Retrospective GST amendment restored Input Tax Credit on delayed returns and triggered refund of interest and penalty recovered.

Clause (5) of Section 16 of the CGST Act, inserted retrospectively from 01.07.2017 by the Finance (No. 2) Act, 2024, removed the basis for denying Input Tax Credit on delayed returns for 2017-18. On that footing, the restriction earlier relied upon by the respondents could not stand, and the amounts recovered as interest and penalty were directed to be refunded. The refund was ordered with interest at 6% per annum from the date of collection until repayment.

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Issues: Whether, in view of the amendment inserting clause (5) in Section 16 of the Central Goods and Services Tax Act, 2017 with effect from 01.07.2017, the petitioner was entitled to avail Input Tax Credit on delayed returns for the financial year 2017-18 and to refund of the interest and penalty collected.

Analysis: Clause (5) of Section 16, inserted by the Finance (No. 2) Act, 2024 with retrospective effect from 01.07.2017, removed the restriction relied upon by the respondents for denying Input Tax Credit on delayed returns for the relevant period. In consequence, the amounts recovered towards interest and penalty on that basis could not survive, and refund was warranted along with interest at 6% per annum from the date of collection till repayment.

Conclusion: The petitioner was held entitled to take Input Tax Credit for the delayed returns filed for the financial year 2017-18, and the interest and penalty already recovered were directed to be refunded with interest at 6% per annum.

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