ITC Denial Solely Due to Supplier’s Retrospective GST Cancellation Unjust Without Verifying Transactions’ Genuineness: Himachal Pradesh HC

The Himachal Pradesh High Court has ruled that denying Input Tax Credit (ITC) to a taxpayer solely because their supplier's GST registration was cancelled retrospectively is unjust. The court held that such a denial cannot be made without first verifying the genuineness of the underlying transaction. The petitioner, a purchasing dealer, had their ITC reversed because their supplier's registration was cancelled with a back date. The High Court observed that the purchasing dealer had no way of knowing about the future cancellation at the time of the transaction. It directed the tax authorities to examine the petitioner's documents, such as tax invoices and proof of payment, to verify if the purchase was genuine. If the transaction is found to be bona fide, the ITC cannot be denied, thereby protecting genuine buyers from the compliance failures of their suppliers.