Section 16(4) of the CGST Act is a provision to put a time bar on the availability of ITC. It says that ITC for the previous year shall be available only up to the filing of the Annual return of the same year or last to file GSTR 3b. The earlier of these two will block the ITC.
It is a controversial provision as many taxpayers lost their ITC due to it. Taxpayers are opposing this provision due to various reasons. The ITC is a vested right of a taxpayer. Putting a time bar on it will definitely make it hard to do the business. In the case of missing an ITC, they have no other option but to lose it. A hardship for small taxpayers because they don’t do scrutiny every day.
Now, this provision is challenged in Calcutta high court. In the case of rainbow infrastructure Vs Assistant commissioner, WPA 7159/ 2020 Recently in Calcutta High Court, Notice issued to State and Central by Court. The time limit of section 16(4) is challenged. I hope this case will bring some relief for the taxpayers.
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Let us wait for the final outcome of this case. The fate of many taxpayers may depend on it.
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