Allahabad High Court Rules Purchasers Not Liable For Supplier's GST Defaults

(MENAFN- KNN India) Allahabad, Jun 7 (KNN) The Allahabad High Court delivered a significant judgment on May 30, 2025, in the case of M/s R.T. Infotech versus State Tax Authorities, establishing that purchasers cannot be held responsible for their suppliers' GST filing defaults.

This landmark ruling provides crucial relief under Section 16(2)(c) of the Central Goods and Services Tax Act.

The court determined that Input Tax Credit should be allowed even when suppliers fail to meet their GST obligations.

The judgment specifically addressed situations where buyers have fulfilled their payment obligations through legitimate banking channels, holding that such compliance should not be undermined by suppliers' subsequent defaults in tax filing procedures.

Under this ruling, the court accepted payment made via the Reverse Tax Collection at Source mechanism and established that buyers cannot be held accountable for their suppliers' GST filing responsibilities.

The decision emphasises that purchasers who maintain proper documentation and follow prescribed payment procedures should not face penalties for circumstances beyond their control.

The judgment builds upon precedents established in earlier cases, including Suncraft Energy Private Limited decided by the Supreme Court in 2023 and D.Y. Beathel Enterprises adjudicated by the Madras High Court in 2022.

These cases collectively strengthen the legal framework protecting genuine taxpayers from arbitrary denial of Input Tax Credits due to supplier-related issues.

According to the court's reasoning, businesses that possess valid invoices, complete payments through banking channels, and operate in situations where tax departments have already initiated action against defaulting suppliers cannot be denied their legitimate tax credits.

This ruling is expected to provide significant protection to honest businesses operating within the GST framework while ensuring they are not penalised for third-party defaults beyond their control.

The decision represents a major development in GST jurisprudence and is likely to influence future tax policy implementation and enforcement practices across various state jurisdictions.

(KNN Bureau)

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