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Yes, in some circumstances—but the answer depends on the legal ground for denial. Under section 16(2)(c) of India’s Central Goods and Services Tax Act, 2017, payment of the tax charged on a supply to the Government is a condition for input tax credit (ITC). On 24 July 2026, the Supreme Court upheld that condition and declined to read it down in Bhandari Scrap Traders v. Union of India. It did not establish that every allegation against a buyer is automatically valid, or that an officer may treat supplier non-payment as proof that no goods or services were supplied. The specific allegation, transaction evidence, buyer conduct, statutory provision and reasoning in the decision all matter.
What the answer means in practice
There is no general rule that GST authorities must first use one prescribed method to verify that a supply was genuine before they can deny ITC. Nor is there a general rule that an invoice and a buyer’s claim of good faith always protect the credit. The Supreme Court’s July 2026 decision makes it unsafe to rely on the contrary proposition as a uniform national rule: section 16(2)(c), which concerns payment of tax to the Government, remains a statutory condition.
That does not make two different questions interchangeable. Whether the buyer actually received the goods or services is one question. Whether the supplier paid the tax charged on that transaction to the Government is another. Evidence answering the first does not, by itself, establish the second. Equally, a supplier’s failure to pay tax does not, by itself, prove that the buyer never received the supply. A notice or order should therefore be understood by the precise allegation and statutory condition it invokes, rather than by a broad label such as “fake invoice.”
This is an India-specific account of the CGST Act and the reported decisions discussed below, current to 13 October 2026. The outcome in a particular case depends on its facts and applicable procedure; this article is not advice on a specific assessment or appeal.
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Which ITC conditions are relevant?
Section 16(1) of the CGST Act allows a registered person to take eligible credit on qualifying inward supplies used or intended for business, subject to the Act’s conditions and restrictions. Section 16(2) sets conditions for taking that credit. For a dispute about genuineness or supplier default, keep at least four requirements distinct:
- Tax document: The recipient must have the prescribed tax document, such as an applicable tax invoice.
- Receipt: The recipient must have received the goods or services. For goods, the record may include delivery and stock evidence; for services, it may include records showing what was delivered and used.
- Tax payment: Section 16(2)(c) concerns payment of the tax charged on the supply to the Government, subject to the statutory scheme.
- Return filing: The recipient must furnish the relevant return, subject to the statutory provisions that apply.
These are not a single “invoice matching” test. A mismatch or missing entry in a return-related system may be relevant to an inquiry, but it should not be confused with a finding about physical receipt, supplier tax payment, fraud, or a separate time limit. Identify which condition the department says is unmet before evaluating the evidence or the response.
The Supreme Court ruling changes how the bona fide-buyer argument should be framed
Bhandari Scrap Traders: section 16(2)(c) upheld
In Bhandari Scrap Traders v. Union of India, decided on 24 July 2026, the Supreme Court upheld the Gujarat High Court’s rejection of a challenge to section 16(2)(c). It found no basis in the case before it to declare the provision unconstitutional or to read it down. The Court also said that the CGST and Delhi VAT statutory schemes differ, so Delhi VAT decisions about bona fide purchasers could not simply be applied to a purchaser under the CGST Act when a supplier failed to pay tax.
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The Supreme Court noted that a special leave petition concerning the Tripura High Court’s decision in Sahil Enterprises had been entertained. It distinguished that decision, however, because the Tripura High Court had not undertaken the same statutory analysis. The practical consequence is important: Sahil Enterprises may be relevant to an argument about a buyer’s position, but its approach cannot be presented as the settled nationwide rule after the Supreme Court’s decision.
Sahil Enterprises: a protective High Court approach
In M/s Sahil Enterprises v. Union of India, decided by the Tripura High Court on 6 January 2026, the Court addressed a bona fide buyer’s position where the respondents did not dispute that the recipient lacked a mechanism to verify whether its supplier had discharged its tax liability. The Court reasoned that a buyer acting in good faith should not bear the consequence of a seller’s failure to deposit tax collected from that buyer, and read down section 16(2)(c) in that case.
The Court observed: “The fact that there is no mechanism with the recipient of goods to verify whether the supplier has discharged its liability to the Government, or not, is not disputed by respondents.” That is the Tripura High Court’s observation in its case, not a general assurance that every buyer is unable to check supplier compliance or that the Supreme Court adopted the same rule. The later Supreme Court judgment expressly distinguished Sahil Enterprises.
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How to read the two decisions together
The decisions show different approaches, but they do not carry equal weight as a nationwide statement after July 2026. The Supreme Court upheld the statutory tax-payment condition and rejected reading it down in Bhandari Scrap Traders. A party may still rely on the facts and reasoning of a High Court decision where relevant, but should explain the jurisdiction, the precise issue and the Supreme Court’s subsequent treatment rather than presenting the High Court position as controlling everywhere.
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Separate the allegation before judging whether verification mattered
A recipient assessing an ITC notice should first determine what the department actually alleges. Several grounds can appear together, but they are legally and factually different. The table is a sorting aid, not a conclusion that any particular document guarantees credit.
