The Rajasthan High Court issued the notices to the Government on a plea challenging the denial of ITC to the buyer of goods, services for default of the supplier.
The petitioner, M/s. Rahul Agencies challenged the vires of section 16 (2) (c) of the Central Goods and Services Tax Act, 2017and section 16 (2) (c) of the Rajasthan Goods and Services Tax Act, 2017 read with Rule 86A(1)(b) of the Central Goods and Services Tax Rules,2017 and Rule 86A (1) (b) of Rajasthan Goods and Services Tax Rules, 2017.
Section 16(2)(C) provides that input tax credit (ITC) must be allowed to the recipient only when the supplier has discharged the output liability through the utilization of the ITC admissible in respect of the supply or by cash.
Advocate Vikas Balia with Advocate Mayank Taparia, the counsel for the petitioner urged that denying ITC to a buyer of goods and services would tantamount to treating both the āguilty purchasersā and the āinnocent purchasersā at par whereas they constitute two different classes.
The petition further stated that denying ITC to a buyer of goods or services for default of the supplier of goods or services would tantamount to shifting the incidence of tax from the supplier to the buyer, over whom it has no control whatsoever, is arbitrary and irrational & therefore violative of the Article 14, Article 19(1)(g) and Article 300A of the Constitution of India. It would also clearly frustrate the underlying objective of removal of cascading effect of tax as stated in the Statement of object and reasons of the Constitution (One Hundred And Twenty-Second Amendment) Bill, 2014.
Therefore the division bench of Justices Sandeep Mehta and Devendra Kachhawaha issued the notice to the government.
Advocates Vikas Balia and Mayank Taparia appeared for the petitioner.
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