1. Introduction
The Goods and Services Tax (GST) Act, 2017 is a landmark legislation that has the potential to transform the Indian economy. The Act has been hailed as a major step towards economic integration and simplification of the tax regime. However, there are some challenges that need to be addressed in order to ensure the success of the GST regime. There is a need to address the concerns of the business community. Among others, one such challenge is the application of Section 16(4) which is proving to be a major burden for the business community at large. Many businessman owing to various reasons could not comply with the provision and hence are now facing huge demand notices. In this article, an attempt shall be made to analyse the provisions of Section 16(4) of the CGST Act, 2017 and to test its validity.
Section 16 of the CGST Act, 2017 reads as under:
Eligibility and condition for taking input tax credit
16. (1) Every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person.
(2) Notwithstanding anything contained in this section, no registered person shall be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless,-
| (a) | he is in …… | |
| (aa) | the details of …… | |
| (b) | he has received ….. | |
| Explanation-…… | ||
| (i) | where the goods …. | |
| (ii) | where the services …. | |
| (ba) | the details of ….. | |
| (c) | subject to the …. | |
| (d) | he has furnished …. | |
Provided that ……………..
Provided further that ……………..
Provided also that ……………..
(3) Where the registered person has claimed depreciation on the tax component of the cost of capital goods and plant and machinery under the provisions of the Income-tax Act, 1961 (43 of 1961), the input tax credit on the said tax component shall not be allowed.
(4) A registered person shall not be entitled to take input tax credit in respect of any invoice or debit note for supply of goods or services or both after the thirtieth day of November following the end of financial year to which such invoice or debit note pertains or furnishing of the relevant annual return, whichever is earlier:
Provided that the registered person shall be entitled to take input tax credit after the due date of furnishing of the return under section 39 for the month of September, 2018 till the due date of furnishing of the return under the said section for the month of March, 2019 in respect of any invoice or invoice relating to such debit note for supply of goods or services or both made during the financial year 2017-18, the details of which have been uploaded by the supplier under sub-section (1) of section 37 till the due date for furnishing the details under sub-section (1) of said section for the month of March, 2019.
On a plain reading of the above provisions, it is apparent that taking of Input Tax Credit (ITC) is subject to various conditions enumerated from Sub-Sections (1) to (4). Section 16(4) imposes a condition upon the Registered Tax-Payer (RTP) wherein it is stated that ITC cannot be taken in respect of any invoice or debit note for supply of goods or services or both after the Thirtieth day of November (as amended) following the end of financial year to which such invoice or debit note pertains or furnishing of the relevant annual return, whichever is earlier. Thus, a limitation is sought to be imposed on the claiming of eligible ITC. However, there are certain grounds on which validity of Section 16(4) is required to be tested. In this article, an attempt shall be made to critically examine and test those arguments and grounds.
2. Analysis of the Provisions of Section 16 w.r.t. Section 16(4)
Section 16(1) which grants eligibility to take ITC, before allowing any such benefit, speaks about “subject to such conditions and restrictions as may be prescribed”. Thus, conditions and restrictions as may be enumerated in the Rules and manner prescribed in Section 49 should be followed to take a valid ITC. Some additional conditions are also prescribed in the Act which are also required to be followed to maintain the validity of ITC. Now the issue which is required to be considered is that whether it is after following these rules and provisions that the ITC becomes a vested right of the RTP and gets protection from Article 300A of the Constitution of India which gives Right of Property to every citizen or is it after compliance with Section 16(2) only that ITC becomes a vested right and that the other conditions are post vesting conditions.
Argument 1: Section 16(2) is a Non-Obstante Clause So It Overrides 16(4):
A plain reading of all the sub-sections of Section 16 makes it amply clear that Section 16(1) is an enabling provision which gives right to any registered taxpayer to the credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business. However, Section 16(2), (3) & (4) are restrictive provisions which lists out certain mandatory conditions which are required to be followed to take the credit of input tax credit as allowed under Section 16(1). Non-Compliance with these conditions shall make the ITC ineligible and the same cannot be taken.
