In a huge relief to businesses, the Calcutta High Court has ruled that taxpayers shouldn’t be denied the benefit of the input tax credit if one is able to establish the genuineness of the transaction through documentary evidence, and statutory obligations, where registration of suppliers from whom procurements have been made is cancelled after the execution of the transaction.
The Court was hearing a batch of four petitions where show-cause notices (SCN) were issued to the taxpayers by the Department, refusing the benefits of input tax credit where registration of their suppliers was cancelled. Petitioners also challenged the controversial Section 16 (c) 2 of the GST regulation which denies taxpayers benefits of the input tax credit if their suppliers fail to pay taxes for such transactions to the government. The Court did not consider deciding on this issue.
Implications for businesses
The Calcutta High Court’s order is a first of its kind wherein a High Court has decided on such a matter.
The ruling holds great significance for other High Courts where similar writ petitions have been placed, but yet to be disposed of. The business community has hailed this judgment.