Union of India vs. AAP & Company (2021): Supreme Court Rules GSTR-3B Is a Valid Return for ITC Limitation Under GST

Union of India vs. AAP & Company (2021):The Supreme Court in Union of India vs. AAP & Company [(2021) 133 Taxmann.com 168 (SC)] addressed a critical question under the GST regime:
👉 Whether Form GSTR-3B qualifies as a return under Section 39 of the CGST Act, 2017, and consequently, whether the limitation for availing Input Tax Credit (ITC) should be reckoned from the due date of filing GSTR-3B or GSTR-3.

The controversy began when the Gujarat High Court struck down Para 3 of the Press Release dated 18 October 2018, which clarified that the last date for availing ITC for FY 2017-18 would be the due date of filing GSTR-3B for September 2018, not GSTR-3.
The Revenue challenged this decision before the Supreme Court, which ultimately reversed the High Court’s ruling, bringing clarity on the legal status of GSTR-3B and the corresponding limitation period for availing ITC.

🧾 Facts of the Case

• The Union of India vs. AAP & Company (2021) assessee, a registered firm, filed a writ petition before the Gujarat High Court, contending that Para 3 of the Press Release dated 18.10.2018 was ultra vires the CGST Act and Rules.
• The High Court ruled in favour of the assessee, holding that GSTR-3B is not a valid return under Section 39. Hence, the limitation for claiming ITC under Section 16(4) should be calculated from the due date of GSTR-3, which was never operationalized.
• The Revenue appealed to the Supreme Court against this ruling.

❓ Points of Dispute

1. Whether Para 3 of the Press Release dated 18.10.2018, prescribing the last date for availing ITC as the due date for filing GSTR-3B, was illegal and contrary to Section 16(4), Section 39(1), and Rule 61 of the CGST Rules.
2. Whether Form GSTR-3B qualifies as a valid return under GST law for determining time limits under Section 16(4).

🧑‍⚖️ Submissions by the Assessee

• The assessee argued that the Press Release of 18 October 2018 exceeded the scope of the Act, as Section 39 refers to GSTR-3, not GSTR-3B.
• It was contended that GSTR-3B was merely a temporary stop-gap arrangement, not a statutory return.
• Applying the limitation period under Section 16(4) based on GSTR-3B would therefore be contrary to the Act and Rules.

🏛️ Submissions by the Revenue

• The Revenue submitted that the Gujarat High Court’s view was no longer sustainable since it had already been overruled by the Supreme Court in Union of India v. Bharti Airtel Ltd. [2021] 131 Taxmann.com 319 (SC).
• Form GSTR-3B, though initially introduced as a simplified mechanism, had been validated as a return under Section 39 by amendments to Rule 61(5).
• The Press Release merely clarified legislative intent and did not create any new restriction.

⚖️ Legal Principles and Analysis

The Supreme Court examined the interrelationship between Sections 16, 39, and Rule 61, along with the practical GST return filing framework during FY 2017-18.

1️⃣ GSTR-3B as a Valid Return under Section 39

The Court referred to Bharti Airtel Ltd. v. Union of India, where it had already held that GSTR-3B is a valid return under Section 39 because:

• Rule 61(5) was amended retrospectively to clarify that GSTR-3B is the return required under Section 39(1).
• The amendment reflected legislative intent that GSTR-3 was not mandatory once GSTR-3B was prescribed.
• Therefore, GSTR-3B could not be treated as merely temporary.

2️⃣ Limitation for Availing ITC under Section 16(4)

• Section 16(4) restricts ITC claims beyond the due date for furnishing the return under Section 39 for September of the following financial year.
• Since GSTR-3B qualifies as a return under Section 39, the last date for claiming ITC for FY 2017-18 is the due date of filing GSTR-3B for September 2018.

3️⃣ Press Release of 18.10.2018 Not Ultra Vires

• The Press Release merely reiterated the statutory position and subsequent amendments.
• It did not override the Act or Rules and was therefore not illegal.

🧾 Supreme Court Decision

The Supreme Court reversed the Gujarat High Court’s judgment and held:

1. GSTR-3B is a valid return under Section 39 of the CGST Act.
2. The limitation for availing ITC under Section 16(4) is to be reckoned from the due date of GSTR-3B for September of the following financial year.
3. The Press Release dated 18.10.2018 is legal and consistent with the GST framework.
4. The Gujarat High Court’s view that GSTR-3B was merely a stop-gap arrangement was disapproved.

Accordingly, the Revenue’s appeal was allowed.

💡 Practical Implications

• Businesses cannot claim ITC for invoices relating to a financial year beyond the due date for September GSTR-3B of the following year.
• GSTR-3B is legally recognized as the return for compliance and limitation purposes.
• Taxpayers must ensure timely reconciliation and ITC claims to avoid denial.
• This judgment harmonizes the GST return filing framework and provides compliance certainty.

🔑 Key Takeaways

1. GSTR-3B = Return under Section 39 for all legal and compliance purposes.
2. ITC claims beyond September GSTR-3B of the next FY are time-barred.
3. The Press Release of 18.10.2018 is valid and legally sound.
4. The Supreme Court aligned AAP & Company with Bharti Airtel, ending ambiguity.

📢 SEO

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• Meta Description: The Supreme Court held that GSTR-3B is a valid return under Section 39 of the CGST Act. ITC must be claimed before the due date of September GSTR-3B of the following year. Read key legal principles, arguments, and implications of this landmark GST ruling.
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