This Tax Alert summarizes a recent ruling of the Andhra Pradesh High Court (HC) upholding the validity of time limit for claiming input tax credit (ITC) prescribed under Section 16(4) of the Central Goods and Services Tax Act, 2017 (CGST Act).
Assessee in the given case commenced its business in March 2020 and filed GSTR-3B for the said month on 27 November 2020 along with late filing fees. Revenue disallowed ITC claimed in the said return since the same was filed beyond the statutory time limit for claiming ITC prescribed under Section 16(4).
Aggrieved, assessee filed a writ petition before the HC challenging Constitutional validity of the said provision and also contending that the non-obstante clause in Section 16(2) would prevail over Section 16(4).
The HC dismissed the writ petition and concluded that:
- ITC is not a statutory or constitutional right but a mere concession/rebate and therefore, imposing time limitation for availing the said concession will not amount to violation of Constitution or any statute.
- Overriding effect cannot be given over other provisions unless a clear inconsistency is established. In the present case, both Section 16(2) and Section 16(4) are two different restricting provisions having no inconsistency between them.
- Collection of late fees is only for the purpose of admitting the returns for verification. Mere acceptance of GSTR-3B return with late fee will not exonerate the delay in claiming ITC beyond the period specified under Section 16(4).
Comments
- This ruling may negatively impact the taxpayers who have claimed ITC in the returns filed beyond the time limit prescribed under Section 16(4). At present, divergent views prevail in the industry on interpretation of the said timelines regarding ITC eligibility.
- It appears from the facts in the given case that the invocation of Section 74, which deals with issuance of SCN due to fraud, misrepresentation, etc., has not been challenged. Businesses may contest applicability of the said provision in absence of any mala fide intention.
- HC has re-iterated the principle that ITC is not a constitutional right, but a concession given under a statute. Hence, legislature has the power to impose restrictions on availing the same.
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