Summary
- A constitutional battle over Section 16(2)(c) of the Central Goods and Services Tax Act, 2017 continues as it conditions input tax credit on the supplier's actual tax payment, affecting bona fide purchasers.
- The Supreme Court's 2026 rulings in Bhandari Scrap Traders and Prime Metals have upheld the validity of this provision for direct supplier defaults but left upstream supplier liability unresolved.
- High Courts are divided, with some adopting taxpayer-protective approaches while others impose stricter compliance requirements, creating a complex legal landscape.
- The ongoing uncertainty compels businesses to enhance vendor due diligence and consider contractual protections to mitigate risks associated with supplier defaults.
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