Retrospective extension of input tax credit timelines under GST defeated reversal based solely on the earlier limitation bar.

Retrospective insertion of Section 16(5) of the CGST Act extended the time limit for specified financial years and permitted input tax credit to be availed in returns filed up to 30.11.2021, notwithstanding the limitation under Section 16(4). On that basis, reversal of credit solely as time-barred under Section 16(4) could not be sustained. The Madras High Court therefore quashed the impugned order to the extent it denied input tax credit on limitation grounds.

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Issues: Whether the reversal of input tax credit was sustainable when the claim fell within the extended period introduced by Section 16(5) of the Central Goods and Services Tax Act, 2017 notwithstanding the limitation in Section 16(4).

Analysis: The challenge concerned reversal of input tax credit on limitation grounds. The later statutory amendment inserted Section 16(5) and operated with retrospective effect from 01.07.2017, extending the time limit for specified financial years and permitting credit to be taken in returns filed up to 30.11.2021. In view of that amendment, the earlier orders reversing credit merely for being time-barred under Section 16(4) could not survive to that extent.

Conclusion: The impugned order was quashed insofar as it denied input tax credit on limitation grounds, and the petitioner succeeded on that issue.

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