Supreme Court notices challenge to ITC denial for belated return-filing under CGST Act sec. 16(4).

In a pivotal development, the Supreme Court of India has recently issued a notice in response to the legal challenge mounted against Section 16(4) of the Central Goods and Services Tax Act, 2017 (CGST Act). This provision stipulates the denial of Input Tax Credit (ITC) for belated return-filing, and the case of Mrityunjay Kumar v. Union of India (SLP No. 28270 of 2023) seeks to reevaluate its constitutional validity. This comes in the wake of the Hon’ble Patna High Court's affirmation of Section 16(4) in the Gobinda Construction case (CWJC No. 9108 of 2021 dated September 8, 2023).

 

Table Section
1. Introduction
2. Section 16(4) of the CGST Act: Overview
3. Legal Challenge: Mrityunjay Kumar v. Union of India
4. Patna High Court Decision in Gobinda Construction Case
5. Key Arguments in the Legal Challenge
6. Supreme Court's Notice and Its Significance
7. Future Implications and Next Steps
8. FAQs

 

Understanding Section 16(4) of the CGST Act:

Section 16(4) has been a point of contention in the GST landscape, specifically addressing scenarios where invoices or debit notes are issued after the due date for return filing. This provision, while designed to maintain the integrity of the tax framework, has faced scrutiny for its potential impact on businesses facing genuine reasons for delayed filing.

 

 

Background of the Legal Challenge: 

Gobinda Construction's case set the stage for the current legal challenge, where the Patna High Court validated the constitutional standing of Section 16(4). In response, Mrityunjay Kumar filed a Special Leave Petition, arguing against the rigid application of the provision and its potential adverse effects on businesses.

 

Key Arguments in the Legal Challenge:

The crux of the legal challenge revolves around the argument that denying Input Tax Credit for belated return-filing may disproportionately affect businesses with legitimate reasons for delays. The petitioner questions the constitutionality of Section 16(4), emphasizing the need for a balanced approach that considers the practical challenges faced by taxpayers.

 

Significance of the Supreme Court Notice:

The Supreme Court's decision to issue a notice signals its intent to thoroughly examine the matter. This acknowledgment implies a willingness to reassess the constitutional validity of Section 16(4), taking into account the potential hardships faced by businesses navigating the complexities of GST compliance.

 

Next Steps and Future Implications:

Scheduled for further hearing on February 05, 2024, the case's outcome will significantly impact businesses, tax professionals, and the broader GST landscape. A ruling either supporting or challenging the constitutional validity of Section 16(4) could reshape financial planning, compliance strategies, and overall tax management for businesses.

 

 

The legal challenge against Section 16(4) brings attention to the ongoing debate surrounding Input Tax Credit denial for belated return-filing under the CGST Act. As businesses await the Supreme Court's decision, the outcome holds the potential to redefine the GST landscape in India. Stay tuned for updates as the legal proceedings unfold, offering insights into the future treatment of Input Tax Credit in cases of delayed return-filing.