Received notice against ITC Claimed

[Sameer Lingras]

Hi,

We have received notice against the ITC claimed. We have paid all the GST pertaining to the supply of goods by our supplier. We have all the invoices with us. As supplier did not paid the GST to the Government . We have received the notice for reversal of ITC along with penalty and Interest. GST is not taking any action against the defaulter supplier instead asking us to pay the same.

Please guide us.

 

 

[Sadanand Bulbule]

Dear

The authority is right in issuing the SCN in the absence of compliance of Section 16[2][c] by the supplier. Burden to prove the entitlement of ITC lies on the recipient under Section 155 of the CGST Act.

Refer Hon'ble Madras High Court judgement reported in 2025 (2) TMI 504 on similar ratio.

[Sameer Lingras]

Hi,

Thanks for the reply. I have gone through the 2025 (2) TMI 504 . As per my understanding we can not claim ITC if we have not paid to the supplier within 180 days of supply of Material. But in our case we have paid to the supplier and we have all the bank statements which clearly shows that the due amounts are paid. Intact the supplier did not even showed those invoices in any of the GSTR returns. Due to which there is a mismatch in ITC. I was going through one of the order it Hon. High court Kolkata in which they have mentioned that the responsibility doesn’t lie with the buyer if the supplier fails to pay the paid the GST against the supply.

[Sadanand Bulbule]

Consciously I disagree with your expressions. As long as there is no compliance of Section 16[2][c], no authority would consider any such explanation. Better try amnesty scheme under Section 128A, if you are eligible. There is no apparent benefit in hallow litigation. Choice is yours.

[KASTURI SETHI]

Also see Section 16 (2) (aa) of CGST Act in this context.

[Shilpi Jain]

What is the period of dispute?

Has the supplier filed his GSTR-1 for the period of invoice?

What is his GSTR-3B filing status?

Is his registration still active?

Ensuring payment of taxes may not be possible in all cases of the supplier.

[Sadanand Bulbule]

Refer following for additional and relevant information:

2024 (6) TMI 109 - APPELLATE AUTHORITY FOR ADVANCE RULING, GUJARAT - IN RE: M/S. WAGO PRIVATE LIMITED,

Admissibility of Input Tax Credit (ITC) - air conditioning and cooling system - ventilation system - HELD THAT:- The work order awarded to M/s. Skai Air Control P Ltd., to supply, install and commission HVAC works for proposed factory, assembly, administration, staff facility & associated works. The work order includes amongst other things even the maintenance and warranty of the air conditioning and cooling system and the ventilation system. Thus the averment raised that the air conditioning and cooling system and ventilation system, cannot be treated as one system and that the vendor is supplying various machines and not one standalone system and that the Air conditioning system is nothing but a group of inter-related and interdependent machines performing a desired task; that they do not lose their identity, is not a legally tenable argument.

The Air Conditioning and cooling system and ventilation system becomes a part of the building once it is installed and thereby an immovable property.

As the installation of the air conditioning and cooling system and ventilation system via a works contract service, makes it an immovable property, it ceases to be a plant and machinery.

The appellant is not eligible to avail ITC on supply of air conditioning and cooling system and ventilation system since it ceases to be a plant and machinery and is blocked under Section 17 (5) (c) of CGST Act, 2017 as the same is works contract services for construction of an immovable property.

Appeal dismissed.

[SANCHIT SEHGAL]

Claiming benefit under GST Amnesty Scheme seems to me to be the better option. Provided that you are eligible.

[Yash Shah]

According to Section 16(2)(c) of the CGST Act 2017, a registered person can avail ITC on his inward supply, if his supplier has paid tax in his return to the Government, either in cash or through utilisation of ITC admissible in respect of the said supply.

Further, as per Section 50(3) read with rule 88B(3), in case of wrong availment or utilisation of ITC, the registered person shall pay interest on such wrong availment or utilisation of ITC at the rate of 18%.

As per Section 122(2)(a), any registered person who has not paid or short-paid or erroneously refunded the tax on its outward supplies, or whether ITC has been wrongly availed or utilised for any reason other than the reason of fraud or any wilful misstatement or suppression of facts to evade tax, shall be liable to a penalty of 10,000 or 10% of the tax due from such person, whichever is higher.

Therefore, in the given case, the issuance of notice by the proper officer for reversal of ITC along with Interest & Penalty is valid and the taxpayer is required to reverse ITC along with Interest & Penalty. However, the taxpayer can re-avail the ITC reversed, once his supplier has paid tax to the government.

On the other hand, the supplier can get a notice from the proper officer demanding to pay tax along with Interest u/s 50 and Penalty u/s 122(1)(iii)

AI Summary

Recipient Faces ITC Reversal Due to Supplier's GST Default; Section 16(2)(c) of CGST Act Cited in Dispute Resolution A party received a notice for reversing Input Tax Credit (ITC) due to their supplier's failure to pay GST to the government. Despite having paid the supplier and possessing all relevant invoices, they face penalties and interest. A respondent explained that under Section 16(2)(c) of the CGST Act, the recipient must prove ITC entitlement, and suggested exploring an amnesty scheme. Another respondent noted that the recipient could reclaim ITC once the supplier fulfills their tax obligations. The discussion highlights the complexities of ITC claims when suppliers default, emphasizing the recipient's burden to ensure compliance.