• Dated 09^th September, 2024

THE DEADLINE OF 30TH NOVEMBER FOR CLAIMING INPUT TAX CREDIT IS APPLICABLE RETROSPECTIVELY, STARTING FROM 1 JULY 2017: KERALA HC

This Alert provides a summary of a recent judgment passed by the Hon'ble Kerala High Court regarding the constitutional validity of Section 16(2)(c) and Section 16(4) of the Central Goods and Services Tax Act, 2017 (CGST Act), wherein Section 16(2)(c) restricts the input tax credit (ITC) available to the recipient if the supplier has not paid the tax to the government. Meanwhile, Section 16(4) sets a deadline for claiming ITC.

Key observations of the High court are as follows:

1. ITC is a conditional entitlement, governed by specific conditions and restrictions outlined in Sections 16(2) to 16(4) and several High Courts have upheld the constitutional validity of these provisions.
2. The Finance Act, 2022 amended Section 16(4) to extend the deadline for claiming Input Tax Credit (ITC) to 30 November of the following financial year. This procedural change was intended to alleviate taxpayer difficulties and, therefore, should be applied retrospectively.
3. To address genuine ITC claims, the Government issued Circular Nos.183/15/2022-GST dated 27 December 2022 and 193/05/2023-GST dated 17 July 2023 recognizing the challenges faced during the initial rollout of GST. Petitioners who were unable to avail themselves of these benefits can now approach the relevant GST authority within 30 days of the order.
4. Accordingly, for the period from 1 July 2017 to 30 November 2022, if a person has submitted their return for the month of September by 30 November, their claim should be acknowledged.

The Hon'ble High Court of Kerala upheld the constitutional validity of Section 16(2)(c) and 16(4) of CGST Act and concluded that the amendment in Section 16(4) should apply retrospectively.

Our View:

• This ruling is expected to benefit taxpayers challenging ITC denials for claims made between 20 October and 30 November of the subsequent financial year.
• The High Court held that the revised deadline of 30 November applies retroactively. However, this is only applicable in cases where the return for September is filed by 30 November. After the amendment to Section 16(4), credits can also be claimed in the return for October, provided it is filed by 30 November.

Prepared By: Sneha Nandi
Reviewed By: Jaidip Basu

M/S M.TRADE LINKS&Ors. vs. UNION OF INDIA [WP(C) NO. 31559 OF 2019]