Home GST Buyers Can’t Claim GST Credit If Suppliers Fail To Pay Tax To Govt

Buyers Can’t Claim GST Credit If Suppliers Fail To Pay Tax To Govt

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Buyers Can’t Claim GST Credit If Suppliers Fail To Pay Tax To Govt
Patna HC's Order for Aastha Enterprises

Within the case of M/s. Aastha Enterprises Vs. State of Bihar [CWJ 10395 of 2023 dated 18th August 2023] Hon’ble Patna Excessive Court docket held that Enter Tax Credit score (ITC) is a profit or concession granted to the assessee below the statutory scheme, somewhat than a proper conferred upon them.

Within the case of M/s. Aastha Enterprises, the petitioner, bought the products from the provider and the taxable worth, in addition to the tax quantity, have been paid to the provider. Nevertheless, the provider did not deposit the tax quantity with the federal government.

The petitioner claimed Enter Tax Credit score (ITC) for the tax quantity paid to the provider, arguing that they have been eligible for ITC because the tax had been paid to the provider.

Nevertheless, the Income Division issued an evaluation order on Could 25, 2022, denying ITC to the petitioner on the grounds that they’d not fulfilled the circumstances stipulated below part 16(2) of the Central Items and Providers Tax Act, 2017 (the CGST Act).

Then the petitioner filed a writ with the Hon’ble Patna Excessive Court docket towards the evaluation order, arguing that ITC couldn’t be denied to a buying seller who had paid the tax and availed ITC primarily based on tax invoices issued by the provider.

The petitioner cited judgments from the Madras Excessive Court docket within the instances of Sri Vinayaga Companies v. The Assistant Commissioner and M/s D.Y Beathel Enterprises v. The State Tax Officer, arguing that initiating proceedings towards a petitioner who had already paid the tax would end in double taxation.

The Income Division countered that part 16 of the CGST Act stipulates sure circumstances for ITC eligibility, and failure to satisfy these circumstances would end in denial of credit score.

The Hon’ble Patna Excessive Court docket in CWJ 10395 of 2023 dominated that the Enter Tax Credit score (ITC) declare was raised by the petitioner, M/s. Aastha Enterprises couldn’t be sustained if the provider had not paid the collected tax to the federal government.

The courtroom relied on judgments from the Madras Excessive Court docket and the Supreme Court docket, which held that the buying seller should show the genuineness of transactions and that mere manufacturing of tax invoices shouldn’t be ample to say ITC.

The courtroom additionally held that if the provider fails to adjust to statutory necessities, the petitioner can not declare ITC and should search restoration from the vendor.

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