Retrospective Amendment to CGST Act, 2017 Allows ITC Claims Beyond Previous Time Limits
In a significant judgment, the Karnataka High Court has overturned the rejection of Input Tax Credit (ITC) claims by M/s Abe Security Mechanics Private Limited, due to a recent amendment to the Central Goods and Services Tax Act, 2017 (CGST Act). The court emphasized that the amendment to Section 16(5), effective retrospectively from July 1, 2017, overrides the previous time restrictions under Section 16(4) for availing ITC.
The case revolves around the petition filed by M/s Abe Security Mechanics Private Limited challenging the Order-in-Original dated February 22, 2024, which denied their ITC claims citing delays beyond the prescribed period under Section 16(4) of the CGST Act. The petitioner contended that their returns were filed within the extended timeline provided by the amendment, allowing claims up to November 30, 2021.
The court, presided by Justice S Sunil Dutt Yadav, noted the importance of the non-obstante clause in Section 16(5), which clearly stipulates that notwithstanding anything contained in sub-section (4), ITC claims for invoices or debit notes pertaining to financial years 2017-18 to 2020-21 are valid if filed before the extended deadline.
Acknowledging the retrospective effect of the amendment introduced through the Finance (No.2) Act, 2024, the court remitted the matter for re-adjudication in light of the new legal provisions. The judgment underscores the legislative intent to provide relief to taxpayers who had missed earlier deadlines, ensuring their entitlement to ITC claims within the revised timeframe.
The court further directed the respondent authority to reconsider the petitioner's ITC claims, given that the returns were filed within the permissible period under the amended Section 16(5). This decision sets a precedent for similar cases where ITC claims were denied due to timing issues, thereby offering relief to taxpayers affected by the previous restrictions.
This judgment is expected to have far-reaching implications for businesses struggling with denied ITC claims due to the prior statutory deadlines. Legal experts suggest that the retrospective amendment aims to align with the evolving needs of taxpayers, providing them an opportunity to rectify past omissions and avail rightful tax credits.
Bottom line:-
Amendment to Section 16(5) of the CGST Act, 2017, inserted retrospectively, overrides the time restriction under Section 16(4) for availing Input Tax Credit (ITC) for specific financial years. Returns filed within the extended timeline are eligible for ITC claims.
Statutory provision(s): Central Goods and Services Tax Act, 2017 Sections 16(4), 16(5), and 39
