ITC Claim Valid Despite Delay: Karnataka High Court Applies CGST Section 16(5) Amendment

The Karnataka High Court weighed in on the GST issue and ruled that because the law changed, taxpayers could go back and claim tax credits from earlier years—as long as they filed their returns by November 30, 2021.

Fact of the Case

This all started with Jahanpanah Clothing Private Limited, a company upset about a tax order dated August 26, 2024. Tax officials had rejected their claim for Input Tax Credit (ITC), arguing the company missed the deadline set out in Section 16(4) of the CGST Act, 2017. Jahanpanah Clothing had filed its GST returns on November 28, 2020, for the early months of that year. Then, the Finance (No. 2) Act of 2024 introduced Section 16(5), giving everyone extra time to claim ITC, even for previous years.

Issue

Could the company get its ITC even though it missed the old cut-off? Does Section 16(5) really give them another shot?

Judgment

The court said Section 16(5) overrides the earlier deadline in Section 16(4). It rolled everything back to July 1, 2017, and made the old rule obsolete. Because Jahanpanah Clothing filed its returns before the new deadline of November 30, 2021, the court decided the denial of ITC was wrong. They canceled the original tax order and sent the case back for reconsideration, telling tax officials to evaluate it with the new rules in mind. The petition was wrapped up, but with instructions for another look.

Key Highlight of the Judgement

This judgment is a huge break for taxpayers. The new Section 16(5) gives them bonus time to claim ITC for certain years. The court spelled out that these new rules trump the old ones and must be applied in similar cases. Now, tax authorities have to revisit past ITC refusals and follow the latest lawnot just old deadlines. The whole idea is to treat taxpayers fairly and honor the fresh rules.