by Mr. R.SRIVATSAN, IRS, NACIN, Chennai
GST UPDATEZ ON 27-11-2024: The Honorable High Court of Madras in its judgement under W.P.No.25081 of 2023 in the case of Sri Ganapathi Pandi Industries vs The Assistant Commissioner (State Tax) (FAC), Chennai North Division, has allowed a batch of writ petitions relating to delayed availability of ITC under GST, based on the recently inserted provisions of 16(5) of the CGST Act 2017.
The case involved a series of writ petitions challenging orders by the GST Department denying the benefits of Input Tax Credit on limitations of time under Section 16(4) of the CGST Act 2017.
The Petitioners separately in various writs, all registered GST taxpayers, sought relief against the demand for reversal of Input Tax Credit (ITC), along with penalties and interest imposed due to the delay in filing GSTR-3B returns for FYs 2017-18 to 2020-21. The delay was largely attributed to hardships during the COVID-19 pandemic.
If one can recollect, in a Key Development the 53rd GST Council Meeting recommended insertion of new provisions allowing extended timelines for availing the ITC for which Section 16(5) and Section 16(6) of the CGST Act, 2017, were introduced through the Finance Act (No. 2) of 2024, with retrospective effect from July 1, 2017. The amendments allow taxpayers to claim ITC for the specified financial years until November 30, 2021.
The impugned orders of the Department involved in directing the registered Taxpayers for reversing ITC claims solely based on the time deadline under Section 16(4), of the CGST Act 2017, were deemed unsustainable by the Honorable High Court, in light of the retrospective amendment.
However, for cases involving issues beyond delayed ITC (e.g., reconciliation discrepancies, excess claims, or fake ITC, etc.,), the GST Department retains the right to act in accordance with the law.
The Honorable Court held that the orders denying the ITC on limitations of time under Section 16(4) of the CGST Act were not sustainable and Orders reversing ITC claims due to delays under Section 16(4) were quashed, consequent upon new provisions of Section 16(5) & 16(6) of the CGST Act 2017.
The Petitioners’ bank accounts frozen under these orders were directed to be defreezed immediately and any tax amounts already recovered should be refunded or adjusted against future tax payments.
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For taxpayers, the important consequences due to this amendment under GST Law is that Taxpayers who missed earlier ITC deadlines can now claim ITC retrospectively up to the new deadline for the specified FY and provides financial relief for businesses affected by prior ITC denials.
For the Department, it must implement the High Court order by reversing the demands, penalties and interest imposed due to delayed ITC claims, though it retains the ability to investigate fraudulent or incorrect ITC claims unrelated to the time-bar issue. The GST Department will need to align its systems and procedures to reflect the retrospective amendment and ensure consistent application of the new deadlines.
The decision establishes a precedent for Similar Cases with clarity on the applicability of retrospective amendments, benefiting other taxpayers facing similar issues.
The bottom line is that the High Court’s judgment underscores the need for a balance between strict compliance and genuine taxpayer challenges, especially during extraordinary circumstances like the COVID-19 pandemic.
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