In an important decision dated June 4, 2024, the Kerala High Court stated the procedural amendment initiated by the Finance Act 2022, which expanded the deadline for filing GST returns from September 30th to November 30th, with retro effect from July 1, 2017. The court’s decision in the case of M. Trade Links v. Union of India (WP(C) Nos. 31559 of 2019 and others) tried to mitigate starting compliance difficulties faced by taxpayers during the past imposition of GST. Here we will be explaining in detail about this particular decision and introducing you to the professional assistance of one of the top CA firms in Delhi for all your needs.
Background and Observations of Court
The change to extend the return filing date to November 30th was considered as a part of a procedural, created for simplifying implementation issues. Gradually, if from July 1, 2017, to November 30, 2022, a person filed the return after September 30th but before November 30th, their ITC claims should be further processed or entitled. The court stated in its ruling that ITC claims should not be canceled if the return for September was filed by November 30th. This gave tremendous peace to taxpayers who had faced problems in the beginning years of GST imposition.
Key Features of the Declaration
Retro impact of Procedural Amendments:
- Extension of Deadline: This amendment under the Finance Act 2022, extended the return filing date from September 30th to November 30th and was given retro effect from July 1, 2017.
- Processing ITC Claims: ITC claims from July 1, 2017, to November 30, 2022, should be processed if the returns were filed within the extended deadline of November 30th. The earlier deadline of October 20th was considered not applicable for this period.
- Relief given to Taxpayers: Taxpayers who filed their returns by the extended deadline will have their claims processed without cancellation based on the past deadline.
- Transparency in Implementation: The court stated that procedural amendments should be operated backdated to promote justice and transparency, particularly in the starting years of GST imposition.
Constitutional Validity of Sections 16(2)(c) and 16(4):
The court also stated difficulties with the constitutional validity of Sections 16(2)(c) and 16(4) of the Central Goods and Services Tax (CGST) Act. These facilities impose terms and time limits on claiming ITC. The petitioners considered these sections as arbitrary and nonconstitutional in nature, but the court rejected and ignored such difficulties, and facilitated the system of ITC claims.
- Constitutionality of Tax Statutes: A taxing statute is considered nonconstitutional if it violates the fundamental rights mentioned under Part III of the Constitution of India. However, the court stated that ITC is a benefit given to dealers within the tax statutes.
- Balance and Dignity: Sections 16(2)(c) and 16(4) make sure that ITC is claimed only when the tax is paid to the government, preventing any fraud claims and maintaining the dignity of the GST system.
- Adherence to Statutory Conditions: The court stresses that ITC is not an ultimate right but a benefit within the tax statutes. The conditions and time limits imposed by Sections 16(2)(c) and 16(4) are important for the overall collection of tax and allocation of revenue.
Arguments by Petitioners
The petitioners argued that the denying ITC was not fair and nonconstitutional for various reasons:
- Documentation Proof: They had valid tax invoices, payment proof, and receipt of goods. Not having evidence of payment in GSTR-2A due to suppliers’ fault should not affect their ITC entitlement.
- Impossible Tax Payments: The law should not force impossible actions, like assurance of suppliers paying tax. The duty to collect taxes is upon the state, not with the related dealers.
- Procedural Justice: ITC can not be denied due to lapses in process or suppliers’ fault.
Submissions by the Department
The respondents showed satisfaction that the GST facilities in Sections 16(2)(c) and 16(4) are framed to make sure of tax compliance and dignity, which is neither forceful nor illogical. These facilities are vital for the balancing and proper working of the GST system, also it ensure ITC is claimed only when the tax payment is done to the government.
Conclusion
The Kerala High Court’s decision led to important procedural relief for taxpayers by extending the return filing deadline and assuring justice in the processing of ITC claims. The court also stated it is constitutionally valid, also balancing between tax compliance and rights of taxpayers. This significant and prominent ruling highlights the availability of just and practical imposition of GST laws and also at the same time protecting the ethics of the tax system. We as the Best Chartered Accountant Firm in Delhi will assist you regarding this ruling and provide you with step by step solution for easing your taxation.
