Kerala High Court: Buyer Can Claim VAT ITC Even If Seller Defaults on Tax Payment

The Kerala High Court has ruled that a bona fide purchaser can claim Input Tax Credit (ITC) under the Kerala VAT Act if they hold valid tax invoices, even if the seller fails to remit the tax to the government.

Overruling its earlier judgment in C.P. Rasheed v. State of Kerala, the Court clarified that the obligation to pay tax lies with the seller, not the buyer.

The court held that denying ITC to genuine purchasers would be unjust and against the statutory framework, protecting buyers who act in good faith.