ITC Relief for FY 2018-19 via Retrospective Statutory Amendments

ITC Relief for FY 2018-19 via Retrospective Statutory Amendments

1. The Core Dispute: Belated Filing and Mismatches

The petitioner received a Show Cause Notice (DRC-01) and a subsequent demand order for FY 2018-19. The demand was based on two primary grounds:

• Section 16(4) Violation: ITC was claimed in a belatedly filed GSTR-3B return.

• ITC Mismatch: A discrepancy was noted between the ITC details in GSTR-2A (supplier data) and GSTR-3B (taxpayer’s claim).

Because the petitioner failed to reply to the initial notice, a final demand order was passed. The petitioner then sought a Rectification of the Order.

2. Legal Breakthrough: Insertion of Sections 16(5) and 16(6)

The High Court noted that while the case was pending, the Finance (No. 2) Act, 2024 introduced major amendments with retrospective effect from July 1, 2017.

I. Relief from Section 16(4) Deadlines

The newly inserted Section 16(5) acts as a “non-obstante” clause. It states that for invoices pertaining to FY 2017-18, 2018-19, 2019-20, and 2020-21, a registered person is entitled to take ITC in any return filed up to November 30, 2021.

II. Settlement of the Limitation Issue

Since the statutory intervention explicitly regularized ITC taken after the original deadline (provided it was filed by Nov 30, 2021), the court held that the issue of “belated availing of ITC” is now settled in favor of the assessee.

3. The Ruling: Remand for ITC Mismatch Verification

While the limitation issue was resolved by law, the factual dispute regarding the GSTR-2A vs. GSTR-3B mismatch remained.

• Remand to Original Authority: The court set aside the demand order and remitted the matter back to the adjudicating authority.

• Opportunity of Hearing: The assessee was directed to file a fresh reply to the Show Cause Notice, treating the now-quashed order as an “addendum” to the original notice.

• Substantiation: The petitioner must provide documents (invoices, proof of payment, etc.) to prove the genuineness of the mismatched ITC.

Key Takeaways for Taxpayers

• Retroactive Protection: If your ITC for FY 2018-19 was denied solely because you filed your return late, you are now protected by Section 16(5), provided that return was filed before Nov 30, 2021.

• Rectification vs. Appeal: As per CBIC Circular No. 237/31/2024/GST, you can file a Rectification Application on the GST portal to fix orders that disallowed ITC under Section 16(4).

• Mismatch Documentation: For mismatches, always keep a reconciliation statement and communication from suppliers ready to prove that the tax was indeed paid to the government.