Input tax credit- Section 16 of CGST Act- In the instant case, the applicant is running a furnace at Mandi Gobindgarh and for the purpose of the same, they are procuring ferrous alloys, scrap, gas, and other materials from within the State of Punjab.

the applicant is seeking an advance Ruling in respect of the following questions.-

a. Whether the purchaser is entitled to claim Input Tax Credit on the purchases made by it from the seller who had discharged its tax liability but the preceding seller has not discharged its liability under the Act?

b. If answer to the above is in negative, then how the purchaser will ensure that the tax liability has been discharged by all the sellers falling in the queue of the transaction?

c. Whether the purchaser would be eligible for the ITC since no infrastructure has been provided by the Govt, in order to ensure discharging of tax liability by the sellers falling in the queue of a transaction?

d. Whether the purchaser is entitled to claim Input Tax Credit on the purchases made by it from the seller in the event of non-payment of tax by the seller even though the purchaser is in possession of the invoice, other relevant documents and the payments have been made through banking channels and there is no connivance or collusion between the purchaser and seller?

From the provisions of the section 16(2)(c) CGST Act and PGST Act, it is very much clear that no registered person shall be entitled to take the credit of any input tax in respect of any supply of goods or services or both unless the tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilization of input tax credit admissible in respect of the said supply. If the seller or preceding sellers have not deposited the tax either in cash or through utilization of input tax credit admissible in respect of the said supply, purchaser is not eligible to claim ITC on such supply.

Held that- As per provisions of section 16(2)(c) of CGST Act read with PGST Act, the purchaser is not entitled to claim Input Tax Credit on the purchases made by it from the seller who had discharged its tax liability but the preceding seller has not discharged its liability under the Act.

Question no. 2,3 and 4 above are not covered under the purview of Section 97(2)(d) of CGST Act and PGST Act, hence no ruling could be passed on these questions.