GST Input Tax Credit (ITC) valid even if goods delivered directly to end consumer instead of dealer.

Issue Involved:

The main issue in this case is whether a business dealer can claim Input Tax Credit (ITC) under GST laws even if the goods purchased from the supplier were not physically received by the dealer but directly delivered to the end consumer as per the dealer’s instruction.

Facts of the Case:

M/s Utkrisht Trade Solutions Pvt. Ltd., a company based in Patna, is involved in trading various consumer goods. The company claimed ITC for GST on goods purchased from suppliers. The State GST authorities inspected the company because it had paid its entire GST liability using ITC rather than cash. Authorities questioned the claim of ITC because the goods were not physically delivered to the company but directly to the end customers, as instructed by the dealer.

Authorities issued a demand to recover taxes, asserting the ITC claims were invalid since there was no physical movement of goods to the dealer. The dealer disputed this claim and provided documents showing instructions given to suppliers to deliver directly to customers. However, both the original authority and the appellate authority rejected the dealer’s arguments and upheld the tax demand.

Arguments of Petitioner:

The dealer argued that under GST laws, physical delivery of goods to the dealer is not mandatory. The dealer had clearly instructed the supplier to deliver goods directly to the end consumer to simplify logistics. Documents proving this arrangement were provided, demonstrating compliance with all necessary GST rules. Additionally, the dealer confirmed that tax was paid to the supplier, who had duly deposited it with the government.

Arguments of Respondents:

The state tax authorities argued that GST rules require physical movement of goods to the dealer to claim ITC. They stated that there was no explicit agreement or documented proof showing goods were delivered directly to the end consumer by the supplier at the dealer’s request. Thus, the claim for ITC was invalid.

Court's Conclusion:

The Court concluded that under GST law, specifically Section 16(2)(b), physical receipt of goods by the dealer is not mandatory if there is a documented arrangement where goods are directly delivered to the end customer by the supplier. The Court found that authorities did not adequately examine the provided documents and arrangements between the dealer, supplier, and end consumer.

The Court set aside the earlier decisions by the GST authorities and instructed them to review the case again. Authorities must verify if there was a clear arrangement and documented instructions provided by the dealer for direct delivery from the supplier to the end consumer. If these documents confirm such arrangements, the dealer is entitled to claim ITC. The authorities must complete this review and issue a clear, detailed order within six months.

GST Case Law Sane Retails Private Limited Versus The State of Bihar

Citation-2025 TAXONATION 721 (PATNA)

CA Yaman Garg

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