Can department Block Your Input Tax Credit (ITC) if Your Supplier’s GST Gets Cancelled Later?


Can department Block Your Input Tax Credit (ITC) if Your Supplier’s GST Gets Cancelled Later?


In the matter of M/s. Engineering Tools Corporation vs. the Assistant Commissioner (ST) [Writ Petition No.3505 of 2024 and W.M.P.Nos.3758 & 3759 of 2024] dated 15.02.2024, the Madras High Court has directed that the claim of Input Tax Credit (ITC) cannot be solely rejected on the ground that the supplier’s GST registration was cancelled with retrospective effect.

In this case, the petitioner submitted that they had purchased goods from M/s.Shikhar Technologies in 2017-2018 and that such purchases are supported by tax invoices, e-way bills, transport documents and proof of payment to the supplier through regular banking channels. Further, it is submitted that, despite of submitting all these documents, the ITC was reversed solely on the ground that the registration of the petitioner’s supplier was cancelled with retrospective effect.

The court emphasized that the tax department should not reject ITC if the transaction was genuine. This means that as long as you have proper documentation to substantiate the purchase ( tax invoices, e-way bills, lorry receipts, delivery challans, proof for payment, etc.), the cancellation of your supplier’s GST registration should not impact your ITC claim.

The Court noted that this reasoning given in the impugned order is inadequate, asserting that the petitioner had already submitted relevant documents supporting the transaction. The court deems the assessment order unsustainable in the given circumstances.

This ruling offers important clarification, saying that a genuine commercial transaction shouldn’t be suffer due to later registration problems faced by the supplier. To avoid any issues, it emphasizes how crucial it is to keep accurate records and ensuring that your suppliers remain compliant to avoid any complications. Through comprehending the lessons learned from case, Businesses can more effectively safeguard their ITC claims and navigate the complexities of GST regulations confidently


The copy of the order is as under:

Engineering-Tools-Corporation-Vs-Assistant-Commissioner-ST-Madras-High-Court 123



Krishnakant Jakhotia

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