📰 𝗠𝗮𝗱𝗿𝗮𝘀 𝗛𝗶𝗴𝗵 𝗖𝗼𝘂𝗿𝘁 𝗥𝘂𝗹𝗶𝗻𝗴: 𝗜𝗧𝗖 𝗖𝗹𝗮𝗶𝗺 𝗗𝗲𝗻𝗶𝗲𝗱 𝗶𝗳 𝗦𝘂𝗽𝗽𝗹𝗶𝗲𝗿 𝗙𝗮𝗶𝗹𝘀 𝘁𝗼 𝗣𝗮𝘆 𝗧𝗮𝘅 𝘁𝗼 𝗚𝗼𝘃𝗲𝗿𝗻𝗺𝗲𝗻𝘁

📢 Court’s Statement: "Input Tax Credit (ITC) cannot be claimed by a registered person if the tax has not been paid to the government, even if the amount was paid to the supplier."

🔍 𝗙𝗮𝗰𝘁𝘀: • 𝗖𝗮𝘀𝗲 𝗧𝗶𝘁𝗹𝗲: Jai Balaji Paper Cones vs Assistant Commissioner, Sales Tax, Tiruchengode • 𝗖𝗼𝘂𝗿𝘁: Madras High Court • 𝗗𝗮𝘁𝗲: 03-Jul-2023

𝗜𝘀𝘀𝘂𝗲: Jai Balaji Paper Cones sought to claim ITC on payments made to a supplier whose GST registration was cancelled prior to the goods being supplied. The company argued that it had fulfilled its payment obligations to the supplier and thus was entitled to ITC, irrespective of the supplier’s tax remittance.

𝗣𝗿𝗼𝗰𝗲𝗲𝗱𝗶𝗻𝗴𝘀: The petitioner asserted that ITC entitlement should be independent of the supplier’s compliance status. However, the court emphasized that the GST Act stipulates that ITC can only be claimed if the tax has been actually paid to the government.

⚖ 𝗝𝘂𝗱𝗴𝗺𝗲𝗻𝘁: The Madras High Court held that the petitioner was ineligible for ITC due to the supplier’s failure to remit tax. The court stated that the petitioner may pursue recovery of the amount paid through legal avenues, such as a suit against the supplier or settlement negotiations.

📜 𝗜𝗺𝗽𝗹𝗶𝗰𝗮𝘁𝗶𝗼𝗻𝘀: This ruling reinforces that ITC claims hinge on the actual payment of tax to the government, underscoring the risk businesses face when dealing with suppliers who may have compliance issues. It also highlights the necessity for businesses to verify the GST status of their suppliers to safeguard ITC claims. Team GSTpanacea 7503031378