2023 (8) TMI 573 - HC - GST

Input Tax Credit Denied Where Supplier's GST Was Cancelled: s.16(2)(c) CGST Act and Rule 36(4) Applied

HC held that the petitioner was not entitled to input tax credit under s.16(2)(c) CGST Act read with Rule 36(4) because the supplier's GST registration ... Input tax credit - relief u/s 16(2)(c) of the Central Goods and Service Tax Act, 2017 r/w Rule 36(4) - HELD THAT:- A registered person is not entitled to credit of input tax in respect of any supply of goods or services of both if tax is not paid to the Government. The registration of the second respondent has been cancelled on 31.10.2018 before three invoices dated 23.11.2018 were raised. Thus, it is clear that the second respondent could not have paid the tax to the ex-chequer. Therefore, there cannot be a mandamus to the first respondent contrary to the provisions of the respective GST Act of 2017 and the Rules made thereunder. Therefore, there is no merits in the present writ petition. The writ petition is dismissed. Issues involved: Interpretation of Section 16(2)(c) of the Central Goods and Service Tax Act, 2017 regarding entitlement to input tax credit when tax is not paid to the Government by the supplier.The judgment by the High Court of Madras addressed the issue of whether a petitioner who paid GST to a supplier, whose GST registration was cancelled before the transaction, is entitled to input tax credit. The petitioner had purchased goods from the second respondent, paying an amount including GST, but the second respondent's GST registration had been cancelled prior to the transaction. The petitioner argued that since they had paid the tax due on the invoices to the supplier, they should not be liable to pay IGST. However, the first respondent contended that the petitioner is not entitled to relief as per Section 16(2)(c) of the CGST Act, 2017 read with Rule 36(4).The court examined Section 16(2)(c) of the CGST Act, which states that a registered person is not entitled to credit of input tax if the tax has not been paid to the Government. Since the second respondent's registration was cancelled before the invoices were raised, it was evident that the tax could not have been paid to the Government. Therefore, the court held that the petitioner cannot claim input tax credit contrary to the provisions of the GST Act and Rules. The court dismissed the writ petition, stating that the petitioner can seek recovery from the suppliers through legal means, without imposing any costs.