Challenge to Section 16(2)(c) of GST Act: Coercive Action Stayed
Summary in Key Points:
Issue: Is Section 16(2)(c) of the GST Act, which denies ITC to a recipient if the supplier fails to pay tax, constitutionally valid?
Facts: The petitioner challenged the validity of Section 16(2)(c), arguing that it unfairly penalizes bona fide purchasers who have paid GST to their suppliers, even if the supplier defaults on remitting the tax to the government. The petitioner pointed out that a similar challenge is pending before the same High Court.
Decision: The court listed the matter for hearing and ordered a stay on any coercive action against the assessee until the matter is decided.
Important Note: This interim order reflects the court’s recognition of the potential hardship caused by Section 16(2)(c) to businesses that may lose ITC due to their supplier’s default, even if they have fulfilled their tax obligations. By staying coercive action and listing the matter for hearing, the court indicates its intent to examine the constitutional validity of this provision and its impact on bona fide taxpayers. This case highlights an ongoing debate regarding the fairness and practicality of denying ITC to recipients based on the actions of their suppliers.