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Judicial Precedents on ITC Where Supplier Registration Is Cancelled / Supplier Found Bogus 🔴 CASE LAWS IN FAVOUR OF THE RECIPIENT (Bona Fide Buyer) 1. Assistant Commissioner of State Tax v. Suncraft Energy Pvt. Ltd. ( Calcutta High Court ) Held: Input Tax Credit cannot be denied to the recipient merely because the supplier failed to discharge tax liability or was later found non-compliant. Ratio: A purchasing dealer cannot be expected to verify whether the supplier has deposited tax with the Government . Such interpretation would make ITC provisions unworkable. Relevance: Strong authority against mechanical ITC reversal under Section 16(2)(c). 2. D.Y. Beathel Enterprises v. State Tax Officer ( Madras High Court ) Held: Before denying ITC to the recipient, the department must first proceed against the defaulting supplier . Ratio: Without exhausting recovery from the supplier, ITC cannot be reversed from the bona fide purchaser. Relevance: Most-cited judgment in bogus billing / su...

Input Tax Credit Cannot Be Denied to Bona Fide Buyer Due to Supplier’s Bogus Billing & Retrospective GST Registration Cancellation – Legal Position, Case Laws & Remedies Introduction A recurring and high-stakes dispute under GST is denial of Input Tax Credit (ITC) to a genuine recipient merely because the supplier’s GST registration is cancelled retrospectively on allegations of bogus billing / fake invoicing. In many cases: The recipient purchased goods or availed services in the normal course of business Full payment including GST was made through banking channels ITC is reflected in GSTR-2A / GSTR-2B Later, the supplier’s registration is cancelled ab initio alleging fake billing The department issues a Show Cause Notice (SCN) proposing ITC reversal, interest and penalty This article explains: What the CGST Act, 2017 and Rules actually provide Whether ITC can be denied to a bona fide purchaser Supreme Court and High Court jurisprudence (in favour and against) Action steps to ...

Section 16 of CGST Act, 2017 – Eligibility and Conditions for Taking Input Tax Credit Updated on: February 2026 (as amended and applicable till date) Prepared by: Yours Tax Consultant 1. Bare Act Text – Section 16 (Effective Provisions) Section 16(1): Every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person. Section 16(2): Notwithstanding anything contained in this section, no registered person shall be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless: (a) he is in possession of a tax invoice or debit note issued by a registered supplier or such other tax...