Constitutional Validity of Section 16(2)(c) of GST Act Challenged: High Court granted interim relief
Summary in Key Points:
- Issue: A petition challenged the constitutional validity of Section 16(2)(c) of the GST Act, which deals with Input Tax Credit (ITC) eligibility.
- Petitioner’s Argument: The provision places an unreasonable burden on the purchaser of goods by requiring them to prove the seller’s GST registration, tax payment, and utilization of ITC for past transactions.
- Decision: The High Court issued a rule, making the case returnable on 04-12-2024, and granted interim relief by prohibiting coercive action against the petitioner until the case is decided.
Decision:
- The High Court acknowledged the petitioner’s arguments and issued a rule, essentially agreeing to hear the case and examine the constitutional validity of Section 16(2)(c).
- The court granted interim relief to the petitioner, preventing any coercive action by authorities while the case is pending. This indicates the court sees merit in the petitioner’s arguments and wants to prevent potential harm while the matter is under consideration.
This case highlights a potential issue with Section 16(2)(c) of the GST Act and its impact on businesses claiming ITC. The court’s decision to hear the case and grant interim relief suggests that the provision might be interpreted or even amended in the future.
HIGH COURT OF GUJARAT
J.R. Beverages (P.) Ltd.
v.
Union of India
BHARGAV D. KARIA and D.N. Ray, JJ.
R/SPECIAL CIVIL APPLICATION NO. 16135 of 2024
NOVEMBER 29, 2024
Krutarth K. Desai and Abhay Y. Desai for the Petitioner. Raj Tanna, AGP and Neel P. Lakhani for the Respondent.
ORDER
Bhargav D. Karia, J.- This petition is filed challenging the vires of the provisions of Section 16(2)(c) of the State Goods and Services Tax Act, 2017 (SGST Act for short) identical to the Central Goods and Services Tax Act, 2017.
2. Learned advocate Mr. Abhay Desai for the petitioners submitted that the effect of the provisions of Section 16(2)(c) of the ‘SGST Act is that the purchaser of goods for seeking entitlement for Input Tax Credit (TTC for short), is imposed with discharging of burden of two kinds. The first burden which the purchaser is required to discharge, it was submitted, is that the seller is registered under the Goods and Services Tax and that he has actually paid the tax on the goods supplied by him. The second burden to be discharged by purchaser is in respect of such supply made by the seller to him, the seller has actually paid the GST for which Input Tax Credit is admissible in respect of the said supply. It was therefore submitted that the purchaser will be required to show that the seller has in respect of all past transaction made by him in relation to goods supplied by him, had utilized the input tax credit, which was in respect of such supplies.
3. In view of the above submissions, issue Rule returnable on 04.12.2024. By way of ad-interim relief, no coercive steps shall be taken by the respondent authorities during the pendency of this petition.
4. To be heard with Special Civil Application No. 15188 of 2020 and allied matter.