⚖️ Supreme Court Upholds Section 16(2)(c): Supplier Must Pay, or ITC Waits

-

📖 2 min read 🗓️ Judgment dated 24-07-2026 ⚖️ In favour of Revenue

Bought goods, paid your GST, filed everything right — but your supplier never deposited the tax. Can your ITC still be denied? The Supreme Court has now settled it: yes, it can.

In Bhandari Scrap Traders vs. Union of India [2026] 188 taxmann.com 986 (SC), the Apex Court upheld the constitutional validity of Section 16(2)(c) of the CGST Act, dismissing the challenge by purchasing dealers.

📌 What Was Challenged

Purchasing dealers filed writ petitions assailing the constitutional validity of Section 16(2)(c) — or, alternatively, sought to have it read down. Their core arguments were:

  • They had satisfied conditions in clauses (a), (aa), (b) and (ba) of Section 16(2).
  • It was impossible to verify whether the supplier actually deposited the tax.
  • Denial of ITC breached Articles 14, 19(1)(g), 265 and 300A of the Constitution.
  • ITC denial should be confined only to fraudulent or collusive transactions.

🔍 What the Court Held

Issue Court's Finding
Nature of ITC A statutory concession with conditions — not a vested right.
Link to actual payment Credit validly tied to tax actually paid by the supplier.
Remedy for buyer Section 41(2) + Rule 37A allow re-availment once the supplier pays.
Double taxation plea Fails, given the re-availment mechanism in Section 41(2).
VAT precedents Inapplicable — no parity between the Delhi VAT Act and the CGST scheme.

✅ The verdict: The Supreme Court affirmed the High Court judgment, found no constitutional infirmity in Section 16(2)(c), and dismissed the special leave petitions.

💡 What This Means for You

A purchasing dealer can re-avail reversed ITC after the supplier discharges the tax liability — the credit isn't lost forever, but it does wait until the supplier pays. Reading down Section 16(2)(c) is no longer an option, and the challenge under Articles 14, 19(1)(g), 265 and 300A stands rejected.

✅ Key Takeaways

  • Section 16(2)(c) is constitutionally valid — the SC refused to strike it down or read it down.
  • ITC is a statutory concession, not a vested right, and is validly linked to the supplier's actual payment of tax.
  • Section 41(2) read with Rule 37A lets the buyer re-avail reversed ITC once the supplier pays — protecting revenue while preserving the buyer's remedy.
  • VAT-era precedents don't apply to the GST scheme.
  • Result: SLPs dismissed — in favour of Revenue.

📢 Dealing with ITC mismatches because of non-compliant suppliers? Share this ruling with your clients and team — and drop your questions on Section 16(2)(c) in the comments.

www.nrk.info

Comments

Post a Comment

Popular posts from this blog

Partner Remuneration is Business Income: Expenses (Including Depreciation) Allowed

-
Image
Partner Remuneration is Business Income: Expenses (Including Depreciation) Allowed Delhi ITAT Confirms Section 28(v) Classification and Upholds Consistency Rule. The Delhi Income Tax Appellate Tribunal (ITAT) has provided critical clarity for partners of professional firms, confirming that remuneration received is classified as Business Income , not 'Salary'. This classification under Section 28(v) of the Income-tax Act, 1961 , allows the partner to claim legitimate business expenditures against that income. The Dispute: CA Partner's Expense Claim The case involved an assessee, a chartered accountant partner, who received remuneration/salary from his partnership firm (Assessment Year 2018-19). The dispute arose over the treatment of expenses: Assessee's Action: Claimed business-related expenses, including depreciation on a motor car, again...
Read more

Deciphering GSTR-9 Table 8A: The Auto-Population Logic Explained

-
Image
Understanding the ITC Data Flow from GSTR-2B to the Annual Return. Table 8A of GSTR 9 is a crucial component of the Annual Return, as it captures the eligible Input Tax Credit (ITC) details for a specific financial year. This table is entirely auto-populated by the GST system based on the filed returns and statements. Understanding the precise time frame the system uses is essential for reconciling your books with the portal data. What is Table 8A of GSTR 9? Core Function: Table 8A of GSTR 9 for FY 2024-25 capture the details of documents / records pertaining to FY 2024-25 appearing in GSTR 2B . Therefore, this table essentially serves as the system's calculated total of eligible ITC available to the taxpayer as per GSTR-2B for the financial year. How is Table 8A Auto-Populated? The auto-population mechanism follows ...
Read more

Employee Cannot Be Penalized: TDS Credit Allowed Despite Employer's Default

-
Image
Delhi ITAT Upholds Tax Credit Based on Salary Slips, Overruling Form 26AS/Form 16 Denial. A recent ruling by the Delhi Income Tax Appellate Tribunal (ITAT) delivers crucial relief to employees facing denial of Tax Deducted at Source (TDS) credit due to non-compliance by their former employer. The Tribunal confirmed that the Revenue cannot deny tax credit to an employee if the employee can provide substantive evidence (like salary slips) showing that tax was actually deducted from their salary, regardless of the employer's failure to remit the tax or issue Form 16 . Background of the Dispute The Facts: The assessee (an ex-employee of TLPL) received gross salary and had TDS deducted under Section 192 . However, the employer neither provided Form 16 nor remitted the TDS amount to the government account. Disallowance: The assessee...
Read more