GST Update

 Desk of CA. Praveen Sharma – 1032 Series (CAPS) 

 GUJARAT HIGH COURT IN THE CASE OF M/s. Nandan Denim Ltd.

Vs.

State of Gujarat & Others

Gujarat High Court: Fake ITC Beneficiaries Cannot Escape GST Liability

The Gujarat High Court has made it clear that merely possessing tax invoices and making payment through banking channels is not enough to claim Input Tax Credit (ITC). If the transactions are found to be fake or there is no actual supply of goods or services, the ITC can be denied.

The Court observed that under Section 16 of the CGST Act, actual receipt of goods or services is a mandatory condition for availing ITC. It also reiterated that Section 155 places the burden on the taxpayer to prove that the credit claimed is genuine.

In this case, the GST Department alleged that the taxpayer had availed ITC based on bogus invoices issued without any real movement or supply of goods. The Court held that beneficiaries of fake invoice chains cannot claim protection simply because they possess invoices or have made payments through banking channels.

Accordingly, the High Court upheld the Department's action to recover tax, interest and penalty, and refused to interfere in the proceedings.

 Key Takeaway

Businesses should not rely only on invoices or GSTR-2B while claiming ITC. They must verify suppliers, ensure actual receipt of goods or services, and maintain proper supporting documents such as e-way bills, transport records and payment proofs. Proper vendor due diligence is essential to avoid future tax demands, interest and penalties.

LINK: CA. Praveen Sharma on Linkedin

Regards
CAPS