GST Rulings

Opportunity to prove bona fides must be given to recipient before ITC denial on account of supplier’s fault: Gauhati HC

Issue

The Petitioner had questioned the validity of Section 16(2)(aa) of the CGST Act, 2017. According to the said provision, Input Tax Credit (ITC) would be available to a recipient subject to the condition that the supplier has furnished the details of the invoice / debit note in Form GSTR-1 and such details are communicated to the recipient in the manner prescribed under Section 37 ibid.

Decision / Observations

[Order of the Hon'ble High Court of Gauhati, dated 09.12.2025, in WP(C) no. 5725/2022]

Merely owing to the condition that Form GSTR-2 must reflect the payment of taxes / invoice (sic.) which may or may not have been paid or correctly uploaded, ITC benefit to a bona fide buyer cannot be avoided as that would be against the object and purpose of the Act itself. Such a restriction is unfair since it places an onerous burden on the recipient.

However, since the object and purpose is to prevent fraudulent ITC claims and to promote supplier compliance, Section 16(2)(aa) ibid was not held as unconstitutional but it was only read down till the time CBIC comes out with a practical solution to the problems posed by making ITC availability, to a bona fide recipient, contingent on factors which are totally in the hands of a supplier.

To the extent that the supplier acts truant, before denying ITC, a bona fide purchaser ought to be given an opportunity to prove his bona fides which can be verified by tax invoices and other documents.

Comments

The aforesaid decision follows similar decisions under the GST regime in Suncraft Energy by the Hon'ble Calcutta High Court and in Diya Agencies by the Hon'ble Kerala High Court.

Srinivasan V, Advocate

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