Section 155 of CGST Act 2017 — Burden of Proof

Section 155 of CGST explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.

Section 155 of the CGST Act, 2017 provides that where any person claims that he is eligible for input tax credit under the Act, the burden of proving such eligibility of that credit lies on that person. In other words, the taxpayer claiming ITC — not the department — must establish that all the conditions for the credit are satisfied.

What Section 155 Says — In Plain English

Section 155 is a concise but powerful rule of evidence. It reverses the general presumption and squarely places the onus on the claimant: where a person claims eligibility for input tax credit, the burden of proving that eligibility lies on that person. Practically, this means the taxpayer, not the department, must produce documents and evidence showing that the ITC conditions under Section 16 are met — a valid tax invoice or debit note, receipt of goods or services, tax actually paid to the Government, filing of returns, and the supplier having reported the supply. If the taxpayer cannot substantiate these conditions, the credit can be denied and recovered with interest and, where applicable, penalty. Because ITC directly reduces the tax reaching the exchequer, the law insists it be allowed only where properly earned and provable.

Clause / Sub-section Breakdown

• Scope of the rule: Applies wherever a person claims eligibility for input tax credit.
• Who bears the burden: The person making the claim — the recipient/taxpayer.
• What must be proved: That the credit is eligible, i.e., the Section 16 conditions are satisfied.
• Consequence of failure: The credit may be disallowed and recovered under Sections 73/74.

Applicability & Scope

• When ITC availed is questioned during scrutiny, audit or investigation.
• In demand proceedings under Sections 73 and 74 alleging wrongly availed or ineligible credit.
• Whenever a registered person seeks to defend a credit claim before any GST authority or tribunal.
• Applies to the person claiming the credit regardless of any default by the supplier.

Worked Examples

Example 1 — Supplier non-reporting. A manufacturer avails ITC of ₹5,00,000 on inputs. During scrutiny, the officer finds the supplier did not report the corresponding outward supply and no tax appears to have reached the Government. Under Section 155, the manufacturer bears the burden of proving eligibility. To retain the credit, it must produce the tax invoice, proof of receipt of goods (e-way bills, delivery records), evidence of payment to the supplier, and reconciliation with the auto-populated GSTR-2B. If this evidence is insufficient, the department can disallow the ₹5,00,000 and demand it with interest.

Example 2 — Services credit. A company claims ITC of ₹1,20,000 on consultancy services but keeps only the invoice, with no proof the services were actually received or used for business. Because the burden is on the company, the bare invoice may not be enough; without evidence of receipt and business use, the credit can be denied under Section 155 read with Section 16.

Step-by-Step in Practice

1. The department questions a specific credit during scrutiny, audit or investigation. 2. The taxpayer is asked to substantiate the claim. 3. The taxpayer assembles the invoice/debit note, proof of receipt of goods or services, proof of tax paid, payment evidence and GSTR-2B reconciliation. 4. If the conditions of Section 16 are demonstrated, the credit stands. 5. If not, the credit is disallowed and recovered under Section 73 or 74.

Common Mistakes & Practical Notes

• Relying on the invoice alone without proof of receipt, payment and tax reaching the Government.
• Not reconciling books with GSTR-2B regularly, so claims cannot be substantiated later.
• Assuming the department must disprove the claim — the onus is on the taxpayer.
• Poor record-keeping under Section 35, which is a frequent cause of disallowance in audits.

Related Sections

Section 155 directly supports the input tax credit framework in Section 16 (eligibility and conditions) and Section 17 (apportionment and blocked credits). It is invoked in demand and recovery proceedings under Sections 73 and 74, and during scrutiny under Section 61 and audit under Sections 65 and 66. The documentary requirements it presumes are set out in Section 31 (tax invoice) and the return provisions in Sections 37 and 39. Because the taxpayer must prove eligibility, robust record-keeping under Section 35 is essential.

Recent Amendments & Context

The text of Section 155 has stayed constant, but its practical weight has intensified as ITC conditions tightened — notably the insertion of Section 16(2)(aa), which ties credit to the supplier actually reporting the invoice in GSTR-1/IFF so that it reflects in the recipient's GSTR-2B. As matching became stricter and fake-invoice enforcement expanded, the burden under Section 155 increasingly turns on whether the taxpayer can show the transaction was genuine and the tax reached the Government. In the Chapter XXI confidentiality context, Section 158A (notified 1 October 2023) now lets a taxpayer consent to share verified GST data with lenders and account aggregators — the same underlying records that help discharge the burden of proving ITC eligibility.