The GST Council may protect genuine buyers from losing input tax credit after supplier tax defaults. The proposal could reach the Council’s 57th meeting on October 7 in New Delhi. 

Sources told ANI that the measure would protect compliant businesses from supplier failures. The proposal would shift tax recovery toward suppliers instead of penalizing genuine buyers. 

The protection could cover buyers holding valid invoices and receiving goods or services. Buyers would also need to prove full payment, including GST, through approved payment channels. 

The proposal follows concerns over disputes linked to supplier compliance and denied input tax credit. The Council could also consider wider ITC eligibility across several business expenses.

Under the proposed framework, buyers could retain their ITC when suppliers fail to deposit collected GST. Tax authorities would instead pursue recovery against suppliers responsible for the unpaid tax. The approach could reduce compliance risks for companies working with smaller or newer vendors. 

The protection would not cover buyers who knowingly participate in fraudulent or collusive transactions. Tax authorities could still act against businesses that participate in fraudulent ITC claims. Improved invoice matching could also help identify suspicious transactions closer to their source. 

The issue has created prolonged litigation under existing GST rules for compliant businesses. Supplier-linked ITC disputes can also increase costs when companies lose legitimate tax credits. Recent court developments have increased scrutiny around automatic denial of credits for supplier defaults. 

The Council may separately consider broader ITC coverage for employee insurance and outdoor catering. Other proposals reportedly include telecom towers, external pipelines and certain legally destroyed expired goods. Vehicle-related ITC could also expand to vehicles carrying up to 13 people, including drivers. 

The proposed vehicle relief could cover insurance, servicing, repairs, maintenance, leasing, renting and hiring expenses. Several existing exclusions would remain, including food, club memberships and personal consumption expenses. Works contracts, immovable property construction and corporate social responsibility spending could also remain excluded. 

The proposal still requires final approval from the GST Council before becoming policy. The October 7 meeting could therefore mark an important step toward stronger ITC protection. The broader reforms could also make GST compliance more predictable for businesses across sectors.

Also Read: Gross GST Collections Rise 3% in February, Growth Moderates