GST ITC Reversal: Madras High Court Applies Section 16(5) Relief, Orders Refund to Business Proprietor [Read Order]
The GST Department has been restrained from initiating any further proceedings on this issue and directed to defreeze the petitioner’s bank account if it had been frozen in execution of the impugned demand
Relief Orders Refund to Business Proprietor
Relief Orders Refund to Business Proprietor
The Madras High Court has quashed the input tax credit ( ITC ) reversal order passed against a sole proprietor directing the GST ( Goods and Services Tax ) to issue refunds if any amount is recovered.
The input tax credit of the petitioner, Rajkumar Josephshine was reversed by the department stating limitation under Section 16(4) of the Central Goods and Services Tax Act, 2017 (CGST Act) and demanded additional tax, penalty, and interest.
The petitioner’s counsel, Adv. R.Krishnamurthy, by asserting that the GSTR-3B returns were filed after the statutory deadline, the petitioner challenged the assessment order dated February 27, 2025, which rejected the ITC claim.
The issue focused on whether the petitioner's circumstances would benefit from the recently added Section 16(5) of the CGST Act, which retroactively extended the deadline for claiming ITC for FYs 2017-18 to 2020-21.
While hearing the writ petition, Justice Krishnan Ramasamy noted that the issue had already been settled by a common order dated 17th October 2024 in a batch of similar writ petitions. In that order, the Court had observed that numerous taxpayers, due to COVID-related hardships, financial constraints, or other genuine difficulties, could not file their returns within the original time limits.
The GST Council in its 53rd meeting, had recommended extending the ITC claim deadline up to 30th November 2021 for the relevant financial years. The Parliament gave effect to this relief through the Finance Act (No.2) of 2024, which inserted sub-section (5) in Section 16 with retrospective effect from 1st July 2017.
The High Court ruled that the petitioner was entitled to the benefit of Section 16(5). Accordingly, the Court quashed the impugned order to the extent it denied the ITC claim solely on limitation grounds.
The GST Department has been restrained from initiating any further proceedings on this issue and directed to defreeze the petitioner’s bank account if it had been frozen in execution of the impugned demand.
Moreover, the Court directed that any tax amounts recovered based on the quashed assessment whether from the cash ledger or credit ledger must be refunded to the petitioner.
Alternatively, if such amounts have been re-credited to the ledger, the petitioner is permitted to utilise them to discharge future tax liabilities.
The order also clarified that the Department retains the right to proceed afresh if there are other grounds, such as wrong or excess availment or fake ITC claims, unrelated to the limitation issue.
Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
