Bombay High Court Admits Constitutional Challenge to GST Section 16(2)(c)
The Bombay High Court has admitted a writ petition that challenges the constitutional validity of Section 16(2)(c) of the Central Goods and Services Tax (CGST) Act, 2017. This section prevents a recipient from claiming Input Tax Credit (ITC) if the supplier has failed to deposit the tax to the government.
Core Issues Under Challenge
- ITC Denial Based on Supplier’s Default: The challenge targets the provision which makes the recipient’s right to claim ITC contingent on a third party’s (the supplier’s) action or inaction. The petitioners argue that disallowing ITC to the buyer for the seller’s default is unjust and financially burdensome.
- Constitutional Grounds: The petition contends that Section 16(2)(c) is a violation of the fundamental rights enshrined in the Constitution, specifically questioning its consistency with Article 14 (Equality before law) and Article 19(1)(g) (Right to practice any profession, or to carry on any occupation, trade or business), as it imposes an impossible condition on the recipient.
- Judicial Proceeding: By admitting the petition, the High Court has acknowledged the serious legal implications of the section, which effectively asks the recipient to bear the tax burden twice—once while paying the supplier, and again by losing the credit—when the default lies elsewhere. The case is expected to be a significant legal test regarding the limits of taxing power versus a taxpayer’s right to legitimate credit.