Further, Section 16(2) starts with a non-obstante clause i.e. “Notwithstanding anything contained in this section….” wherein it says that any RTP is required to follow certain conditions mentioned from Section 16(2)(a) to 16(2)(d) to be eligible for the credit of ITC which is allowed under Section 16(1).
Again, Section 16(3) (which is not non-obstante clause) reads that in case the registered person has claimed depreciation on the tax component of the cost of capital goods and plant and machinery under the provisions of the Income-tax Act, 1961 (43 of 1961), the input tax credit on the said tax component shall not be allowed. This is again a restrictive provision which limits the scope of Section 16(1).
Further more, Section 16(4) (which is not a non-obstante clause) reads that a RTP shall not be entitled to take ITC if the same is not taken within the time limit specified in the section.
Thus, a conjoint reading of the entire section presents the following picture:
a) Section 16(1) is an enabling provision which gives right to any registered taxpayer to take credit of input tax.
b) Section 16(2) is a restrictive section under which he is required to comply with certain conditions, failing which the credit of ITC shall not be allowed to him.
c) Section 16(3) is again a restrictive section which mentions that if depreciation under Income Tax Act, 1961 is claimed on ITC portion of assets specified therein, ITC cannot be allowed for that portion.
d) Section 16(4) requires RTP to follow a time limit to take ITC. Thus, it is also a restrictive section limiting the scope of the enabling Section 16(1).
Now one school of thought holds the belief that since Section 16(2) starts with a non-obstante clause, it overrides all the other provisions of the section and resultantly Section 16(4) becomes otiose.
In this connection there has been a plethora of judicial precedents as under:
a) State of West Bengal v. Union of India AIR 1963 SC 1241
b) Union of India v. G.M. Kokil AIR 1984 SC 1022
c) Chandavarkar Sita Ratna Rao v. Ashalata S. Guram [1986] 4 SCC 447
d) Vishin N. Khanchandani v. Vidya Lachmandas Khanchandani [2002] 123 Taxman 227
e) ICICI Bank Ltd. v. SIDCO Leathers Ltd. [2006] 67 SCL 383 (SC)
f) Central Bank of India v. State of Kerala [2009] 4 SCC 94
g) State Bank of West Bangal v. Union of India [1964] 1 SCR 371
h) S. Raghunath v. State of Karnataka [1992] 1 SCC 335
i) G. Varadarajulu v. State of Tamil Nadu [1998] 4 SCC 231
j) Aswini Kumar Ghose v. Arabinda Bose, (1952) AIR SC 369
k) Amar Jewellers Ltd. Assistant Commissioner of Income-Tax, [2022] 137 taxmann.com 249 (Gujarat)
In Principles of Statutory Interpretation, 9th Edition by Justice G.P. Singh Chapter V, Synopsis IV at pages 318 and 319, it is written as under:
A non-obstante clause is generally appended to a section with a view to give the enacting part of the section, in case of conflict, an overriding effect over the provision in the same or other Act mentioned in the non- obstante clause. It is equivalent to saying that inspite of the provisions or Act mentioned in the non-obstante clause, the provision following it will have its full operation or the provisions embraced in the non-obstante clause will not be an impediment for the operation of the enactment or the provision in which the non-obstante clause occurs.
From the above it can be derived as follows:
a) Statutes should be interpreted in light of their entire text, and exception clauses or non obstante clauses should not be interpreted in isolation from the main enacting provision.
b) The purpose of the non-obstante clause must be ascertained with which the legislature has inserted it.
c )Non-obstante clause is employed to give overriding effect to some contrary provision but not complimentary provisions.
d )It is enacted to give the enacting part of the section in case of conflict an overriding effect over the provision of the Act or the contract mentioned in the non-obstante clause.
e )A non-obstante clause must be given effect to, to the extent the Parliament intended and not beyond the same.
