PB AAR: Not Allowed to Claim GST ITC If Vendor Paid Tax Liability

The purchaser would not be qualified for claiming the ITC on the subject of purchases that the seller made, who would have released its tax liability, Punjab Authority of Advance Ruling (AAR) stated.

No registered individual would be eligible to get the ITC for any supply of goods or services or both until the tax levied is for the supply that has been paid to the government, stated by the two-member bench of Varinder Kaur and Viraj Shayamkarn Tidke.

A furnace at Mandi Gobindgarh procures ferrous alloys, scrap, gas, and other materials run by the taxpayer in the state of Punjab. In exchange for the GST invoice, which it may use to claim an input tax credit for the tax it paid on its purchases, the assessee receives the material. The assessee pays through banking channels, and all transactions are recorded in its accounting records.

The assessee is making sure the seller has paid any taxes owed and that the transactions he made have been noted in the seller’s books of accounts by requesting reports from its immediate suppliers, i.e., Form GSTR-3B and Form GSTR-1, just to be safe.

The applicant requested a preliminary ruling on the issue of whether the buyer may claim input tax credits for purchases they made from the seller, who had paid its taxes but the prior seller had not.

The buyer is not qualified to claim GST Input Tax Credit on the supply under Section 16(2)(c) of the CGST Act if the seller or prior sellers have not paid the tax, either in cash or by using allowable input tax credits in relation to the sale, AAR held.