Time Limit u/s 16(4) Cannot Override Grace Period u/s 16(5) of GST for Claiming ITC: Kerala HC [Read Order]

In a recent judgement examining the interplay of limitation periods under the GST regime, the High Court of Kerala permitted a writ petition and ruled that the limitation period specified under Section 16(4) of the CGST Act to claim InputTax Credit (ITC) cannot supersede the grace period granted under Section 16(5), setting aside an order that refused credit to a taxpayer who filed within the extended time frame.

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The petition has been filed by M/s. Deepam Palm Dish challenging an order given by the State Tax Officer denying the Input Tax Credit (ITC) claimed by the petitioner for the tax periods of April 2018 and March 2019.

The controversy arose when the department issued an order under Section 73 of the CGST Act refusing the petitioner’s claim of ITC. The denial was because the petitioner had failed to file the concerned returns within the time limit specified under Section 16(4) of the CGST Act.

Dissatisfied with this, the petitioner moved the High Court stating that it should be entitled to the benefit of the credit. The petitioner’s stand was based on Section 16(5) of the CGST Act, which fixes a precise cut-off date – November 30, 2021 – for filing returns and taking credit of prior transitional periods. The petitioner stated that he was entitled to the credit because the returns were filed in February 2021, far before the deadline.

Justice Ziyad Rahman A.A. perused the record and accepted the submission of the petitioner. The Court noted that the impugned order recorded that the returns for the month of April 2018 and March 2019 were filed on February 15, 2021 and February 27, 2021 respectively. Clearly these dates were earlier to the deadline of 30.11.2021 provided under Section 16(5).

The Court observed the legislative purpose behind § 16(5) and noted that it contained a ‘non-obstante’ clause. Section 16(5) overrules Section 16(4). The judgement held that if a taxpayer files the return within the precise cut-off date contemplated under Section 16(5) the rigorous timelines prescribed under Section 16(4) become insignificant and cannot be a bar to claim the credit.

The Court therefore held that denial of ITC on the basis of time line prescribed under Section 16(4) alone was not sustainable in law. The assessment order (Ext.P4) was set aside and the writ suit was disposed of. The Court directed the first respondent, the State Tax Officer to evaluate the matter afresh and provide the benefits of Section 16(5) of the CGST Act to the petitioner, if otherwise entitled to it.

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