7 months ago
Tripura HC Allows ITC for Bona-Fide Purchasers
The Tripura High Court has ruled that Input Tax Credit (ITC) cannot be denied to a buyer who has made a genuine purchase, even if the seller has not paid the tax to the government.
The court said that as long as the buyer has a valid tax invoice and has taken all reasonable precautions, they should not be penalized for the seller's failure to pay taxes.
This decision provides relief to honest taxpayers.
However, experts believe that the Supreme Court might have the final say on this matter, as other High Courts have upheld the constitutional validity of the section in question.
Tripura High Court ruled that ITC cannot be denied to bona-fide purchasers even if the supplier has not deposited the tax.
The court held that Section 16(2)(c) of the CGST Act should not be used to deny ITC to purchasers in genuine transactions.
The petitioner, a trader of rubber products, had availed ITC on goods purchased from a supplier who failed to deposit the tax.
The court observed that the legislature did not distinguish between bona-fide purchasing dealers and those involved in fraudulent transactions.
Experts suggest that the matter is likely to be settled by the Supreme Court, as other High Courts have upheld the constitutional validity of Section 16(2)(c).
- Who
- Tripura High Court, Petitioner (trader of rubber products), Supplier (Sentu Dey)
- What
- Ruling on Input Tax Credit (ITC) under CGST Act
- Where
- Tripura High Court, India
- When
- Ruling on January 6, 2026; Published on January 9, 2026
- Why
- To determine if ITC can be denied to a bona-fide purchaser due to supplier's default in tax payment
Key facts
- Court
- Tripura High Court
- Section Involved
- Section 16(2)(c) of the CGST Act
- Petitioner's Business
- Trading of rubber products
- Key Articles
- Articles 14, 19(1)(g), 265, 300-A of the Constitution of India
- Expert Opinion
- Harpreet Singh, Partner with Deloitte
- Date of Ruling
- January 6, 2026
- Publication Date
- January 9, 2026
Quotes
Tripura High Court
The judicial body that made the ruling
“Section 16(2)(c) of the (CGST) Act is held not violative of Article14, 19(1)(g) or 265 or 300-A of the Constitution of India; But Section 16(2) (c) of the Act ought not to be interpreted to deny ITC to purchasers in a bona fide transaction like the petitioner and it should be read down and applied only where the transaction is found to be not bona fide or is a collusive transaction or fraudulent transaction to defraud the revenue”
thehindubusinessline.com
Harpreet Singh
Partner with Deloitte and tax expert
“the decision provides significant relief to bona fide taxpayers by holding that ITC cannot be denied merely due to a supplier’s failure to deposit tax, provided valid invoices are held and reasonable due diligence is undertaken. However, considering few of the High Courts have upheld the constitutional validity of Section 16(2)(c), the matter is likely to be settled by the Supreme Court”
thehindubusinessline.com
