GST Update

???? Desk of CA. Praveen Sharma – 1054 Series (CAPS) ????

?? Supreme Court in the case of Bhandari Scrap Traders v. Union of India

The Supreme Court has upheld the constitutional validity of Section 16(2)(c) of the CGST Act, reaffirming that Input Tax Credit (ITC) is a conditional benefit and not an absolute right. The Court clarified that a registered recipient can claim ITC only when the supplier has actually deposited the GST collected with the Government.

The judgment further states that merely possessing a valid tax invoice and receiving goods or services is not sufficient to avail ITC. Compliance with all statutory conditions under Section 16 is mandatory, including payment of tax by the supplier. The Court observed that this requirement is neither arbitrary nor unconstitutional, as it is intended to protect government revenue and ensure tax compliance.

The ruling also highlights the importance of conducting proper vendor due diligence, regularly monitoring supplier GST compliance, and maintaining adequate documentation before claiming ITC. Businesses should strengthen their compliance processes, as failure by a supplier to deposit GST may affect the recipient's entitlement to ITC in accordance with the provisions of the CGST Act.

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CAPS