Kerala High Court Rules Section 16(5) as a Non-Obstante Clause; Allows ITC for FY 2017-21 if Returns Filed by Nov 30, 2021

ISSUE

Whether the denial of Input Tax Credit (ITC) for the period 2018-19, based on the limitation period prescribed under Section 16(4), is sustainable in light of the subsequently introduced Section 16(5), which permits ITC if returns are filed before a specific cut-off date.

FACTS

The Denial: The petitioner claimed Input Tax Credit for the period 2018-19. The authorities declined the claim on the ground that the monthly returns (GSTR-3B) were not submitted within the time stipulated under Section 16(4) of the CGST/KGST Act (i.e., by the due date of September of the following year).
New Provision: The petitioner contended that the Finance (No. 2) Act, 2024 introduced Section 16(5) retrospectively. This section allows taxpayers to avail ITC for FY 2017-18, 2018-19, 2019-20, and 2020-21 if the returns were filed on or before 30th November 2021.
Petitioner’s Stand: Since they had filed their returns before this cut-off date contemplated under Section 16(5), they argued they were entitled to the credit notwithstanding the earlier breach of Section 16(4).

HELD

Non-Obstante Clause: The High Court observed that Section 16(5) begins with the words “Notwithstanding anything contained in sub-section (4)”. This non-obstante clause gives Section 16(5) an overriding effect over Section 16(4).
Limitation Irrelevant: Once a taxpayer satisfies the condition of submitting returns within the extended window (up to 30.11.2021) provided by Section 16(5), the original time limit under Section 16(4) loses its significance.
Fresh Cause of Action: The Court held that Section 16(5) is a separate statutory provision introduced subsequently. It provides a fresh cause of action and a statutory right to the petitioner to claim the relief, even if they had previously failed in challenges against Section 16(4).
Verdict: The impugned order denying ITC was set aside. The Respondents were directed to reconsider the matter and pass fresh orders granting the benefit of Section 16(5). [In Favour of Assessee]

KEY TAKEAWAYS

Retrospective Amnesty: Section 16(5) acts as a legislative amnesty for the initial years of GST (FY 17-18 to 20-21). If you missed the 16(4) deadline but filed your GSTR-3B by 30 Nov 2021, your ITC is safe.
Overriding Effect: The judgment clarifies that officers cannot cite Section 16(4) (the “September deadline”) to reject claims covered by Section 16(5). The “Notwithstanding” clause legally paralyzes the older restriction for these specific years.
Rectification Opportunity: Taxpayers who have suffered adverse orders or are facing notices for these years should immediately cite this judgment and Section 16(5) to seek rectification or dropping of proceedings.

HIGH COURT OF KERALA

Pazhassi Motors

State of Kerala^*

ZIYAD RAHMAN A.A., J.

WP(C) NO. 45451 OF 2025

DECEMBER 4, 2025

Anish P., Akhil Shaji, R. Jaikrishna, Kum. Narayani Harikrishnan, C.S. Arun Shankar and K. Suresh Chandran, Advs. for the Petitioner.

JUDGMENT

1. The petitioner is a registered tax payer under the provisions of the CGST/KGST Act, 2017. The grievance of the petitioner is against Ext.P1 order of assessment pertaining to the year 2018-19, in which the input tax credit claimed by the petitioner was declined. The reason for rejecting the claim was that the petitioner failed to submit the returns pertaining to the months of May 2018 – March 2019 within the period stipulated under Section 16(4) of the CGST Act. The case of the petitioner is that, in view of Section 16(5), which was subsequently introduced in the CGST Act, the petitioner is entitled to get the input tax credit, in view of the fact that the petitioner had submitted the returns pertaining to the relevant period before the cut off date contemplated under Section 16(5) of the Act. It was in these circumstances that this writ petition was submitted.

2. I have heard Sri. Jaikrishna, 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 that even going by the pleadings, the petitioner had earlier submitted a writ petition, which was numbered as W.P.(C.) No.31219/2022, before this Court challenging the constitutional validity of Section 16(4) of the CGST Act, and as per the common judgment dated 04.06.2024, this Court rejected the said contention, and the writ petitions were dismissed. Therefore, it was pointed out that the petitioner cannot claim the relief in this writ petition without seeking the modification in the said judgment either by challenging or seeking review of the same.

4. However, after considering all relevant aspects, I am not inclined to accept the said contention. This is particularly because, the claim now raised by the petitioner is based on a statutory provision that was introduced later, and it specifically provides for input tax credit, subject to the condition that the returns are filed before the 30th day of November, 2021. Apart from the fact that the returns are to be filed within the said cut off date, no other conditions are imposed in Section 16(5), and it is also a relevant aspect to notice that Section 16(5) starts with the wording “notwithstanding anything contained in Subsection 4.” This would indicate that, once the tax payer submits the return within the period stipulated in Section 16(5), the time limit contemplated under Section 16(4) of the CGST loses its significance. Therefore, this being a separate statutory provision subsequently introduced, it amounts to a fresh cause of action for the petitioner to claim the relief sought in this writ petition. Therefore, I find that, the fact that the petitioner had earlier approached this Court challenging Section 16(4) of the CGST Act and got an adverse order, cannot be a reason not to entertain this writ petition.

In such circumstances the petitioner is entitled to the benefit of Section 16(5), and hence an interference is required. Accordingly, this writ petition disposed of quashing Ext. P1, with a direction to the 2nd respondent to reconsider the matter and pass fresh orders, by giving the petitioner an opportunity to be heard. While passing the said order, the benefit of Section 16(5) shall be granted to the petitioner, if the petitioner is otherwise entitled to the same.