Archive · 5 Oct 2026
GST Council May Consider Protecting Buyers From Supplier Tax Defaults
A business can sometimes claim back GST it has paid as input tax credit.
But a buyer may lose that credit if its supplier does not send the tax to the government.
The GST Council may discuss a plan to protect buyers who made genuine purchases and paid their suppliers.
Under the plan, the government would seek the unpaid tax from the supplier instead.
Buyers involved in fraud would not get this protection.
The proposal may be discussed at a meeting on October 7, but it still needs further approval.
The Council may also consider allowing businesses to claim credit for more kinds of expenses.
These could include employee insurance, catering, some vehicles and costs related to operating them.
The GST Council may consider protecting genuine buyers from losing input tax credit when suppliers fail to pay tax.
The proposal may be discussed at the Council’s 57th meeting on October 7 and would require further approval.
Under the proposal, tax recovery would be pursued against the defaulting supplier rather than the genuine buyer.
Protection would not cover buyers knowingly involved in or benefiting from fraudulent transactions.
The Council may also consider expanding credit eligibility for expenses including employee insurance, catering, vehicles and related costs.
- Who
- The GST Council and businesses claiming input tax credit.
- What
- The Council may consider protecting genuine buyers from losing input tax credit because a supplier defaults, along with expanding eligible business expenses.
- When
- The proposals may be discussed at the Council’s 57th meeting on October 7.
- Where
- India.
- Why
- Supplier-related denial of input tax credit has led to business disputes and litigation, and may make companies cautious about dealing with smaller or newer vendors.
Buyer protection
Limits and enforcement
Who should bear supplier tax defaults
Buyer protection
Genuine buyers who paid for purchases and met their obligations should not lose input tax credit because their supplier failed to deposit tax.
Limits and enforcement
The proposal would not protect buyers knowingly involved in or benefiting from fraud; tax authorities could still act against them.
- Meeting
- 57th GST Council meeting, scheduled for October 7
- Buyer protection
- A genuine buyer may not lose input tax credit solely because a supplier failed to deposit tax
- Recovery
- Tax recovery would be pursued against the defaulting supplier
- Fraud exception
- Protection would not extend to buyers knowingly involved in or benefiting from fraudulent transactions
- Potentially eligible expenses
- Employee health and life insurance, outdoor catering, telecommunication towers, pipelines outside factory premises and free samples
- Vehicles
- The proposal could cover vehicles with seating capacity of up to 13 people, including the driver, and related expenses
- Other possible credit
- Goods destroyed after their shelf life where destruction is required by law
- Status
- Reported proposals for discussion; further approval would be required