Section 16(5) overrides Section 16(4) time-limits for FY 2017-18 to 2020-21 if returns were filed by 30.11.2021.

By | April 23, 2026
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Section 16(5) overrides Section 16(4) time-limits for FY 2017-18 to 2020-21 if returns were filed by 30.11.2021.

The Dispute: The 16(4) Deadlock

The Conflict: For FY 2018-19, the petitioner filed their March 2019 return on 28.10.2019.

  • The Revenue’s Stance: Under the original Section 16(4), the deadline to claim ITC for FY 2018-19 was the due date of the September 2019 return (October 20, 2019). Since the petitioner was late by 8 days, the ITC was rejected by both the Assessing Officer (AO) and the Commissioner (Appeals).

The Legal Shift: While the writ petition was pending, the Parliament inserted Section 16(5) retrospectively from July 1, 2017.

The Judicial Verdict

The High Court ruled in favour of the Assessee, setting aside the previous orders based on these grounds:

1. The Power of “Non-Obstante”

The court noted that Section 16(5) begins with the phrase “Notwithstanding anything contained in sub-section (4)”. This means that for the specific years 2017-18, 2018-19, 2019-20, and 2020-21, the strict deadlines of Section 16(4) are completely suspended.

2. The New “30.11.2021” Deadline

Following CBIC Circular No. 237/31/2024-GST, the court affirmed that as long as the GSTR-3B return for those early years was filed on or before November 30, 2021, the ITC claim is legally valid. Since the petitioner filed in October 2019, they were well within this new “amnesty” window.

3. Remand for Factual Verification Only

The Court set aside the demand but did not grant the refund/credit automatically. It remitted the matter back to the SCN stage with a strict instruction:

  • The Department cannot discuss the limitation (time-bar) issue anymore.

  • The Department can only verify if the petitioner is factually eligible (i.e., do they have the invoices, were the goods received, was tax paid to the government by the supplier).

Key Takeaways for Taxpayers

  • Revival of “Lost” ITC: If you have an Order-in-Original or Appeal pending solely on Section 16(4) grounds for the first four years of GST, this judgment (and the 2024 Act) is your strongest weapon to have that order quashed.

  • Scope of Audit: During the remand/re-verification, be prepared to provide the “Golden Quadrant” of evidence:

    1. Tax Invoices

    2. Payment Proofs (to the supplier within 180 days)

    3. GSTR-2A/2B matching

    4. E-way bills/Delivery notes (to prove receipt of goods)

  • Retrospective Benefit: Even if you have already paid the demand under protest or had it recovered from your cash ledger, you may now be eligible to claim a refund or re-avail the credit under the new Section 16(6) mechanism.