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| Allegation | Question to isolate | Evidence that may be relevant |
|---|---|---|
| No actual supply or receipt | Did the goods or services described in the transaction reach the recipient or get delivered? | Invoices and purchase orders alongside transport or e-way records where applicable, goods-receipt and stock records, or service-delivery records. |
| Supplier did not pay tax | Is the proposed denial based on section 16(2)(c), and what is alleged about tax payment for the transaction? | Invoice and payment records, supplier registration and return status at the relevant time, and the recipient’s contemporaneous transaction records. These do not independently prove remittance to the Government. |
| Defective or missing tax document | What document is said to be absent or defective, and which prescribed requirement is implicated? | The tax invoice and related transaction documentation. |
| Collusion or fraud | What conduct is attributed to the recipient, and what facts are said to support that allegation? | Commercial records, payment trail, delivery evidence and contemporaneous communications may help establish what occurred and what the buyer knew or did. |
| Return or time-limit issue | Is the dispute about filing, a return-related mismatch or the time allowed to claim credit, rather than whether a supply was genuine? | Relevant returns and filing records, claim dates and the particular statutory provision invoked. |
The point of this separation is not to assume that the officer must accept the buyer’s account, or that a buyer can independently see every supplier remittance. It is to avoid answering a non-receipt allegation with evidence that proves only payment, or answering a tax-payment allegation as if delivery alone resolves it.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Build the record around the transaction, not a checklist label
The cases do not establish a universal evidence checklist or a document that guarantees ITC. The records below can help establish what happened in a particular transaction; their weight will depend on the facts, the allegation and the applicable rules.
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For goods
- Keep the tax invoice, purchase order and payment evidence, including how the GST amount was paid.
- Where applicable, retain e-way bills and transport records, together with proof of delivery or goods receipt.
- Maintain stock or inventory entries that connect the receipt to the business’s records and subsequent use, where relevant.
For services
- Retain the invoice, purchase order or engagement record, plus payment evidence.
- Keep service-delivery records that show the work, access, output or other performance relevant to that service.
- Preserve ordinary contemporaneous business communications that help explain the scope and delivery of the transaction.
For either kind of supply
- Preserve supplier registration and return-status information available for the relevant time, without treating it as conclusive proof of tax remittance.
- Keep communications that document ordinary commercial due diligence and any steps taken when a discrepancy arose.
- Organize records by transaction and date so the response can connect each document to the particular invoice and allegation.
These materials can support evidence of receipt, payment, supplier status and buyer conduct. They do not automatically establish that the supplier paid the tax to the Government, and the cited decisions do not say any one record creates a safe harbor. A recipient should map each item to the fact it can actually prove.
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A practical way to analyze a notice or denial
- Read the operative allegation. Identify whether the notice or order asserts non-receipt, supplier non-payment, a deficient document, fraud or collusion, return non-compliance, or a time-limit problem. Note the statutory provision cited for each ground.
- Separate the transaction facts. For each disputed invoice, establish what was ordered, what was supplied, when it was received, how payment was made and which business records correspond to it.
- Match evidence to the allegation. Delivery and stock records speak to receipt; bank records speak to payment between buyer and seller; supplier return information may speak to compliance indicators. Do not treat one category as proof of a different fact.
- Check the legal authority and jurisdiction. Consider the Supreme Court’s 24 July 2026 ruling on section 16(2)(c), the relevant High Court authorities and whether a decision is binding in the forum hearing the dispute. Treat Sahil Enterprises as a High Court approach later distinguished by the Supreme Court, not as a universal rule.
- Examine the decision’s reasoning and procedure. Compare the final order’s stated ground and reasoning with the notice, the records and the statutory condition. Any challenge should address the actual decision and applicable procedural requirements rather than relying only on a general claim of bona fides.
- Keep timing issues separate. If the department relies on a return or deadline issue, analyze that provision and the relevant dates independently from whether the supply occurred or the supplier paid tax.
This sequence is an issue-spotting method, not a substitute for responding within the deadlines that apply to a specific notice, assessment or appeal. The case materials summarized here do not establish those deadlines or the procedure for every jurisdiction and procedural posture.
Do not confuse GSTR-2B visibility or deadlines with genuineness
A reader may ask whether ITC that does not appear in GSTR-2B can still be claimed. That question should not be collapsed into the broader question of whether a supply was genuine. A return-related mismatch, the recipient’s evidence of receipt, supplier tax payment under section 16(2)(c), and the statutory time limit are distinct issues. The applicable law and the specific period or claim must be examined before reaching a conclusion; the case decisions discussed above do not establish a blanket answer for every GSTR-2B discrepancy.
GST Council Circular No. 237/31/2024-GST discusses section 16(5) and section 16(6), inserted with retrospective effect from 1 July 2017, and specified extensions to the time limit under section 16(4). Those provisions may matter to claims that would otherwise be time-barred in the circumstances they cover. The circular does not decide whether a supply was genuine or resolve the separate section 16(2)(c) issue.
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Bhandari Scrap Traders settles a significant point: the Supreme Court declined to invalidate or read down section 16(2)(c) in the case before it, and rejected treating a CGST purchaser as equivalent to a purchaser under the different Delhi VAT statutory scheme. It therefore narrows the force of a broad argument that a bona fide buyer can never lose ITC because of supplier default.
It does not turn every supplier default into proof of a fake supply, decide every possible factual dispute about receipt or buyer conduct, or prescribe a single verification procedure for officers. Nor does it make invoices, bank transfers or commercial diligence conclusive. In a contested case, the useful question is not simply “Was the buyer bona fide?” It is which statutory condition is said to fail, what evidence supports that allegation, and how the relevant court decisions apply to the transaction and forum.
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