Input tax credit timing under VAT was not confined to the seller's invoice month; amendment treated as clarificatory.

Section 10(3) of the Karnataka Value Added Tax Act did not require input tax credit to be claimed only in the month of the selling dealer's invoice. The court read the provision in light of the VAT scheme, which is to avoid cascading tax and preserve legitimate set-off, and held that a rigid invoice-month rule would defeat that object. It further treated the 2015 amendment, allowing credit for purchases in the preceding five tax periods, as clarificatory because it resolved ambiguity and matched existing accounting practice. The impugned orders and demands were therefore quashed.

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Issues: Whether Section 10(3) of the Karnataka Value Added Tax Act, 2003 required a dealer to claim input tax credit only in the month in which the selling dealer raised the invoice, and whether the 2015 amendment to Section 10(3) was clarificatory and applicable retrospectively.

Analysis: The object of the VAT regime was to avoid the cascading effect of tax by allowing set-off of input tax against output tax. A construction that confined credit only to the invoice month would defeat that scheme and could result in denial of legitimate credit for practical accounting reasons. The earlier decision was understood as requiring credit in the period in which input tax was paid, but not as mandating that the claim must be linked to the seller's invoice month. The later amendment, which permitted credit for purchases in the preceding five tax periods, was found to clear the ambiguity and align with the existing accounting practice, making it clarificatory in nature.

Conclusion: Section 10(3), as it stood before the 2015 amendment, did not require input tax credit to be claimed only in the month of the seller's invoice, and the amended provision was treated as clarificatory and retrospective. The impugned orders and demands were quashed.

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