Registered Person cannot Claim ITC if GST is Not Paid to Government: Madras HC [Read Order]

In a recent ruling, a Single Bench of Justice C. Saravanan of Madras High Court has ruled that a registered person cannot claim the Input Tax Credit (ITC) if the Goods and Services Tax (GST) is not paid to the government.

The Petitioner, M/s Jai Balaji Paper Cones, bought a shipment of goods from the second respondent located in Gundur District, Andhra Pradesh. This purchase was made through three invoices dated 23.11.2018. The Petitioner seems to have made the payment to the second respondent- Raghava Industries. However, it came to light that the GST registration of the second respondent had been cancelled on 31.10.2018.

According to the petitioner's claim, they have already paid an amount of Rs. 4,14,000/- to the second respondent, which includes the GST payable on three invoices. The petitioner argued that because they have already paid the tax amount due on these three invoices dated 23.11.2018 to the second respondent, they should not be required to pay IGST (Integrated Goods and Services Tax).

The petitioner made the GST payment to the second respondent. Nevertheless, the problem arises from the fact that the second respondent's GST registration had already been cancelled, and the tax amount remained unpaid to the government.

The counsel for the first respondent-The Assistant Commissioner of Sales Tax submitted that the petitioner is not entitled for the relief in view of Section 16(2)(c) of the Central Goods and Service Tax Act, 2017 read with Rule 36(4).

The Section 16(2)(c) of the Central Goods and Service Tax, reads as “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 utilization of input tax credit admissible in respect of the said supply”.

The bench noted that “Thus, a registered person is not entitled to credit of input tax in respect of any supply of goods or services of both if tax is not paid to the Government. The registration of the second respondent has been cancelled on 31.10.2018 before three invoices dated 23.11.2018 were raised. Thus, it is clear that the second respondent could not have paid the tax to the ex-chequer.”

While dismissing the writ petition, the High Court stated that it is not possible to issue a mandamus to the first respondent that goes against the provisions of the GST Act of 2017 and the corresponding Rules.

However, the petitioner is entitled to recover the amount from the suppliers in the manner known to law. entitled to recover the amount from the suppliers in the manner known to law.

To Read the full text of the Order CLICK HERE

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