Allahabad High Court Examines Constitutional Validity of ITC Restrictions Due to Supplier Defaults

The Hon'ble Allahabad High Court recently took up a critical writ petition in the landmark case of Lohum Materials Private Limited Vs Union of India. The core of this judicial examination revolves around a highly debated issue under the Goods and Services Tax regime: the denial of Input Tax Credit (ITC) to a bona fide purchasing assessee due to the subsequent non-compliance or defaults committed by the supplying dealer.

Introduction to the Dispute

Under the current GST framework, the seamless flow of credit is often disrupted when a supplier fails to deposit the collected tax or file the requisite returns. In this matter, the purchasing assessee approached the High Court challenging the stringent legislative amendments that block their ITC for faults entirely attributable to the supplier. The Court recognized the gravity of the grievance, noting that penalizing an honest recipient for the subsequent actions of a third party raises substantial legal and constitutional questions.