From a conjoint analysis of the above judicial precedents, the language of Section 16 and the principles of interpretation of statutes as enumerated above, it is clear that the non-obstante clause in Section 16(2) does not in any manner limit the operation of Section 16(3) or Section 16(4) as they are not contradicting, rather they all being restrictive provisions, are basically complementing each other and are limiting the scope and operation of Section 16(1). The basic intent of the overriding effect of Section 16(2) is to diffuse any misuse of the enabling provision contained in Section 16(1) and to specify certain conditions that shall ensure that the credit is taken as per the scheme of the Act and after following proper conditions, rules and regulations. The legislature does not seem to intend that Section 16(4) be made otiose by the application of Section 16(2).
However, one more school of thought in this matter is that the non-obstante clause does not only override the contrary provisions in Section 16, but anything and everything contained in the entire section. So, Section 16(4) is also overridden even if it is complementing. In this context, it is to be mentioned that when there seems to be a conflict between two provisions of the same Act, a harmonious construction of the two becomes sine qua non to ensure reflection of the true intention of the legislature. In the instant case, it is very apparent that both are restrictive provisions and thus there is no overlap between the two and it cannot be said that Section 16(2) overrides the other provisions of the section in its entirety. A harmonious construction of the two provisions leads to the conclusion that they are both intended to promote the same goal, which is to ensure that ITC is available to businesses to the extent that it is used in the course or furtherance of their business. An interpretation that would completely divulge the provision from the intent of the legislature would be contrary to the principle of harmonious construction.
Arguments For Case Laws Generally Quoted
In Eicher Motors Ltd. and Anr vs Union of India and Ors. Etc, (1999) 152 CTR (SC) 273, the Hon’ble Supreme Court of India considered MODVAT Credit as an ‘indefeasible right’.
However, it must be understood that this indefeasible right as stated by the Hon’ble Court is created only once the same gets vested and not before that. Once a right gets vested, it cannot be taken away by any authority and then it becomes indefeasible. Any infringement by any person or authority on such rights, can be interfered by the court.
Now it is to be determined whether compliance with Section 16(2) itself makes ITC a vested right. As per the above analysis, it can be concluded that it is the combined compliance to all the conditions of Section 16 followed by other provisions of the law which makes the ITC a vested right. After following these conditions if any additional conditions are subsequently imposed on the RTP, it shall get protection from Article 300A of the Constitution of India.
The Hon’ble Supreme Court of India in ALD Automotive Pvt. Ltd. Vs The Commercial Tax Officer & Ors., (2019) 13 SCC 255, held as under:
“32. The input credit is in nature of benefit/ concession extended to dealer under the statutory scheme. The concession can be received by the beneficiary only as per the scheme of the Statute.”
“The conditions under which Input Tax Credit is to be given are all enumerated in Section 19 as noticed above. The condition under which the concession and benefit is given is always to be strictly construed. In event, it is accepted that there is no time period for claiming Input Tax Credit as contained in Section 19(11), the provision become too flexible and give rise to large number of difficulties including difficulty in verification of claim of Input Credit. Taxing Statutes contains self-contained scheme of levy, computation and collection of tax. The time under which a return is to be filed for purpose of assessment of the tax cannot be dependent on the will of a dealer.”
The Apex Court in the case of M/S. TVS Motor Company Ltd. vs The State of Tamil Nadu And Others, 2018 Latest Caselaw 763 SC, read as under:
“After discussing certain judgments of this Court and other High Courts, the High Court has observed that the legal position was that right to claim ITC is not a vested right or an indefeasible right. It is a benefit conferred under the Act in certain contingencies and subject to conditions prescribed in the statutory scheme. Therefore, it is open to the State Legislature to provide for conditions and restrictions while extending the concession. Likewise, it was also necessary for any assessee to claim input credit to fulfill those conditions.”
