The Nagpur Bench of the Bombay High Court has raised an important question concerning the implementation of the retrospective Input Tax Credit (ITC) relief introduced through Section 16(5) of the Central Goods and Services Tax Act, 2017 (CGST Act).
The Bench comprising Justice Anil L. Pansare and Justice Nivedita P. Mehta, by order dated 28 August 2026, observed that the six-month limitation prescribed through Notification No. 22/2024-Central Tax dated 8 October 2024 may have curtailed a benefit that Parliament had substantively conferred under Section 16(5).
The bench has not finally disposed of the challenge. Instead, it has directed the Union of India, State of Maharashtra and GST Council to be brought on record and has sought further consideration of the issue on 11 September 2026.
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The dispute arises from the interplay between Section 16(5) and Notification No. 22/2024-Central Tax.
Section 16(5) was inserted by amendment dated 16 August 2024 with retrospective effect from 1 July 2017. The provision specifically addressed invoices or debit notes relating to FY 2017-18, 2018-19, 2019-20 and 2020-21.
Under the amended provision, notwithstanding Section 16(4), a registered person became entitled to avail ITC in a return under Section 39 filed up to 30 November 2021 in respect of the specified financial years.
The legislative intervention was therefore intended to provide relief in cases where ITC had otherwise become vulnerable because of the time restriction contained in Section 16(4).
However, the subsequent notification prescribed a separate mechanism for taxpayers seeking to obtain the benefit in cases where orders had already been passed.
The Court noted that Notification No. 22/2024-Central Tax was issued under Section 148 of the CGST Act, which empowers the Government to prescribe special procedures for specified classes of registered persons.
The notification provided a mechanism for taxpayers to seek rectification of orders passed under Sections 73, 74, 107 or 108, where demand had been confirmed on account of wrongful availment of ITC in violation of Section 16(4).
Significantly, the notification required the registered person to submit the rectification application within six months from the date of issuance of the notification.
It also prescribed that the concerned authority was required to decide the application within three months from the date of filing.
This six-month procedural deadline became the central issue before the High Court.
The petitioner challenged the notification on the ground that the six-month deadline effectively curtailed the benefit created by Section 16(5).
The petitioner’s case, as recorded by the Court, was that once a beneficial statutory provision had been introduced, the benefit granted by the substantive provision could not be restricted merely by prescribing a procedural time limit.
The petitioner specifically argued that taxpayers who approached the authorities belatedly should not automatically lose the benefit of the substantive amendment.
The issue consequently went beyond the individual taxpayer. It raised a broader question concerning the extent to which delegated legislation prescribing a special procedure can regulate or restrict the enjoyment of a benefit created by Parliament.
The Court examined the statutory source of the notification—Section 148 of the CGST Act.
Section 148 empowers the Government, on the recommendations of the GST Council and subject to prescribed conditions and safeguards, to notify specified classes of registered persons and prescribe special procedures concerning matters including registration, returns, payment of tax and administration.
The Bench accepted, at this stage, that prescribing a special procedure through a notification is permissible under Section 148.
However, the Court distinguished between the power to prescribe a procedure and the manner in which that power must be exercised.
According to the Court, the critical question was whether the notification contained the safeguards contemplated by Section 148.
The Court’s principal concern relates to taxpayers who were prevented by sufficient cause from filing the rectification application within the six-month period.
The Bench noted that the relevant question was whether the GST Council, while recommending the special procedure, had considered situations in which a taxpayer could not submit the application within six months for sufficient cause—and whether the Government had considered that aspect while issuing the notification.
The respondents’ counsel was unable to provide information on this aspect.
The Court further observed that the notification itself did not indicate that such a recommendation had been made by the GST Council or that the Government had considered the issue.
The Bench made a significant observation regarding the effect of the notification.
It noted that Section 16(5) created a right in favour of taxpayers to avail ITC in respect of the specified financial years, subject to the statutory conditions. According to the Court, the amended provision itself did not prescribe a time limit for submitting an application to avail the benefit.
The notification, however, imposed a six-month period for making the rectification application.
The Court observed that the result was that the right created by the statutory amendment had effectively been curtailed to six months through the procedural notification.
This observation represents the central legal issue likely to be examined further in the proceedings.
The Court did not hold that the Government lacked power altogether to prescribe a procedure.
On the contrary, the Bench expressly observed that the Government was empowered to prescribe a procedure under Section 148.
The concern was that, while exercising that power, appropriate safeguards ought to have been incorporated so that the purpose of Section 16(5) could be effectively achieved.
The Court explained that, in the present context, an appropriate safeguard would mean allowing further time where a taxpayer, for sufficient cause, was unable to submit the application within six months.
In the Court’s view, such a mechanism would ensure that the beneficial purpose underlying Section 16(5) was not defeated merely because a taxpayer could not comply with the procedural deadline.
The Bench went a step further and observed that, in the absence of such a safeguard, the notification would not withstand scrutiny under Section 148 because of the Government’s failure to safeguard the taxpayer’s interest while prescribing the procedure.
This is particularly significant because the Court’s reasoning does not appear to question the existence of the delegated power itself. Instead, the focus is on the limits and manner of exercising that delegated power.
The case therefore raises an important administrative-law question in the GST framework: Can a special procedure framed under Section 148 impose a rigid limitation that effectively prevents a taxpayer from obtaining a substantive benefit conferred retrospectively by Section 16(5), without providing an exception for sufficient cause?
Given the importance of the interpretation of Section 148 and the notification issued under it, the Bench decided that further assistance was necessary.
The Court directed the petitioner to add Union of India, State of Maharashtra and GST Council as party respondents.
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