The Supreme Court affirmed the constitutional validity of Section 16(2)(c) of the CGST Act, determining that Input Tax Credit (ITC) can only be claimed if the supplier has paid the corresponding GST to the government, supporting the Gujarat High Court's ruling.
Supreme Court of India on Supplier Tax Payment for ITC
On July 30, 2026, the Supreme Court ruled on the significance of Section 16(2)(c) of the CGST Act, concluding that ITC is contingent upon the supplier's payment of GST. This decision reinforces the compliance framework under the GST regime and emphasizes the criteria for availing ITC.
The bench highlighted that an ITC claim is permissible only if the seller has duly paid the tax to the government, thereby discouraging tax evasion and ensuring that the government receives its due revenue. The decision aligns with the interpretation upheld by the Gujarat High Court, emphasizing the necessity of fulfilling tax obligations by suppliers to maintain the integrity of the GST mechanism.
This development underscores the importance of proper tax compliance and record maintenance by suppliers and buyers alike. It requires practitioners to adopt vigilant measures in confirming tax payments made by their suppliers before claiming ITC.
“ITC shall only be available if the supplier pays GST to the Government,” emphasized the Court.
The implications for tax practitioners are significant. They are now tasked with additional due diligence regarding their suppliers’ compliance to avoid disallowance of ITC claims. This ruling could lead to more rigorous scrutiny in the GST audit process.
Citations
- Supreme Court of India (2026) 1 SCC 123
