The Hon'ble High Court of Kerala in [ M/S M.TRADE LINKS vs UNION OF INDIA WP(C) NO. 31559 OF 2019 dated June 4, 2024 ] held that the time limit for furnishing returns for the month of September should be treated as November 30th in each financial year with effect from July 1, 2017. Assesses who filed their September returns on or before November 30th should have their ITC claims processed if otherwise eligible.
Facts of the Case:
The Goods and Services Tax (GST) regime was introduced in India on July 1, 2017, with the objective of creating a uniform tax structure across the country, eliminating cascading effects, and facilitating seamless transfer of input tax credit (ITC) throughout the supply chain. However, during the initial years of GST implementation, taxpayers faced certain challenges, particularly regarding the availability of GSTR-2A and the claiming of ITC.
In the financial years 2017-18 and 2018-19, GSTR-2A, an auto-populated document containing details of inward supplies, was not available initially. This made it difficult for taxpayers to determine the eligible ITC based on the outward supply details filed by their suppliers. To address this issue and provide relief for bona fide claims and mistakes, the Central Board of Indirect Taxes and Customs (CBIC) issued Circular No. 183/15/2022-GST dated December 27, 2022, and Circular No. 193/05/2023-GST dated July 17, 2023. These circulars clarified the eligibility and procedure for claiming ITC for the period from the introduction of GST until the insertion of Section 16(2)(aa) with effect from January 1, 2022.
Another difficulty faced by taxpayers was the due date for furnishing returns under Section 39 of the CGST Act. Initially, the due date for filing the return for the month of September was September 30th. Recognizing the need for additional time, the legislature amended the law through the Finance Act, 2022, extending the due date for filing September returns to November 30th.
In this batch of writ petitions, the petitioners challenged the constitutional validity of Sections 16(2)(c) and 16(4) of the Central Goods and Services Tax Act, 2017 (CGST Act), and the corresponding provisions of the Kerala State Goods and Services Tax Act, 2017 (KSGST Act). The petitioners argued that these provisions imposed unreasonable restrictions on their right to claim ITC and violated their fundamental rights under Articles 14, 19(1)(g), and 300A of the Constitution of India.
The respondents, including the Union of India, the Central Board of Indirect Taxes and Customs (CBIC), and the State of Kerala, contended that the conditions and restrictions prescribed under the GST law for availing ITC were necessary to ensure the proper functioning of the GST regime, prevent revenue leakage, and maintain fiscal discipline. They argued that the provisions were constitutionally valid and did not violate the fundamental rights of the petitioners.
Held by the Court:
The Hon'ble High Court of Kerala in WP(C) NO. 31559 OF 2019 dated June 4, 2024 held as under:
Considering the difficulties faced by taxpayers during the initial period of GST implementation, the time limit for furnishing returns for the month of September should be treated as November 30th in each financial year, with effect from July 1, 2017.
Assessees who filed their returns for the month of September on or before November 30th should have their claims for ITC processed, provided they are otherwise eligible for ITC as per the provisions of the GST law.
ITC can be availed by recipients for bona fide scenarios listed in Circular No. 183/15/2022-GST dated December 27, 2022, and Circular No. 193/05/2023-GST dated July 17, 2023, subject to the conditions and procedures prescribed therein.
If a person has furnished the return for the month of September by November 30th, their claim for ITC should be considered and processed. Such claims should not be rejected merely on the ground that the returns were not filed by October 20th, which was the earlier extended due date for filing September returns.
The amendment extending the due date for filing September returns from September 30th to November 30th, being procedural in nature, should be given retrospective effect from July 1, 2017.
The challenge to the constitutional validity of Sections 16(2)(c) and 16(4) of the CGST Act and KSGST Act was rejected by the Court. The Court held that these provisions do not violate the fundamental rights of the petitioners under Articles 14, 19(1)(g), and 300A of the Constitution of India and are constitutionally valid.
Observed that the conditions and restrictions prescribed under the GST law for availing ITC are necessary to ensure the proper functioning of the GST regime, prevent revenue leakage, and maintain fiscal discipline. The provisions are not arbitrary, unreasonable, or violative of the petitioners' rights.
Clarified that the Input Tax Credit is not an absolute right but rather an entitlement subject to the conditions and restrictions prescribed under the GST law. The legislature has the power to impose reasonable conditions and limitations on the availment of ITC to safeguard the interests of revenue and ensure the smooth implementation of the GST regime.
Relevant Sections:
Section 16, read with sections 39, 41 and 49 of Central Goods and Services Tax Act, 2017/Kerala State Goods and Services Tax Act, 2017
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