Introduction: The recent Kerala High Court ruling delves into the constitutional validity of sections 16(4) and 16(2)(c) of the CGST Act, 2017, focusing on the denial of input tax credit despite fulfilling conditions outlined in Section 16. This article examines the court’s observations and implications of the ruling.
The Hon’ble High Court of Kerala in the case titled M/s. M. Trade Links vide order dt.04.06.2024, in which several writ petitions under the Central Goods and Services Tax Act and Kerala State Goods and Services Tax Act, 2017 were presented before the Court. The petitions challenged the denial of input tax credit to registered dealers despite possessing valid tax invoices, proof of payment, and receipt of goods or services. The petitioners argued that the non-availability of tax payment details in GSTR-2A should not impact their entitlement to claim input tax credit, as they have fulfilled the conditions outlined in Section 16 of the GST Act. They also emphasized that Section 155 places an undue burden on the recipient to prove the genuineness of their input tax credit claim, especially in situations where the supplier fails to remit the tax collected from the recipient. Furthermore, the petitioners contended that the requirement for the recipient to ensure the tax payment by the supplier is impractical and contrary to the legal principle of “lex non cogit ad impossibilia”, which states that the law does not compel individuals to perform impossible tasks.
The court has made several observations regarding Section 16(4) of the CGST Act, 2017. It has emphasized that Section 16(4) clearly stipulates that a registered person shall not be entitled to take input tax credit in respect of any invoice or debit note for the supply of goods or services after the 30th day of November following the end of the financial year to which such invoice or debit note pertains or the furnishing of the relevant annual return, whichever is earlier. The court has stated that the language of Section 16 of the CGST Act suffers from no ambiguity and clearly stipulates the grant of input tax credit subject to the conditions and restrictions specified therein.
Further, the last date to claim input tax credit, as per Section 16(4) of the CGST Act, 2017, is the 30th day of November following the end of the financial year to which the invoice or debit note pertains or the furnishing of the relevant annual return, whichever is earlier. This provision sets a specific deadline for claiming input tax credit, and failure to adhere to this deadline may result in the denial of input tax credit for the respective invoices or debit notes.
The Hon’ble High Court also discusses the constitutional validity of Section 16(2)(c) and 16(4) of the Central Goods and Services Tax (CGST) Act. It mentions that few High Courts have upheld the constitutional validity of these sections. Specifically, the Andhra Pradesh High Court in the case of Thirumalakonda Plywoods v. Assistant Commissioner [2023 SCC Online AP 1476] has held that these sections are constitutionally valid. This indicates that the court has recognized the legal soundness and compliance of Section 16(2)(c) and 16(4) with the constitutional provisions, as upheld by the Andhra Pradesh High Court.
Moreover, the Hon’ble High Court held that as per Section 16(4) of the CGST Act, 2017, the last date for claiming Input Tax Credit (ITC) for the years 2017-18, 2018-19, and 2019-20 would be the 30th day of November following the end of the financial year to which the invoice or debit note pertains, or the furnishing of the relevant annual return, whichever is earlier. This provision sets a specific deadline for claiming input tax credit, and failure to adhere to this deadline may result in the denial of input tax credit for the respective invoices or debit notes.
Conclusion
The outcome of the ruling indicates that the petitioners have been granted the liberty to claim the benefit of Circular No. 183/15/2022-GST dated 27.12.2022 and Circular No. 193/05/2023-GST dated 17.07.2023. They are allowed to make their claim within one month from the specified date before the appropriate authority, who will examine and process the claim. Additionally, it states that the time limit for furnishing the return for the month of September is to be treated as 30th November in each financial year with effect from 01.07.2017, specifically for the petitioners who had filed their returns for the month of September on or before 30th November, and their claim for Input Tax Credit (ITC) should be processed if they are otherwise eligible for ITC.
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