This article analyses the Supreme Court’s speaking order in Bhandari Scrap Traders, where the Court upheld the constitutional validity of Section 16(2) (c) of the CGST Act and affirmed that ITC is subject to actual payment of tax to the Government.
‣ Section 16(2) (c) – Buyer’s ITC depends on whether tax charged by the supplier has been paid to the Government
‣ Bona Fide Buyers – The ruling leaves honest purchasers exposed where suppliers default after collecting GST
‣ High Court Split – The Supreme Court endorsed the Gujarat view over contrary read-down rulings from other High Courts
‣ Reversal & Re-availment – Credit may be reversed if the supplier defaults and re-availed once tax is deposited
‣ Business Impact – Supplier due diligence, compliance monitoring and indemnity clauses are now critical
The article highlights the need for technology-driven verification to protect genuine buyers from another party’s default.
