GST nonpayment: Go after sellers, Madras High Court tells Tax Department

By LE Desk

Chennai, April 29: A recent Madras High Court ruling has come as a significant relief for genuine buyers under the Goods and Services Tax regime. The decision will help buyers who’ve paid tax on the goods or services availed but the sellers haven’t deposited it in the government’s kitty, according to BloombergQuint.

As per GST law, buyers can avail input credit based on the tax invoice which has details such as the amount of tax charged, description of goods or services, the total value of supply of goods or services, GSTIN of the supplier and recipient, etc. And one more condition is that tax has to be paid by the supplier.

Seventeen traders of raw rubber sheets had moved the high court against the GST department’s decision to deny them the benefit of the input tax credit. The tax department sought to recover the input credit availed by these traders since the seller had not deposited the tax with the government.

The GST department argued that the traders had availed input credit on the premise that tax had already been remitted to the government by their sellers. When it turned out that the sellers have not paid any tax and the traders could not furnish any proof for the same, the department was entirely justified in proceeding to recover the tax from them. And so the department cannot be faulted for having reversed input credit already availed by the traders. The high court dismissed the tax department’s contentions.

It pointed out a fundamental flaw in the revenue department’s approach i.e. no inquiry against the defaulting sellers and non-initiation of recovery action against them. Once the department realised that the sellers have collected tax from the traders and not deposited it, strict action should’ve been taken against the former. Even more so, since the department believes there was no movement of goods, the high court said, BloombergQuint reported.

https://www.bloombergquint.com/law-and-policy/gst-non-payment-go-after-sellers-madras-high-court-tells-tax-department