The Allahabad High Court has issued notice in a writ petition challenging the constitutional validity of certain provisions of the Central Goods and Services Tax (CGST) Act, 2017 that restrict availability of Input Tax Credit (ITC) to purchasing dealers on account of supplier-side defaults. 

A Division Bench comprising Justice Saumitra Dayal Singh and Justice Swarupama Chaturvedi was hearing the writ petition filed by M/s Lohum Materials Private Limited. During the hearing, the Court permitted the petitioner to implead the State of Uttar Pradesh as respondent in the matter. 

The challenge in the petition has been raised against the amended provisions of Sections 16(2)(aa), 16(2)(ba), and 38(2)(b) of the CGST Act, 2017. According to the petitioner, these provisions unfairly prejudice genuine recipients of goods and services even when they have fully complied with their obligations under GST law. 

The petitioner argued before the Court that a purchasing dealer who has paid the entire value of goods or services along with the applicable GST, and who has also received goods against a valid tax invoice, should not be denied the benefit of ITC due to subsequent defaults or irregularities committed by the supplier. It was contended that the statutory framework effectively penalises bona fide recipients for circumstances beyond their control. 

The writ petition specifically asserts that the “primary right” of a registered recipient to avail ITC has been “arbitrarily obstructed” despite full compliance on the recipient’s part. The petitioner further submitted that ITC entitlement cannot be restricted merely because of events that occur after the receipt of goods or services, particularly when the purchasing dealer has no practical mechanism to monitor the supplier’s tax compliance in real time. 

After hearing counsel appearing for the petitioner, the Union of India, the State authorities, and CGST authorities, the Court observed that the matter requires consideration. Consequently, the Bench issued notice to the Attorney General of India as well as the Advocate General of Uttar Pradesh. 

The Revenue sought time to file its counter affidavit, which was granted by the Court. The Bench granted four weeks’ time to the respondents to file their replies and two weeks thereafter to the petitioner to file a rejoinder affidavit. 

The matter has now been directed to be listed in the week commencing July 13, 2026. The Court also clarified that the prayer for interim stay would be considered after exchange of affidavits between the parties. 

Case Details

Case Title: M/S Lohum Materials Private Limited Versus UOI

Case No.: WRIT TAX No. – 2021 of 2026

Date: 04/05/2026

Counsel For Petitioner: Pooja Talwar

Counsel For Respondent: Amit Mahajan, A.S.G.I.