SC Upholds Section 16(2)(c): Supplier’s Tax default can cost even the bona fide buyer’s ITC

This ruling puts to rest any hope of pre-GST VAT jurisprudence protecting bona fide purchasers extending to GST regime. Input Tax Credit is a statutory concession that vests only once every condition in Sections 16 to 21 is met, including actual tax payment by the supplier, and good faith is no shield. Accordingly, Businesses therefore must go beyond verification of a valid invoice and banking proof of payment ensuring regular monitoring on vendor compliance and conducting robust due diligence. Where ITC is reversed due to supplier default, re-availment under Section 41 read with Rule 37A remains the only statutory remedy for such case.