Input tax credit (ITC) allowable only if the supplier had discharged the output liability: Rajasthan HC issued Notice to Finance Ministry

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 Input tax credit (ITC) allowable only if the supplier had discharged the output liability: Rajasthan HC issued Notice to Finance Ministry 

 

Hon’ble Rajasthan High Court, in M/s Rahul agency. v Union of India [Order dtd 27.05.2021 in WP 7351 of 2021]has been pleased to issue notices to respondents wherein validity of Section 16(2)(c) read with Rule 86A are challenged.
A Division Bench of the  Rajasthan High Court issued Notices to Respondents including Finance ministry on
Section16(2)(C) which provides that input tax credit (ITC) must be allowed to the recipient only when the supplier had discharged the output liability through utilisation of the ITC admissible in respect of the supply or by cash.
The matter was argued by Advocate Vikas Balia and Advocate Mayank Taparia on the ground that denying ITC to a buyer of goods and services would tantamount to treating both the ‘guilty purchasers’ and the ‘innocent purchasers’ at par whereas they constitute two different classes. The petition further stated that denying ITC to a buyer of goods or services for default of the supplier of goods or services would tantamount to shifting the incidence of tax from the supplier to the buyer, over whom it has no control whatsoever, is arbitrary and irrational & therefore violative of the Article 14, Article 19(1)(g) and Article 300A of the Constitution of India. It would also clearly frustrate the underlying objective of removal of cascading effect of tax as stated in the Statement of object and reasons of the Constitution (One Hundred And Twenty-Second Amendment) Bill, 2014.

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1 Comment

  1. May 28, 2021
    V Jayaraman FCA

    Perfect. I fully support this. Only when this is done, atleast for the sake of claiming ITC, payment will be made by the dealers.

    Reply

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