Amended input tax credit entitlement under the CGST Act led to quashing of rejection and remand for fresh hearing.

The Karnataka High Court noted that the insertion of Section 16(5) into the CGST Act by Section 118 of the Finance (No. 2) Act, 2024 created a further entitlement to avail input tax credit for the specified financial years, and that the authorities had to give effect to the amended provision. On that basis, the impugned rejection order was set aside, the matter was restored to the stage of the show cause notice, and the authorities were directed to reconsider the claim after granting the petitioner a sufficient and reasonable opportunity of hearing.

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Issues: Whether the impugned order rejecting the petitioner's claim could be quashed in view of the statutory insertion of Section 16(5) to the CGST Act through Section 118 of the Finance (No.2) Act, 2024, and whether the matter had to be sent back for fresh consideration after giving the petitioner an opportunity of hearing.

Analysis: The petition was decided on the basis that the amended provision inserted a further entitlement to avail input tax credit for the specified financial years, and that the respondents were required to give effect to the amendment. On that footing, the Court directed the parties back to the stage of the show cause notice, required the authorities to implement the amended provision, and to proceed only after affording sufficient and reasonable opportunity to the petitioner. The impugned order was also set aside.

Conclusion: The impugned order was quashed and the matter was remitted for reconsideration in accordance with the amended law, after hearing the petitioner.

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