Disallowance of Input Tax Credit Quashed as Returns Were Filed

Disallowance of Input Tax Credit Quashed as Returns Were Filed Within Amending Section 16(5) Timeline

Issue

Whether the disallowance of Input Tax Credit (ITC) for the period October 2017 to March 2018 on the ground of time bar is legally sustainable when the returns were furnished within the timeline prescribed under the amended Section 16(5) of the CGST/SGST Act.

Facts

Period of Dispute: The matter pertains to the period from October 2017 to March 2018.
Filing of Returns: The petitioner, a registered person, furnished the GST returns for the said period between January 2018 and July 2020.
Department Action: The Revenue framed an assessment order under Section 73 (demand proceedings not involving fraud) disallowing ITC on the ground that the returns were not filed within the prescribed time limit.
Legal Challenge: The petitioner challenged the assessment order denying ITC before the Court.

Decision

The returns for the period October 2017 to March 2018 were found to have been submitted within the timeline contemplated by the amended Section 16(5), which enables the availment of credit.
Since the returns fell within the extended statutory timeline, the petitioner was held entitled to claim the input tax credit.
The disallowance in the assessment order premised on time bar was quashed to that extent.
The competent authority was directed to consider and grant the ITC benefit in accordance with law, provided the petitioner was otherwise eligible.
The issue was decided in favour of the assessee.

Key Takeaways

Retrospective Benefit of Section 16(5): ITC cannot be denied on the ground of limitation if the returns for FY 2017-18 through FY 2020-21 were filed within the relaxed timeline introduced under Section 16(5).
Quashing of Time-Barred Disallowances: Assessment orders passed under Section 73 disallowing ITC solely due to delayed return filing are unsustainable if compliant with the amended Section 16(5) statutory window.
Conditional Grant of Relief: While the time-bar hurdle is removed under Section 16(5), actual credit allowance remains subject to fulfilling other substantive eligibility criteria under the GST framework.

HIGH COURT OF KERALA

Ganesh Kumar Gopalan

State Tax Officer

ZIYAD RAHMAN A.A., J.

WP (C) NO. 12704 OF 2026

MARCH 31, 2026

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

JUDGMENT

1. This writ petition is submitted by the petitioner being aggrieved by Ext.P1 order of assessment passed under Section 73 of the CGST Act. One of the findings in the Ext.P1 order is that the petitioner is not entitled to input tax credit pertaining to the months from October 2017 to March 2018, as the petitioner failed to submit the returns within the period stipulated under Section 16(4). Even though the petitioner submitted an appeal against Ext.P1 order, the same was withdrawn by the petitioner, as evidenced by Ext.P6 order.

2. According to the petitioner, the appeal was withdrawn in view of the introduction of Section 16(5) of the Act that enables the petitioner to claim the input tax credit pertaining to the relevant months, as the petitioner submitted the returns before the cut off date contemplated under the said provision. As per Section 16(5) of the Act, in case the taxpayer is furnishing the returns on or before 30^th November 2021, such taxpayer would be entitled to claim the input tax credit irrespective of the time limit contemplated under Section 16(4).

3. After considering all relevant aspects, I find merits in the said submission, as it is discernible from Ext.P1 order that the petitioner had submitted the returns for the period from October 2017 to March 2018, during the period from 31.01.2018 to 14.07.2020. Thus, it is evident that all the returns were submitted within the time stipulated in Section 16(5). Therefore, the petitioner is entitled to the input tax credit.

In such circumstances, this writ petition is disposed of, quashing Ext.P1 to the extent it declines the input tax credit on the reason of non-filing of the returns within the period stipulated in Section 16(4). The 1^st respondent shall reconsider the matter, to the extent of input tax credit for the reason mentioned above, and grant the benefit under Section 16(5) of the CGST Act to the petitioner in case the petitioner is otherwise entitled to it. It is clarified that the fact that the petitioner had withdrawn an appeal submitted against Ext.P1 as evidenced by Ext.P6 will not preclude the petitioner from pursuing the contention of Section 16(5).