HIGH COURT OF KARNATAKA
Manjunatha Exports
v.
Deputy Commissioner of Central Tax*
S Sunil Dutt Yadav, J.
WRIT PETITION NO. 6883 OF 2026 (T-RES)
MARCH  11, 2026
Venkatesh G., Adv. for the Petitioner. Aravind V. Chavan, Adv. for the Respondent.
ORDER
1. The petitioner has sought for setting aside of the Order-in-Original at Annexure-A as well as the Order-in-Appeal at Annexure-B. The petitioner has also sought for refund of statutory pre-deposit made under Section 107(6) of the Central Goods and Services Tax Act, 2017 (for short ‘CGST Act’).
2. The case made out by the petitioner is that the form GSTR-3B for the month of March-2019 came to be filed online by the petitioner though belatedly on 28.10.2019. It is stated that respondent No.1 has issued show-cause notice, proposing to demand Input Tax Credit (ITC) amounting to Rs.27,21,200/- which allegedly had been availed in contravention of the provision of Section 16(4) of the CGST Act.
3. It is the contention of the petitioner that the Assessing Authority had declined to permit the petitioner to claim ITC on the ground that it was belated in light of Section 16(4) of the CGST Act. It is submitted that by virtue of amendment to Section 16(5), which is a non-obstante clause, the time limit prescribed under Section 16(4) stood relaxed for the years of financial years 2017-18, 2018-19, 2019-20 and 2020-21 till 30th day of November, 2021. Accordingly, it is submitted that by virtue of such amendment to the Finance Act with effect from 01.07.2017, though the appointed date is 27.09.2024, the petitioner is entitled for credit to the ITC availed.
4. Perused the Order-in-Original and Order-in-Appeal. The only ground on which steps were taken to deny ITC claim is that it was claimed beyond the period prescribed under Section 16(4). Section 16(4) and Section 16(5) of the CGST Act reads as hereunder:
“16. Eligibility and conditions for taking input tax credit.
(4) A registered person shall not be entitled to take input tax credit in respect of any invoice or debit note for supply of goods or services or both after the [thirtieth day of November] following the end of financial year to which such invoice or debit note pertains or furnishing of the relevant annual return, whichever is earlier.
(5) Nothwithstanding anything contained in sub-section (4), in respect of an invoice or debit note for supply of goods or services or both pertaining to the Financial Years 2017-18, 2018-19, 2019-20 and 2020-21, the registered person shall be entitled to take input tax credit in any return under section 39 which is filed upto the thirtieth day of November, 2021.”
5. It is pertinent to note that the Central Board of Indirect Taxes and Customs vide Circular No. 237/31/2024-GST dated 15.10.2024, issued to all Principal Chief Commissioners/Chief Commissioners/principal Commissioners/Commissioners of Central Tax (All) and Principal Director General/Directors General (All) has clarified the issues regarding implementation of provisions of sub-section (5) and sub-section (6) in section 16 of CGST Act, 2017. The Circular clarifies that sub-section (5) of Section 16 has been inserted retrospectively with effect from 01.07.2017 vide Finance (No.2) Act, 2024, thereby overriding the earlier time restriction prescribed under sub-section (4) of Section 16 in respect of the financial years 2017-18, 2018-19, 2019-20 and 2020-21. Sub-section (5) to Section 16 was inserted by the Finance (No.2) Act, 2024, with retrospective effect from 01.017.2017. In pursuant thereof, the Ministry of Finance (Department of Revenue) Central Board of Indirect Taxes and Customs, issued Notification No.17/2024-Central Tax, dated 27.09.2024, followed by Circular No. 237/31/2024-GST dated 15.10.2024 providing clarification regarding the implementation of the said provision. The aforesaid legislative development by insertion of sub-section (5) to Section 16 through Finance (No.2) Act 2024, read with the clarification, affirms that claims of Input Tax Credit (ITC) availed through GSTR-3B returns filed up to 30th November 2021 shall be permissible. The relevant extract is reproduced hereunder:
“Reference is invited to sub-section (5) and sub-section (6) of section 16 of the Central Goods & Services Tax Act, 2017 (hereinafter referred to as the “CGST Act”) inserted in section 16 of the CGST Act, with effect from the 1st day of July, 2017, vide section 118 of the Finance (No. 2) Act, 2024, whereby the time limit to avail input tax credit under provisions of sub-section (4) of section 16 of CGST Act has been retrospectively extended in certain specified cases.”
6. It must be noticed that Section 16(5) was inserted by way of an amendment by Finance Act (No.2), 2024. The said clause is a non-obstante clause, as it states, “notwithstanding anything contained in sub-section (4)”. If that were to be so, in light of the petitioner having claimed ITC with respect to the financial year 2018-19, by virtue of Section 16(5), petitioner’s entitlement would be extended till 30.11.2021, whereas the return of the petitioner was filed on 28.10.2019. The return filed is within the extended time prescribed under Section 16(5).
7. In light of the same, the Order-in-Original at Annexure-A as well as the Order-in-Appeal at Annexure-B are set aside. Matter is remitted to the stage of reply to show-cause notice. The petitioner to appear before the respondent No.1 on 15.04.2026.
8. Needless to state, the authority to look into the factual aspects of eligibility of claim of ITC, but not to revisit the permissibility of claiming ITC by virtue of the extended time under Section 16(5) of the CGST Act, in light of the discussion made above. All other contentions are kept open.
Accordingly, petition is disposed of.