In the complex world of Goods and Services Tax (GST), a crucial and contentious issue has taken centre stage—the time limit for availing input tax credit under section 16(4) of the Central Goods and Services Tax (CGST) Act. This matter has sparked a series of judgments, with legal battles unfolding in various high courts, leading to a significant judicial debate.
Unveiling the Judgments:
The journey began with the Andhra Pradesh (AP) High Court’s pronouncement in the Tirumalakonda Plywoods case, setting the tone for subsequent legal battles. The Patna High Court added its perspective in the Gobinda Construction case. More recently, the Calcutta High Court ruled against BBA Infrastructure Limited. The latest addition to this legal discourse is the Chhattisgarh High Court’s take on the matter in the case of Jain Brothers, affirming the constitutional validity of section 16(4).
The Essence of Section 16(4):
Section 16(4) of the CGST Act lays down a critical condition—a registered person must avail credit by the earliest of two dates: the due date for furnishing the return under section 39 (GSTR-3B) for the month of September following the end of the relevant financial year. Initially set at 20th October or the date of furnishing the annual return by 31st December, this provision underwent a transformative amendment from 1st October 2022. The amended version stipulates the earliest of 30th November or the date of furnishing the annual return by 31st December.
Constitutional Challenges:
This seemingly innocuous provision has become a battlefield in various high courts, with judgments consistently ruling against taxpayers. A common thread in these cases is the belated filing of GSTR-3B, leading to the denial of credit based on the breach of the time limit set by section 16(4).
The Overriding Conundrum:
One key argument revolves around section 16(2), contending that its non-obstante clause overrides section 16(4). Section 16(1) establishes eligibility conditions, subject to restrictions outlined in section 16(2). Petitioners argue that this non-obstante clause renders the time limit condition in section 16(4) inapplicable. However, the courts assert that sections 16(2) and 16(4) operate in different contexts and are not contradictory.
The Calcutta High Court’s Stand:
In a noteworthy case, the petitioner claimed to have availed credit through books of account, challenging the exclusive reliance on GSTR-3B for credit claims. However, the Calcutta High Court did not favour this argument, emphasizing the statutory requirement to adhere to GSTR-3B timelines.
Late Filing Dilemma:
Another point of contention centred around late filing with the payment of a late fee. The courts uniformly clarified that allowing late filing with a fee does not extend the time limit for availing credit under section 16(4). The provision remains unaltered unless amended by notification.
Constitutional Perspective:
Arguments invoking Article 14 (right to equality), Article 19(1)(g), and Article 300A were presented. Nevertheless, judgments consistently assert that GST credit is a concession, not an inherent right, and that meeting the conditions on the date of credit availment is crucial.
The Way Forward:
As the legal landscape evolves, uncertainties loom regarding whether these cases will reach the Supreme Court. A recent judgment from the Madras High Court addressed the time limit issue due to belated GSTR-3B filing due to financial constraints, sparking questions about the exclusive reliance on GSTR-3B and the absence of a mechanism for filing with non-payment or short payment during financial crunch situations.
In conclusion, these cases bear significant implications for businesses, prompting crucial questions about fairness, practicality, and the constitutionality of the time limit conditions under section 16(4) of the CGST Act. As businesses navigate this legal labyrinth, the need for clarity and potential legislative amendments becomes increasingly apparent. The saga continues, and the implications resonate across the intricate landscape of GST compliance.
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