Retrospective Insertion of Section 16(5) Validates Input Tax Credit

Retrospective Insertion of Section 16(5) Validates Input Tax Credit Filed Before November 30, 2021

Issue

Whether the disallowance of Input Tax Credit (ITC) under Section 16(4) of the CGST/TNGST Act for a belated return filed on 30.10.2019 for FY 2018-19 remains sustainable following the retrospective insertion of Section 16(5) via Act 15 of 2024.

Facts

Assessee Status: The petitioner is a registered tax person under the GST regime.
Return Filing: The return for the month of March 2019 (FY 2018-19) was filed on 30.10.2019 along with late fees, past the prescribed due date of 20.10.2019.
Departmental Action: The respondent issued an order under Section 73 read with Section 16(4) disallowing the ITC claimed and imposing interest and penalty due to the delayed filing.
Legislative Amendment: Subsequent to the order, Section 16(5) was inserted retrospectively into the CGST Act by Act 15 of 2024, extending the ITC claim time limit for FYs 2017-18 to 2020-21 up to 30.11.2021.
Assessee’s Stand: The petitioner contended that since the return was filed on 30.10.2019, it safely fell within the extended retrospective cut-off date of 30.11.2021.

Decision

Statutory Intent: Parliament specifically enacted Section 16(5) to enable registered dealers who had filed returns for FYs 2017-18 through 2020-21 before 30.11.2021 to avail ITC.
Administrative Alignment: Notification No. 17/2024-CT and Circular No. 237/31/2024 were duly issued to give administrative effect to this retrospective benefit.
Timeliness Covered: As the return was submitted on 30.10.2019, the claim directly falls within the extended limitation period prescribed under Section 16(5).
Order Quashed: The disallowance order based on Section 16(4) limitation was rendered legally unsustainable and was set aside in favour of the assessee, subject to meeting other statutory requirements.

Key Takeaways

Overriding Effect: The retrospective insertion of Section 16(5) overrides time-bar disallowances previously levied under Section 16(4) for FYs 2017-18 to 2020-21.
Effective Cut-off: Returns filed on or before 30.11.2021 for the covered financial years are fully eligible for ITC benefits despite being submitted past their original monthly due dates.
Relief for Assessees: Taxpayers facing Section 73 demand orders or pending litigation solely grounded on time-barred ITC claims for these periods can seek relief under Section 16(5), provided other underlying statutory conditions are met.

Issue

Facts

Assessee Status: The petitioner is a registered tax person under the GST regime.
Return Filing: The return for the month of March 2019 (FY 2018-19) was filed on 30.10.2019 along with late fees, past the prescribed due date of 20.10.2019.
Departmental Action: The respondent issued an order under Section 73 read with Section 16(4) disallowing the ITC claimed and imposing interest and penalty due to the delayed filing.
Legislative Amendment: Subsequent to the order, Section 16(5) was inserted retrospectively into the CGST Act by Act 15 of 2024, extending the ITC claim time limit for FYs 2017-18 to 2020-21 up to 30.11.2021.
Assessee’s Stand: The petitioner contended that since the return was filed on 30.10.2019, it safely fell within the extended retrospective cut-off date of 30.11.2021.

Decision

Statutory Intent: Parliament specifically enacted Section 16(5) to enable registered dealers who had filed returns for FYs 2017-18 through 2020-21 before 30.11.2021 to avail ITC.
Administrative Alignment: Notification No. 17/2024-CT and Circular No. 237/31/2024 were duly issued to give administrative effect to this retrospective benefit.
Timeliness Covered: As the return was submitted on 30.10.2019, the claim directly falls within the extended limitation period prescribed under Section 16(5).
Order Quashed: The disallowance order based on Section 16(4) limitation was rendered legally unsustainable and was set aside in favour of the assessee, subject to meeting other statutory requirements.

Key Takeaways

Overriding Effect: The retrospective insertion of Section 16(5) overrides time-bar disallowances previously levied under Section 16(4) for FYs 2017-18 to 2020-21.
Effective Cut-off: Returns filed on or before 30.11.2021 for the covered financial years are fully eligible for ITC benefits despite being submitted past their original monthly due dates.
Relief for Assessees: Taxpayers facing Section 73 demand orders or pending litigation solely grounded on time-barred ITC claims for these periods can seek relief under Section 16(5), provided other underlying statutory conditions are met.

