Retrospective input tax credit extension under GST barred reversal for credits within the extended filing period.

The amendment inserting Section 16(5) of the CGST Act was treated as retrospectively extending the time to claim input tax credit for invoices or debit notes relating to the specified financial years, where the Section 39 return was filed up to 30.11.2021. As the amended framework and supporting notification and circular governed the claim, the limitation under Section 16(4) could not sustain reversal of credit falling within the extended period. The Madras HC therefore quashed the impugned order to that extent and restrained the Department from proceeding further on the same limitation issue.

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Issues: Whether the order reversing input tax credit was liable to be quashed on the ground that the credit claim, though otherwise within the extended time introduced by the amendment, was hit by the limitation in Section 16(4) of the Central Goods and Services Tax Act, 2017.

Analysis: The challenged order concerned reversal of input tax credit for the relevant financial year. The governing provision originally prescribed a time limit under Section 16(4) of the Central Goods and Services Tax Act, 2017. The later statutory amendment inserted Section 16(5) and extended the entitlement to take input tax credit for invoices or debit notes pertaining to the specified financial years where the return under Section 39 was filed up to 30.11.2021. The amendment was treated as operating retrospectively from 01.07.2017, and the subsequent notification and circular supported its implementation. In light of the amended framework, the limitation-based reversal could not be sustained for credits falling within the extended period.

Conclusion: The impugned order was quashed to the extent it reversed input tax credit that fell within the period allowed by Section 16(5) of the Central Goods and Services Tax Act, 2017, and the Department was restrained from proceeding further on that limitation issue.

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