Denial of GST Input Tax Credit to Recipient for Default of Supplier: Delhi HC issues Notice to Centre [Read Order]

Input Credit Refund - Taxscan

The Delhi High Court will look into ambiguity in the existing Central Goods and Services Tax (GST) Law that whether input tax credit can be denied to a purchaser for the default committed by the seller.

The two-judge bench comprising Justices S Muralidhar and Asha Menon was hearing a petition by Bharti Telemedia Ltd where the petitioner challenged the legality and validity of Section 16(2)(c), second proviso to Section 16(2)(d) and proviso to Section 16(4) of the Central Goods and Service Tax Act, 2017. The Petition also challenged the validity of Section 43A(6) of the Central Goods and Service Tax Act, 2017, which has yet been notified.

The petitioner contended that the law empowers the Department to recover any revenue loss owing to non-payment of taxes by erring suppliers and credit cannot be denied to the recipient for default on part of the supplier.

Section 16(2)(c) of CGST Act, 2017 provides for a condition wherein the recipient would only be entitled to Input Tax Credit if the tax charged in respect of such supply has been actually paid by the Supplier. The second proviso to Section 16(2)(d) provides that the recipient shall add an amount of Input Tax Credit availed, along with interest to the output tax liability if the recipient fails to pay the invoice amount to the supplier within 180 days.

On Friday, the bench issued a notice to the centre asking response in the matter and posted the case on 18th September 2019.

To Read the full text of the Order CLICK HERE