[Opinion] Question of Time | How To Redirect Section 16(4) CGST Act

Sudhir Kumar Arora – [2024] 158 taxmann.com 699 (Article)

A key observation of various courts while dismissing the writ petition was that ITC is not a vested right under the statutory scheme of things, it is merely a benefit provided under the Act, Section 16(4) of the CGST ACT which prescribes a time limit to avail the Input Tax Credit.

Presently for the year 2018-19 under ASMT-10 or under Show Cause Notice for demand and recovery of amounting ITC after the due date of availment under section 16(4) along with Penalty under Section-73(1), imposition of Interest under section-50 and 50(3) & Imposition of Late Fees under section-4 CGST AND SGST Act,2017 under compliance of above is being taken into consideration by the GST department as the part of the process and same time the taxpayers and the tax advisors associated with taxpayers have been on the lookout.

Sub section 2 of section 16 starts with a clause ‘Notwithstanding anything contained in this section …….”, this sub section has an overriding power on the other provisions of this section including sub section (4), input tax credit can be taken if the certain conditions are fulfilled, which is :

i. Recipient is in possession of the tax invoice or debit note.

ii. The supplier has furnished the details of tax invoice or debit note in the statement of outward supplies, that is GSTR-1 and is appearing in GSTR-2B of the recipient.

iii. The recipient has received the goods or services.

iv. The supplier has paid the tax to the Government.

v. The recipient has filed their returns.

A basic interpretation of law gives taxpayer the right to take input tax credit without any limit or time frame In the case of ALD Automotive (P.) Ltd. v. CTO [2018] 91 taxmann.com 475/254 Taxman 233 (Bom.) Supreme court held that the input tax credit is in the nature of benefit/concession extended to dealers under the statutory scheme. The condition under which input tax credit is to be enumerated in section 19 under it is accepted.

If a taxpayers has not filed their tax return GST-3B within the stipulated time frame and has filed it after the period specified under section 16(4) for example in Financial year 2018-19 it was 20.10.2019, the ITC claimed as is being disallowed. The central issue revolved around the denial of ITC due to late filing under Section 16(4) of the CGST Act.

Whether the disallowment of ITC was justified based on the taxpayer further whether the statutory time limit under Section 16(4) of the CGST Act overrides the entitlement provisions in section 16(2).

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