Denial of ITC for Non-Payment of Tax by Supplier: Validity of Section 16(2)(c) of GST constitutionally challenged

Orissa High Court in the matter of M/s. OSL Securities Limited V/S Union of India has put a stay on demand issued invoking provisions of Section 73 of the OGST/CGST Act on the ground that, the petitioner has claimed Input Tax Credit (ITC) and his supplier has not shown the transaction in its Form-GSTR-3B.

M/s. OSL Securities Limited by way of filing the writ petition has challenged the vires of Clause (c) of Sub-section (2) of Section 16 of the Odisha Goods and Services Tax Act, 2017 (in short, “the OGST Act”)/ Central Goods and Services Tax Act, 2017 (in short, “the CGST Act”) which provides for a registered person is entitled to credit of input tax, if the tax charged in respect of supply has been paid to the Government, either in cash or through utilization of input tax credit admissible in respect of the said supply.

The petitioner, therefore, challenged the order dated 27.12.2023 passed by Assistant Commissioner of State Tax, Cuttack-1, Central Circle under Section 73 of the CGST/OGST Act raising a demand to the tune of Rs. 11,56,818.00, comprising tax of Rs. 5,45,204/-, interest of Rs. 5,57,094.00 and penalty of Rs. 54,520.00 with respect to tax periods July, 2017 to March, 2018.

As an interim measure, the court directed that the petitioner shall deposit 20% of the tax as determined vide assessment order dated 17.12.2023 passed under Section 73 of the OGST/CGST Act within a period of four weeks from today. In the event of such deposit, no coercive action shall be taken against the petitioner till disposal of the writ petition.

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