It can be inferred from the above judgements that ITC eligibility must follow certain conditions, rules and regulations and without it, it does not vest on any RTP. In the instant case, mere compliance with Section 16(2) does not make ITC a vested right for any RTP as it is one among the many conditions for ensuring eligibility of ITC.
Further, it is often argued that in the case of ALD Automotive Pvt. Ltd., Section 19(11) of Tamil Nadu Value Added Tax Act, 2006 are Pari Materia to Section 16(4) and thus it is already ruled by the Hon’ble Apex Court against the RTP. In this context, a careful reading of both the provisions makes it amply clear that the language is different in both the provisions i.e. Section 16(4) and Section 19(11). Let us analyse the same:
Section 19(11) of the Tamil Nadu Value Added Tax Act, 2006 reads as under:
11) In case any registered dealer fails to claim input tax credit in respect of any transaction of taxable purchase in any month, he shall make the claim before the end of the financial year or before ninety days from the date of purchase, whichever is later.
An analysis of the same reflects that the language, facts and background of both the legislations are different and thus the same cannot be considered as pari materia.
Argument 2: Section 16(4) reads about taking ‘take’ credit:
Section 16(1) uses the words “entitled to take credit”, Section 16(2) uses the words “entitled to the credit” and Section 16(4) uses the words “entitled to take input tax credit”.
It is important to observe the words “take credit” in the above sections to make a proper understanding of the legislation.
In Union of India v. Bharti Airtel Ltd., [2021] 131 taxmann.com 319 (SC), the Hon’ble Apex Court read as under:
“33. As per the scheme of the 2017 Act, it is noticed that registered person is obliged to do self-assessment of ITC, reckon its eligibility to ITC and of OTL including the balance amount lying in cash or credit ledger primarily on the basis of his office record and books of accounts required to be statutorily preserved and updated from time to time. That he could do even without the common electronic portal as was being done in the past till recently pre-GST regime. As regards liability to pay OTL, that is on the basis of the transactions effected during the relevant period giving rise to taxable event. The supply of goods and services becomes taxable in respect of which the registered person is obliged to maintain agreement, invoices/challans and books of accounts, which can be maintained manually/electronically. The common portal is only a facilitator to feed or retrieve such information and need not be the primary source for doing self-assessment. The primary source is in the form of agreements, invoices/challans, receipts of the goods and services and books of accounts which are maintained by the assessee manually/electronically. These are not within the control of the tax authorities. This was the arrangement even in the pre-GST regime whilst discharging the obligation under the concerned legislation(s). The position is no different in the post-GST regime, both in the matter of doing self-assessment and regarding dealing with eligibility to ITC and OTL. Indeed, that self-assessment and declarations would be any way subject to verification by the tax authorities. The role of tax authorities would come at the time of verification of the declarations and returns submitted/filed by the registered person.
34. Section 16 of the 2017 Act deals with eligibility of the registered person to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business. The input tax credit is additionally recorded in the electronic credit ledger of such person under the Act. The “electronic credit ledger” is defined in section 2(46) and is referred to in section 49(2) of the 2017 Act, which provides for the manner in which ITC may be availed. Section 41(1) envisages that every registered person shall be entitled to take credit of eligible input tax, as self-assessed, in his return and such amount shall be credited on a provisional basis to his electronic credit ledger.
35. As aforesaid, every assessee is under obligation to self-assess the eligible ITC under section 16(1) and 16(2) and “credit the same in the electronic credit ledger” defined in section 2(46) read with section 49(2) of the 2017 Act. Only thereafter, section 59 steps in, hereunder the registered person is obliged to self-assess the taxes payable under the Act and furnish a return for each tax period as specified under section 39 of the Act. To put it differently, for submitting return under section 59, it is the registered person who has to undertake necessary measures including of maintaining books of accounts for the relevant period either manually or electronically. On the basis of such primary material, self-assessment can be and ought to be done by the assessee about the eligibility and availing of ITC and of OTL, which is reflected in the periodical return to be filed under section 59 of the Act.”
