ITC Cannot Be Denied When Returns Filed Within Section 16(5) Deadline, Rules Kerala HC

The Kerala High Court ruled that the taxpayer is eligible for ITC since his returns were filed before the cut-off date under Section 16(5), which overrides Section 16(4). The earlier order denying ITC was quashed, and the matter was remanded for fresh consideration.

The writ petition was filed by a taxpayer named Vabind in the Kerala High Court, challenging an Ext.P3 order passed by the GST department. The order had declined Vabind’s ITC (Input Tax Credit) claim belonging to the financial year 2018-19, on the grounds that the taxpayer failed to furnish his return for the relevant FY within the statutory time limit specified under Section 16(4) of the Act.

The key argument in the current case is that under Section 16(5) of the Act (which was added later), the Vabind is entitled to the ITC because he filed his returns before November 30, 2021, which is the deadline mentioned in that section.

When the court heard the arguments of both sides, it noted that Vabind filed his returns for the financial year 2018-19 during the period between February 12, 2019, and December 18, 2019. meaning, it is clear that the returns were filed before the cutoff date as mentioned under Section 16(5) of the Act.

Additionally, Section 16(5) begins with the phrase “Notwithstanding anything contained in subsection (4),” which means it overrides Section 16(4). So, if the taxpayer files the required returns within the time allowed under Section 16(5), then the deadline mentioned in Section 16(4) no longer matters. Because the petitioner filed the returns within the allowed time, they should get the relief.

In conclusion to the aforesaid findings, the court quashed the Ext.P3 order passed by the GST department. The case is sent back to the tax authorities for fresh consideration after giving the taxpayer the opportunity of a hearing. The court has granted the benefit of Section 16(5) of the CGST Act to Vabind.