HIGH COURT OF MADRAS

S. Saravanan

Assistant Commissioner (ST)^*

S. Raveekumar, J.

WP No. 29892 of 2023
WMP Nos. 29509 and 29510 of 2023

AUGUST 12, 2026

R. Swarnavel for the Petitioner. I. Dinesh, AGP (taxes) for the Respondent.

ORDER

1. This Writ Petition has been filed challenging the impugned order passed by the respondent in GSTIN 33ACGPS4598F2Z8 for the Financial Year 2018-2019 reference No. ZD33082313435FK dated 23.08.2023 under Section 73 read with Section 16(4) of the Goods and Service Tax Act.

2. The petitioner is a registered taxable person under the relevant provisions of the Goods and Services Act, 2017. It is the case of the petitioner that the petitioner filed its returns for the month of March 2019 on 30.10.2019, with a delay of ten days from the prescribed due date of 20.10.2019. Though the return was filed belatedly, the same was accompanied by the applicable late fee under Section 47 of the Act. However, the respondent denied the ITC availed by the petitioner in the said return and consequently levied interest and penalty.

3. The learned counsel for the petitioner would submit that sub-sections (5) and (6) of Section 16 were inserted by the Finance (No.2) Act, 2024 (Act 15 of 2024) with retrospective effect, providing relaxation in the time limit prescribed for availment of Input Tax Credit in respect of the financial years 2017-18 to 2020-21. In view of the said amendment, the learned counsel submitted that the case of the petitioner is squarely covered under the extended period.

4. The learned Additional Government Pleader (Taxes) appearing for the respondent does not dispute the above legal position.

5. Heard the learned counsel appearing on either side and perused the records.

6. The issue involved in the Writ Petition relates to the belated filing of claim of the Input Tax Credit in the returns. The petitioner for the month of March 2019, ought to have filed returns on or before 20.10.2019. However, the same was filed on 30.10.2019. In view of the belated returns and the belated claim of ITC, the same was disallowed by the respondent. However, considering the fact that new GST enactment came into force only in 2017 and the fact that the dealers were not accustomed to the procedures, the Parliament, in its wisdom inserted sub-clause (5) to Section 16, enabling the dealer who have filed their returns for financial year 2017-18 to 2020-21 before 30.11.2021, to avail ITC.

7. Section 16(5) of the CGST Act was inserted with retrospective effect from 01.07.2017 by Act 15 of 2024, thereby providing a relaxation in respect of time limit prescribed under Section 16(4) for availment of Input Tax Credit pertaining to the Financial Years 2017-18 to 2020-21. Section 16(5) of the CGST reads as follows:

”Notwithstanding 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 persons shall be entitled to take input tax credit in any return under section 39 which is filed upto the thirtieth day of November, 2021.”

8. In furtherance of the amendment, Notification No.17 of 2024-Central Tax, dated 27.09.2024 and a circular No.237/31/2024-GST, dated 15.10.2024 were also issued.

9. In the present case, the petitioner admittedly filed the relevant return on 30.10.2019, which is well before the extended statutory cut-off date of 30.11.2021 prescribed under Section 16(5). The petitioner is, therefore, entitled to the benefit of the aforesaid retrospective amendment, subject to fulfilment of the other statutory requirements for availment of ITC.

10. This Court, in Sri Ganapathi Pandi Industries v. Asstt. Commissioner (State Tax) (FAC) (Madras)/(W.P.No.25081 of 2024 etc. batch) considered the said issue and passed a detailed order holding that, in view of the retrospective amendment to Section 16 of the Act, the benefit of extended period prescribed under Section 16(5) would be available to eligible registered persons.

11. In view of the aforesaid statutory amendment, the impugned order dated 23.08.2023 cannot be sustained and is liable to be set aside. Accordingly, the impugned order is set aside.

12. Therefore, the Writ Petition is allowed on the following terms:

(i)

The orders impugned is quashed insofar as it relates to the claim made by the petitioner for ITC which is barred by limitation in terms of Section 16(4) of the CGST Act, 2017 but, within the period prescribed in terms of Section 16(5) of the said Act.

(ii)

As a consequence, the respondent-Department is restrained from initiating or continuing with any recovery proceedings against the petitioner by virtue of the impugned order based on the issue of limitation.

(iii)

It is also made clear that if at all, any amount has been recovered from the petitioner based on the impugned assessment order from the cash ledger/credit ledger of the petitioner or through any other mode of recovery prescribed under the Act, the same shall be refunded to them or utilized/adjusted by the petitioner towards payment of future tax.

No costs. Consequently, connected Miscellaneous Petitions are closed.