GST
Purchases paid in cash from a suspect supplier
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Facts
Yes, cash payments are harder to prove and are often treated as a red flag. Bank payments are strong evidence that tax was paid to the supplier.
Provisions and law
- Sec 155, CGST Act 2017The person who claims ITC has the burden of proving that the claim is genuine.
- Sec 16(2), CGST Act 2017ITC is allowed only with a tax invoice, receipt of goods or services, tax actually paid to the Government by the supplier, and the recipient's own return filed.
Analysis
For cash bills, collect receipts signed by the supplier, cash book entries, and proof of goods movement and use. Separate cash invoices from bank-paid ones in your reply, so the stronger ones are not mixed with weak ones. Income-tax rules also limit cash payments, so check that side too. Going forward, pay suppliers through bank only.
Conclusion
- List cash-paid invoices separately.
- Collect receipts, cash book and movement proof for them.
- Present bank-paid invoices as the core of your defence.
- Pay all suppliers by bank in future.
A Savvy can do this for you
Reply to fake ITC notice when a supplier is found non-existent, Sec 16(2)(c)
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