Input tax credit

This query is : Resolved

Nikhil Prajapati (Querist)
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01 June 2019 Input Tax credit (GST) cannot be denied to recipient for default on part of the supplier- Delhi High Court issued notice to UNION OF INDIA

Delhi HC issues notice in writ petition challenging Section 16(2)(c), second proviso to Section 16(2)(d) and proviso to Section 16(4) of Central Goods and Service Tax Act, 2017 (CGST Act); Validity of Section 43A(6) of CGST Act, which hasn’t been notified yet, is also being challenged; Petitioner’s contention is that the Department has been vested with all the powers to recover any revenue lost owing to non-payment of taxes by erring suppliers and credit cannot be denied to recipient for default on part of the supplier; Lists the matter on September 18 : Delhi HC

The matter is being heard by Division Bench comprising of Justice Dr. S. Muralidhar and Justice Asha Menon.

The Petitioner i.e. Bharti Telemedia Ltd. is engaged in providing Direct-To-Home satellite television broadcast services. Writ Petition has been filed challenging 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 Writ Petition also challenged the validity of Section 43A(6) of the Central Goods and Service Tax Act, 2017, which has not been notified until.

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.

Proviso to Section 16(4) extends the benefit of availment of ITC till the due date of furnishing of return under Section 39 for the month of March, 2019 in respect of certain invoices, only if the supplier for such supplies has uploaded the details of such invoices in its return under Section 37(1) for the month of March, 2019. Section 43A(6) of the CGST Act provides that the supplier and recipient shall be jointly and severally liable to pay tax or pay ITC availed in relation to outwards supplies for which the details have been furnished under sub-section (3) and (4) but returns thereof has not been furnished.

The provisions have been challenged on the following grounds:

Section 16(2)(c), proviso to Section 16(4) is violative to Article 14 of the Constitution of India;
The Department has been vested with all the powers to recover any revenue lost owing to non-payment of taxes by erring suppliers;
The credit cannot be denied to the recipient for the default on the part of supplier.

Delhi HC has issued a notice to Union of India today and posted the matter on September 18, 2019.

May question is now can we take itc on the basis of purchase invoice even if supplier has not filed gstr return (i.e. credit is not showing in GSTR 2A).??