Thus, the Hon’ble Apex Court has observed that it is the books of accounts which is the primary material on which self-assessment is done. The input tax credit is additionally recorded in the electronic credit ledger under the Act. It held that the common portal is only a facilitator to feed or retrieve such information and need not be the primary source for doing self-assessment. The primary source is in the form of agreements, invoices/challans, receipts of the goods and services and books of accounts which are maintained by the assessee manually/electronically.
Analysis of Other Sections of the Act to Ascertain its Meaning:
Section 16(1) has divided the concept of taking ITC into two parts. One is “entitled to take credit of input tax” and the other is “shall be credited to the electronic credit ledger of such person”. Thus, it has separated the process of taking of ITC in books from the process of getting it credited in the electronic credit ledger of such person. In this context, the provisions of other sections of the Act requires a thorough reading:
Section 41(1) of the CGST Act, 2017 reads as under:
Availment of input tax credit
41.(1) Every registered person shall, subject to such conditions and restrictions as may be prescribed, be entitled to avail the credit of eligible input tax, as self-assessed, in his return and such amount shall be credited to his electronic credit ledger.
The same bifurcation as mentioned above has also been made in Section 41(1) as mentioned above which mentions that ITC shall be availed as self-assessed in the return filed and then shall be credited to the Electronic Credit Ledger.
Section 43A of the CGST Act, 2017 reads as under:
Section 43A. Procedure for furnishing return and availing input tax credit –
(1) Notwithstanding anything contained in sub-section (2) of section 16, section 37 or section 38, every registered person shall in the returns furnished under sub-section (1) of section 39 verify, validate, modify or delete the details of supplies furnished by the suppliers.
From a bare reading of Section 43A, it reveals that ITC is availed by furnishing return. Thus, filing return is a means to avail ITC and not to take ITC.
(It is to be mentioned that Section 43A has been Omitted by the Finance Act, 2022, w.e.f. 1-10-2022. However, the same has been included by us in our analysis so as to understand the intent of the law from the words used in other sections of the Law.)
Further, time of supply for output liability ascertainment is basically dependent on the date when the same is taken in books of accounts i.e. either invoice is issued, payment is received etc. For output liability, reporting the same in returns is just an additional compliance. Thus, when output liability is due on the basis of it being taken in books and records, the same should be the intent of the legislature when it is dealing with the concept of ITC.
It is apparent that both taking ITC and crediting the same in electronic credit ledger with the help of returns are entirely different concepts. It is the books of accounts wherein the ITC is first taken, then it is availed in return filed and then credited in Electronic Credit Ledger in portal. Thus, it is a three staged process and entitlement is decided in the first stage itself i.e. taking of credit which is done in the books of accounts.
Thus, it is clear that crediting ITC in the Electronic Credit Ledger is just an additional requirement and not the primary vesting condition. It is the taking of credit in books of accounts which is the primary vesting condition.
The basic intent behind introducing the GST Law was to ensure seamless flow of credit and to avoid cascading effect of taxes. If we try to match this intent with the use of words “take credit”, it is observed that it duly matches with this basic intent wherein only basic and logical impediments are created on the way of taking of ITC by any RTP. Any deviation from the same would ultimately lead towards defeating this very provision.
Further, Section 17(5) reads as under:
(5) Notwithstanding anything contained in sub-section (1) of section 16 and sub-section (1) of section 18, input tax credit shall not be available in respect of the following, namely:
Section 17(5) is again a restrictive provision which lists out certain situations wherein ITC shall not be available, and it is again a non-obstante clause. If we carefully observe the language of the section, it overrides only two sections i.e. Section 16(1) and Section 18(1). If we go through the text of these two sections, they both are enabling sections i.e. they give the entitlement i.e. “entitled to take credit” to any RTP. Thus, a careful reading of this section reveals that Section 16(1) is perceived to be an enabling section and 16(2) is not perceived to be an enabling section, rather it only lists out situations under which ITC shall not be available, rather being made available. It also means that compliance of all the conditions of Section 16(2) alone shall not give any vested right to take ITC. If conditions are complied, it will just not be an impediment in the way of earning of ITC by the RTP.
