TaxTMI 
TaxTMI 
2025 (12) TMI 756
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....ngaged in the business of production, blending and supply of tea in India and other countries, has questioned the validity of the provisions contained in Section 16(2)(aa) of the Central Goods and Services Tax Act, 2017 (hereinafter to be referred as the "CGST Act") and Assam Goods and Services Tax Act, 2017 (hereinafter to be referred as the "AGST Act"). 2. The provision of Section 16 of the CGST Act, in its entirety, is being extracted herein below for ready reference:- "16. Eligibility and conditions for taking input tax credit.- (1) Every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, be entitled to take credit of input tax charged on any s....
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....red person.] (ba) the details of input tax credit in respect of the said supply communicated to such registered person under section 38 has not been restricted; (c) subject to the provisions of section 41, the tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilisation of input tax credit admissible in respect of the said supply; and (d) he has furnished the return under section 39: Provided that where the goods against an invoice are received in lots or installments, the registered person shall be entitled to take credit upon receipt of the last lot or installment: Provided further that where a recipient fails to pay to the supplier of goods or se....
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....turn under the said section for the month of March, 2019 in respect of any invoice or invoice relating to such debit note for supply of goods or services or both made during the financial year 2017-18, the details of which have been uploaded by the supplier under sub-section (1) of section 37 till the due date for furnishing the details under sub-section (1) of said section for the month of March, 2019.]" 3. According to Mr. A. Kanodia, learned Advocate for the petitioner, Clause (aa) of sub-section (2) of Section 16 of the CGST Act and AGST Act puts an arbitrary condition that the Input Tax Credit (hereinafter to be referred as "ITC") would be available to a purchaser, subject to the condition that the supplier has furnished the details....
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....n 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. 6. Looke....
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....preme Court [reported in (2024) 121 GSTR 230] and Diya Agencies -Vs- STO :: (2024) 124 GSTR 172 (Kerala High Court). In Commissioner Trade and Tax, Delhi -Vs- M/s Shanti Kiran India (P) Limited [Civil Appeal No(s).2042-2047/2015], the Supreme Court affirmed the decision of the Delhi High Court, whereby the benefit of ITC was made available to the registered purchaser/ dealer, who had paid taxes to the registered seller/ dealer in terms of invoices raised by them even though those sellers did not deposit the collected tax with the Government. The Delhi High Court had found that the purchaser had paid taxes in good faith to the seller and, therefore, was entitled to the benefit of ITC. The benefit was allowed to the purchaser subject to....
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....3. Thus, unless the supplier has paid the tax in respect of the said supply, ITC cannot be claimed by the recipient on the said supply. 14. The purpose of inserting Section 16(2)(aa) into the CGST Act is to mandate a stricter condition for availing ICT. It actually ties the recipient's ability to claim ITC directly to the supplier's compliance with their GST filing obligations. This amendment was introduced to address tax evasion and improve the transparency and integrity of the GST system. Thus, the purpose and rationale is to prevent fraudulent ITC claims, to promote supplier compliance and eliminate provisional ITC, which has proved to be effective in curbing fraudulent claims. There is no reason why it should be declared unconstituti....