Input tax credit denial for supplier default remains valid under CGST, but honest buyers face real compliance hardship.
Input tax credit under the CGST regime may be denied where the supplier fails to deposit tax, even if the recipient holds valid invoices, the supply is reflected in return data, the goods or services have been received, and no other disqualifying restriction applies. The commentary explains that Section 16(2)(c) creates hardship for bona fide purchasers who cannot independently verify invoice-level tax payment in real time, while the revenue treats input tax credit as a statutory concession subject to strict conditions. The Gujarat High Court upheld the constitutional validity of the provision, declined to read it down, and distinguished VAT-based precedent, while calling for better technological and legislative safeguards for honest buyers. (AI Summary)