It is the books of accounts of any taxpayer wherein the ITC is first taken and the Ledgers in the common portals are only additional facilitators. The law should not intend to create a situation wherein after a time lapse Output Liability is considered to be valid and payable, but ITC disallowed even though it is duly recorded in books of accounts and the fact is proved by the RTP. Thus, the conclusion very amply depicts the intent of the law wherein it says that ITC must be recorded in the books of accounts of the assessee within a specified time period. If it is not recorded even in the books of accounts within that time, the ITC shall lapse and cannot be claimed.
3. Substantive Right Cannot Be Taken Away By A Procedural Lapse
In M/s Ramnath Exports Pvt Ltd vs Vinita Mehta & Anr. (Civil Appeal No. 4639 of 2022) [Arising out of SLP (C) No. 30216 of 2018], it was held as under:
It is a trite law that the procedural defect may fall within the purview of irregularity and capable of being cured, but it should not be allowed to defeat the substantive right accrued to the litigant without affording reasonable opportunity.
4. Does Section 16(2)(aa) have any relation with Section 16(4)
One issue that is cropping up w.r.t. the time limit specified in Section 16(4) wherein the same is applied to the provisions contained in Section 16(2)(aa). Section 16(2)(aa) reads as under:
|
aa) |
the details of the invoice or debit note referred to in clause (a) has been furnished by the supplier in the statement of outward supplies and such details have been communicated to the recipient of such invoice or debit note in the manner specified under section 37; |
Thus, the section read with applicable rules requires any RTP to claim ITC only when the same is reflected in his GSTR-2B i.e. after the supplier of goods furnished the invoices in the GSTR-1 filed by him. Now there is a school of thought that this reflection in GSTR-2B of the RTP should be within the time limit specified u/s 16(4). Thus, even if the RTP has taken ITC in his books within the four corners of Section 16(4), he is being barred from claiming ITC only due to the default committed by a third person who is not in control of the RTP. Thus, it does not appear logical to think that the legislature would intend to punish the RTP due to a procedural default committed by some other person. Further, when taking of credit is the primary requirement of the section, it cannot be interpreted in a manner to defeat the very intent of the law.
4. Returns filed under Amnesty Notifications Are Subject to Section 16(4)
There is another issue wherein ITC is being sought to be disallowed when filing returns pursuant to release of amnesty notifications by the CBIC. Notification No. 3/2023-Central Tax dated 31-03-2023 read as under:
In exercise of the powers conferred by section 148 of the Central Goods and Services Tax Act, 2017 (12 of 2017) (hereinafter referred to as the said Act), the Central Government, on the recommendations of the Council, hereby notifies that the registered person, whose registration has been cancelled under clause (b) or clause (c) of sub-section (2) of section 29 of the said Act on or before the 31st day of December, 2022, and who has failed to apply for revocation of cancellation of such registration within the time period specified in section 30 of the said Act as the class of registered persons who shall follow the following special procedure in respect of revocation of cancellation of such registration, namely:-
(a) the registered person may apply for revocation of cancellation of such registration upto the 30th day of June, 2023;
(b) the application for revocation shall be filed only after furnishing the returns due upto the effective date of cancellation of registration and after payment of any amount due as tax, in terms of such returns, along with any amount payable towards interest, penalty and late fee in respect of the such returns;
(c) no further extension of time period for filing application for revocation of cancellation of registration shall be available in such cases.
