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Input means any goods other than capital goods used or intended to be used by a supplier in the course or furtherance of business.


Input tax  in relation to a registered person, means the central tax, State tax, integrated tax or Union territory tax charged on any supply of goods or services or both made to him and includes

(a) The integrated goods and services tax charged on import of goods

(b) The tax payable under the provisions of sub-sections (3) and (4) of section 9

(c) The tax payable under the provisions of sub-sections (3) and (4) of section 5 of the Integrated Goods and Services Tax Act

(d) The tax payable under the provisions of sub-sections (3) and (4) of section 9 of the respective State Goods and Services Tax Act or

(e) The tax payable under the provisions of sub-sections (3) and (4) of section 7 of the Union Territory Goods and Services Tax Act

But does not include the tax paid under the composition levy


Bright Star Plastic Industries v/s Additional Commissioner – Odisha High Court {W.P No. 2708 of 2021}

The department had issued a Show Cause Notice for cancellation of Registration on the ground that “you have claimed Input Tax Credit (ITC) of Rs 2,04,650,06 against fake invoices issued by the non-existent supplier and to pay the tax, interest and penalty of Rs 3,48,066/-

The Petitioner’s Advocate stated that on the collective reading of Section 16 of the OGST Act with Rule 21 of the OGST Rules 2017, there is no provision that enables the cancellation of the registration of the purchasing dealer for any fraud committed by the seller dealer.

Secondly, he points out that the cancellation registration of the selling dealer took place long after the dates of the purchases made by the present Petitioner from the said dealer. He, therefore submits that on the date of purchases took place, there is no way that the Petitioner would have known that at some future point in time, the registration of the selling dealer was to be cancelled.

Rule 21 States

The Registration granted to a person is liable to be cancelled, if the said person

  1. Does not conduct any business from the declared place of business or
  2. Issues invoices or bill without supply of goods or services in violation of the provisions of the Act, or the Rule made thereunder; or
  3. Violates the provisions of the Section 171 of the Act or the rules made thereunder.

Therefore, the Court finds merit in the contention that for the fraud committed by the selling dealer, which resulted in cancellation of a selling dealer’s registration, there cannot be automatic cancellation of the registration of the purchasing dealer. None of the three circumstances outlined in Clauses (a), (b), (c) of the Rule 21 are attracted in the present case.  Consequently, Rule 21 of the OGST Rules cannot be invoked by the department, in circumstances such as the present, to cancel the registration of the purchasing dealer.


LGW Industries Ltd & Ors v/s Union of India – Calcutta High Court {W.P No. 23512 of 2019, 6768 of 2020, 7285 of 2020, 8289 of 2021}

The main contention of the government portal showing their registrations as valid and existing at the time of transactions and petitioners could not be faulted if they appeared to be fake later on. If the department concerned finds on enquiries that the Registered Taxable Person were fake and bogus and on this basis petitioners could not be penalized unless the department establish with concrete materials that the transactions between supplier and recipient question. Recipient also submit that all the purchases invoices – wise were available on the GST Portal in form GSTR 2A which are matter of record.

The Court consider the fact that further verification cannot be said that there was any failure on the part of the Petitioners in compliance of any obligation required under the statue before entering the transactions in question.


Credit can’t be denied in the hands of bonafide buyer or recipient of goods/services, in the above cases the supplier is a bogus supplier or non – existent and it is stated in both the judgment that unless there is connivance (secretly involved) between bogus supplier and bonafide buyer. Budget 2022-23 proposed amendment in which sixth condition has been proposed to avail the credit i.e Section 16(2)(ba) which states that the ITC has to be communicated to the assessee and has not been restricted by proposed change of Section 38 which will be one of the most harsh section if implemented.


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