Conditions for availment of ITC by any recipient of supply are listed in Section 16 of CGST Act, 2017. One of the conditions of availment of ITC as listed in Section 16(2) by way of clause (c) provides that the value of tax on which ITC is intended to be availed by the receiver shall be paid to the government exchequer by the supplier. Clause (c) reads as “the tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilisation of input tax credit admissible in respect of the said supply” .

However, there was no mechanism on GST portal to verify that the vendor/supplier has duly paid its entire due output tax liability (as shown in GSTR-1) or not. Also, it not practically possible for receiver to seek each & every vendor’s/supplier’s GST returns to ascertain whether due output tax has been paid by all its vendors/suppliers before availing ITC. Therefore, there was an apparent contradiction between provisions in Section 16(2)(c) and practical working while availing ITC.

Also, recent Union Budget, 2022 pronounced on 01 February 2022 also vide Finance Bill, 2022 intends to substitute the provisions of Section 38 of CGST Act, 2017 to introduce a mechanism of auto-generated statement vide which the inadmissible ITC will be shown in the auto-generated statement itself on account of various reasons, inter-alia, due to mismatch between outward supplies furnished under GSTR-1 of a tax period by the vendor/supplier with the tax paid through GSTR-3B in the same tax period. Relevant extract of newly proposed Section 38 is re-produced below –

“38. (1) The details of outward supplies furnished by the registered persons under sub-section (1) of section 37 and of such other supplies as may be prescribed, and an autogenerated statement containing the details of input tax credit shall be made available electronically to the recipients of such supplies in such form and manner, within such time, and subject to such conditions and restrictions as may be prescribed.

(2) The auto-generated statement under sub-section (1) shall consist of––

1. …………………………..
2. details of supplies in respect of which such credit cannot be availed, whether wholly or partly, by the recipient, on account of the details of the said supplies being furnished under sub-section (1) of section 37

 

1. …………….
2. ……………
3. by any registered person, the output tax payable by whom in accordance with the statement of outward supplies furnished by him under the said subsection during such period, as may be prescribed, exceeds the output tax paid by him during the said period by such limit as may be prescribed; or

Now, in order to ensure the payment of tax by the vendor/supplier to the government exchequer, a new mechanism has been recently introduced on the GST common portal vide which the recipient can ensure payment of tax by its supplier/vendor. The said facility is available on the common portal by following the steps:

Login GST Portal >> Search Taxpayer >> Search by GSTIN/UIN >> Enter GSTIN >> Liability Paid Percentage.

Screenshot of one such details as can be fetched by following above steps is given as under –

Advice – Thus, it is advisable to perform due diligence of vendor’s/supplier’s payment of tax before availing ITC in the above explained manner. It is equally important to document this due diligence by way of keeping a screenshot of this report to avoid future litigations.