Input tax credit may be confined to registered dealers where the restriction serves verification, compliance, and tax administration objectives.

Input tax credit under the West Bengal Value Added Tax Act, 2003 is confined to registered dealers, because section 22 links the benefit to registration, tax invoices from registered dealers, and prescribed record-keeping, while the registration and return provisions support that scheme. The restriction on credit for purchases made during the unregistered period was upheld as a reasonable classification with a rational nexus to verification, monitoring, widening the tax base, and compliance. Although the Act aims to remove cascading tax, the legislative choice to limit credit to registered dealers was found neither arbitrary nor discriminatory, and the disallowance of credit for the pre-registration period was affirmed.

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Issues: Whether input tax credit under the West Bengal Value Added Tax Act, 2003 could be claimed for purchases made during the period when the dealer was not registered, and whether the restriction confining such credit to registered dealers was ultra vires or inconsistent with the object of the Act.

Analysis: The statutory scheme of the West Bengal Value Added Tax Act, 2003 shows that input tax credit is tied to registered dealers. Section 22(1) confers the benefit only on registered dealers, section 22(5) requires a tax invoice issued by a registered dealer, and section 22(11) obliges the registered dealer to maintain prescribed registers and accounts. Section 23(1) requires a dealer liable to tax to obtain registration before carrying on business, while section 32 and Rule 34 contemplate returns by registered dealers. The definitions of input tax, input tax credit, and net tax in section 2 further support the legislative design. The restriction was held to be a reasonable classification based on an intelligible differentia, with a nexus to verification, monitoring, widening of the tax base, and better compliance. The Court accepted that the Act aims at removing the cascading effect, but held that the legislative choice to confine credit to registered dealers is neither arbitrary nor discriminatory.

Conclusion: The challenge to the restriction on input tax credit failed, and the denial of credit for the pre-registration period was upheld.

Final Conclusion: The petition was dismissed, and the assessment disallowing input tax credit for the unregistered period stood affirmed.

Ratio Decidendi: A statutory input tax credit scheme may lawfully confine credit to registered dealers when the restriction is supported by a rational classification connected with verification, compliance, and the legislative object of the tax law.

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