may not file his return in GSTR-1 timely; or does not furnish the details of invoice; or debit note of such supply correctly for which an honest/bona fide tax payer (may be purchaser) ought not to be denied his ITC. It imposes an impossible burden on the purchaser to verify the details furnished by the supplier in his outward supply statement in Form GSTR-1 and the auto- population of such details in the recipients GSTR-2A/GSTR-2B. Currently, the laws in practice pertaining to goods and services taxes do not provide the purchaser with any such mechanism to take any action or non-disclosure of the invoice in the outward supply statement in Form GSTR-1 by the supplier though tax has been correctly paid by the supplier in his GSTR-3B payment return, thereby making the denial of ITC on account of non-reflection of invoice in GSTR-2A/ GSTR-2B under the said Clause to be arbitrary. Thus, the provision required in the alternative to be read down if not held to be unconstitutional.
Para 6: 6. Looked at from another angle, denying the ITC to a buyer of goods or services for default of supplier of goods and services would amount to shifting the incidence of tax from the supplier to the buyer which is unconstitutional and against the scheme of CGST Act and AGST Act. A buyer of goods or services would have to pay GST twice on the same transaction; once at the time of purchase of the goods by paying GST to the supplier and secondly, on disallowance of the ITC.
Para 7 :The objective of the CGST Act and the AGST Act is to charge tax only on “value additions” and to avoid a cascading effect of taxes.
Para 8: The Central Board of Indirect Taxes and Customs (CBIC) vide Circular No.183/15/2022-GST dated 27.12.2022 and Circular No.193/05/ 2023-GST dated 17.07.2023 had made an arrangement up-to 31.12.2021 to allow ITC to recipients where ITC details were not uploaded or correctly reported in Form GSTR-1 by the supplier, thereby causing non- reflection in Form GSTR-2A as it existed up-to 31.12.2021. There cannot be any rational of such mistake not occurring even after 01.01.2022.
para 9 It is thus, in the alternative prayed that the contents of the afore- noted CBIC Circulars should be made applicable for the period on or after 01.01.2022.
Several relevant case laws were also referred in this case law. However, the High Court is reluctant to strike down the Section 16(2 (aa) despite the best arguments as above have been put.
The CBIC is not responding on 100s of issues and in the matter, vide para 21, the High Court has made the following significant observation.
21. We have read down this provision only till the time CBIC comes out with any practical solution to the problem posed by making the availability of ITC to the bona fide purchaser contingent on factors which are totally in the hands of a supplier and not the purchaser.
Though a major portion of this article is taken from the referred case law, my intention is that these arguments must be referred in all applicable cases to strengthen our case when it reaches the GSTAT.