India GST Department Denied Secured Creditor Status in Insolvency Case, While Section 16(2)(c) Faces Judicial Scrutiny

The National Company Law Appellate Tribunal (NCLAT) ruled on 30 June 2026 that the GST Department’s claim for secured creditor status under Section 82 of the Central Goods and Services Tax (CGST) Act could not override the priority scheme of the Insolvency and Bankruptcy Code. In the Besto Tradelink Ltd. case, the department’s claim of roughly Rs 83 million was treated as an unsecured operational debt, and the resolution plan approved on 1 February 2024 left the claim unchanged.

Separate legal analysis highlights ongoing challenges to Section 16(2)(c) of the CGST Act, which ties eligibility for Input Tax Credit (ITC) to the supplier’s actual tax payment. Courts across India—including the Allahabad, Tripura, and Delhi High Courts—have debated protection for bona‑fide purchasers, while the Gujarat High Court upheld the provision’s constitutional validity. The Supreme Court later dismissed a Special Leave Petition against that decision, leaving the judicial split unresolved.