ITC Denial Quashed as Section 16(5) Overrides Original Limitation Period for FY 2017-18 to 2020-21

1. The Core Dispute: Statutory Deadlines vs. Retrospective Relief

The petitioner’s Input Tax Credit (ITC) claims for late 2019 and early 2020 were originally rejected. The tax authorities argued that the returns (filed in December 2020 and November 2021) were submitted beyond the time limit set by Section 16(4).

The Original Rule (Section 16(4)): Generally restricts ITC claims to the deadline of November following the end of the financial year.
The New Relief (Section 16(5)): Introduced via the Finance Act (No. 2) of 2024 (effective retrospectively from July 1, 2017), this provision extends the deadline specifically for the initial years of GST (FY 2017-18 to 2020-21).

2. Legal Analysis: The Overriding Power of “Notwithstanding”

The High Court emphasized that the legislature introduced Section 16(5) specifically to provide relief to taxpayers who faced difficulties during the early transition to GST and the COVID-19 pandemic.

I. Overriding Effect

The court noted that Section 16(5) begins with the non-obstante clause: “Notwithstanding anything contained in sub-section (4).”

Significance: This means that if a taxpayer meets the conditions of Section 16(5), any restriction or deadline mentioned in Section 16(4) becomes legally irrelevant.

II. The November 30, 2021 Cut-off

The only primary condition under Section 16(5) for the relevant financial years is that the return (GSTR-3B) must have been filed on or before November 30, 2021.

Fact of the Case: Since the petitioner filed their returns on December 28, 2020, and November 18, 2021, they were well within the statutory “amnesty” window created by the amendment.

3. Final Ruling: Statutory Right Cannot Be Denied

The Court held that the benefit under Section 16(5) is a statutory right conferred by the Parliament. Even if there were prior lapses or if the petitioner had unsuccessfully challenged Section 16(4) earlier, the new provision creates a fresh cause of action.

Verdict: The orders rejecting the ITC were quashed.
Outcome: The petitioner is entitled to the ITC benefit, provided they are otherwise eligible on merits.

Key Takeaways for Taxpayers

Check Your Filing Dates: If your ITC for FY 2017-18 to 2020-21 was denied due to a delay, check if you filed that GSTR-3B before November 30, 2021. If yes, you are legally entitled to the credit.
Rectification Procedure: If you have an existing adverse order, you may apply for rectification or appeal citing this retrospective amendment and CBIC Circular No. 237/31/2024-GST.
Fresh Cause of Action: This ruling confirms that Section 16(5) is a powerful, independent tool that overrides previous denials based on Section 16(4).

HIGH COURT OF KERALA

Malabar Plaza Residency & Restaurant

Assistant State Tax Officer^*

ZIYAD RAHMAN A.A., J.

WP (C) NO. 40219 OF 2025

NOVEMBER 6, 2025

Lijo Varghese, K.N. Sreekumaran and P.J.Anilkumar, Advs. for the Petitioner. Smt. Reshmitha R Chandran, SR GP for the Respondent.

JUDGMENT

1. The petitioner is a registered taxpayer under the provisions of the CGST and KSGST Act 2017. The petitioner has approached this Court being aggrieved by the recovery proceedings initiated against the petitioner based on Ext.P2 order passed under Section 73 of the CGST Act. In Ext.P2, the Input Tax Credit claimed by the petitioner was rejected on the reason that the returns pertaining to the months of December 2019 to March 2020 were submitted beyond the statutory time limit contemplated under Section 16(4) of the Act. The petitioner challenges the said order mainly on the ground that as per the amendment brought to the CGST Act, Section 16(5) was introduced with effect from 16.08.2024, and as per the said provision, in cases where, the returns were submitted on or before 30^th November 2021, the Input Tax Credit can be granted to the parties concerned.

2. I have heard Sri.K.N Sreekumaran, the learned counsel for the petitioner and Smt. Reshmitha. R. Chandran, the learned Government Pleader for the respondents.

3. The learned Government Pleader pointed out serious lapses on the part of the petitioner in pursuing his remedies, as immediately after issuance of Ext.P2 order, the petitioner was intimated on 22^nd March 2025 to file an application to rectify the order but the petitioner did not respond. Therefore, it is pointed out that, the relief sought by the petitioner need not be considered.

4. However, I am of the view that even if there are lapses on the part of the petitioner, it is not necessary to deny the relief sought by the petitioner merely on the aforesaid reason. This is particularly because, as far as the benefits available to the petitioner under Section 16(5) of the CGST Act is concerned, it is a statutory right, available to him, as the petitioner had already submitted its return within the cut off date contemplated under Section 16(5) of the Act. The dates of filing of the returns are discernible from Ext.P2 order itself, and the same would indicate that all the returns pertaining to the relevant months were submitted either on 28.12.2020 or 18.11.2021. Besides, Section 16(5) starts with the words, “Notwithstanding anything contained in Sub-Section (4)”. Therefore, in the light of the stipulation contained in Section 16(5) the cut off date fixed for filing the returns in Section 16(4) is not at all relevant. Therefore, I am inclined to accept the contentions raised by the petitioner even though the same was opposed by the learned Government Pleader.

5. Accordingly, this writ petition is disposed of, quashing Ext.P2, with a direction to the 1^st respondent, to reconsider the matter after giving the petitioner an opportunity for being heard and grant the benefit of Section 16(5) of CGST Act to the petitioner, if the petitioner is otherwise eligible for the same.