Vide above notification, the CBIC has allowed any registered person whose registration has been cancelled and who has failed to get his revocation application filed within the time limit specified under the applicable provisions of the law, to file their revocation applications within 30th June, 2023. However, it specifies that before filing such application the following conditions needs to be complied:
a) All due returns upto the date of furnishing of returns needs to be filed
b) Due taxes should be paid
This notification which is in the form of an amnesty scheme declared by the CBIC allows a RTP to file all his returns, if any pending since the inception of the law and make due payment of taxes. Pursuant to this, he may get his cancellation revoked and continue his business. It does not anywhere specify that the ITC shall be barred by Section 16(4). Further, when it is allowing to file returns from July, 2017, it is also allowing to claim ITC which is also allowed while filing of returns. The words used in the notification are “….after payment of any amount due as tax”. The words “amount due” shall have to be read with the provisions of Section 59 which relates to Self-Assessment of Taxes. ITC is first taken in books of accounts, then the taxes are self-assessed and ITC is availed though filing of returns and then the same gets credited to the Electronic Credit Ledger.
If the legislature would have intended to disallow the availment of ITC after taking the same, it would have made the ITC column inactive in GSTR-3B in such cases. This would cause huge injustice to the taxpayers who are complying with the law after the release of the amnesty notification and paying due taxes after claiming their hard-earned ITC and paying applicable interest and late fee. The intent of legislature seems to be clear that Section 16(4) in such cases shall not be applicable as the ITC has already been taken in the books of accounts by the RTP. Thus, the contention that ITC cannot be claimed in filing returns does not seem to stand any valid grounds.
The legislature shall never intend to take away a substantive right earned by the taxpayer u/s 16(1), by imposing a harsh procedural condition which may cause the entire purpose of the enactment of the new law being defeated. Thus, ITC entitlement which is a substantive right of any RTP and is earned after compliance with a plethora of other stringent conditions cannot be intended to be taken away by a procedural defect.
Conclusion:
From the above discussion, it may be concluded that the legislative intent behind inserting Section 16(4) can never be to take away the ITC which is made eligible by following the broad scheme of the law. It will never intent to take away from one hand what it gives from another. It only intends to ensure that the ITC should be taken in a timely manner and within a specified time limit in the books of accounts of the RTP. The operation of the Non-Obstante clause is also discussed in detail and it appears that the same does not override Section 16(4) in any manner. The issue of Section 16(4) is already under judicial scrutiny in the following cases among many others:
> Surat Mercantile Association v. Union of India, [2021] 124 taxmann.com 342 (Gujarat)
> Shri Kumaran Construction Co. v. Union of India, [2021] 124 taxmann.com 291 (Jharkhand)
> Trimurthy Sales Corporation v. Union of India, [2021] 124 taxmann.com 300 (Jharkhand)
> Arjundas Construction Corporation and Another vs. The Union of lndia [TS(DB)-GST-HC(CAL)-2020-695], 25-11-2020
> Rainbow Infrastructure Private Limited vs. Assistant Commissioner, State Tax, Goods and Service Tax, Barrakpore Zone [TS(DB)-GST-HC(CAL)-2020-691]
> Balachandra Yallappa Salabhavi [TS(DB)-GST-HC(KAR)-2020-589]
It is the wisdom of the Hon’ble Courts that a final view on the same can be taken. But we can only hope that undue hardship to business units and specially MSMEs be avoided by the Government, by taking necessary corrective steps/ clarifications even before any judgement comes up and give relief to many innocent tax collectors/ agents of the Government (Registered Tax Payers) which will ultimately lead to a situation of creation of good faith in the broader business community.
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Disclaimer: The above expressed views, interpretations made and conclusions arrived at are purely the personal views of the author. The possibility of other views on the subject matter cannot be ruled out. So, the readers are requested to check and refer relevant provisions of statute, latest judicial pronouncements, circulars, clarifications etc. before acting on the basis of the above write up. The author shall not responsible in any manner.
Author Bio
As per Circular No. 183/15/2022-GST Dated the 27th December, 2022, we can avail ITC of FY 2017-18 & 2018-19 as per books.
Is Section 16 (4) restrict ITC if our vendor filed their return after the cut off date for the FY 2017-18 & 2018-19?