GST Return Filing u/s 16(5) Timeline Makes S 16(4) Time Bar Lose Significance: Kerala HC Orders Reconsideration of ITC Claim [Read Order]

The Kerala High Court in a recent case has ruled that the statutory timeline introduced under Section 16(5) of the CentralGoods and Services Tax Act (CGST) overrides the earlier time restriction contained in Section 16(4), thereby entitling taxpayers to input tax credit (ITC) if they filed their returns before 30 November 2021.

The judgment came in a writ petition filed by Pazhassi Motors, a registered dealer under the CGST/KGST Acts, challenging an assessment order that denied ITC for FY 2018–19 on the ground that the relevant returns were filed belatedly.

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The assessing authority had rejected the ITC claim solely by invoking Section 16(4), which prescribes the last date for availing ITC linked to the filing of annual returns.

The petitioner argued that this position was no longer tenable after the introduction of Section 16(5) through the FinanceAct, 2024. Section 16(5), which begins with a non‑obstante clause, allows ITC for past periods provided the taxpayer filed the pending returns on or before 30 November 2021.

The petitioner had filed all relevant returns within this extended statutory window and therefore claimed entitlement to ITC notwithstanding the earlier time bar.

The State opposed the writ petition by pointing out that the petitioner had previously filed W.P.(C) No. 31219/2022 challenging the constitutional validity of Section 16(4), and that challenge had been dismissed by the High Court in June 2024.

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According to the State, the petitioner could not now seek relief without first seeking modification or review of the earlier judgment. The Government Pleader argued that the earlier dismissal operated as a bar to the present proceedings.

Justice Ziyad Rahman AA rejected this objection, holding that the introduction of Section 16(5) created a fresh statutory right and a fresh cause of action. The Court observed that Section 16(5) was enacted after the earlier judgment and specifically begins with the phrase “notwithstanding anything contained in sub‑section (4).”

This legislative formulation makes it clear that the new provision overrides the earlier time limit and must be applied independently. The Court emphasised that Section 16(5) imposes only one condition: the filing of returns before 30 November 2021. Once this condition is satisfied, the time bar under Section 16(4) “loses its significance.”

The Court further noted that Section 16(5) does not impose any additional restrictions or qualifications beyond the filing deadline. Therefore, if the taxpayer has complied with the statutory cut‑off date, the denial of ITC solely based on Section 16(4) is unsustainable.

The Court held that the assessing authority had failed to consider the effect of the newly introduced provision and had mechanically applied the earlier time bar.

In light of these findings, the High Court quashed the assessment order and directed the State Tax Officer to reconsider the matter afresh. The officer must grant the benefit of Section 16(5) if the petitioner is otherwise eligible and must provide an opportunity of hearing before passing fresh orders.

The Court clarified that the earlier dismissal of the constitutional challenge to Section 16(4) does not preclude the petitioner from invoking the subsequently enacted Section 16(5).

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