The problem of the transitional credit (TRAN credit) beneath the GST is under litigation with the two High courts-Kerala and Bombay settling it in favour of the taxpayer.
The Kerala High court, in its order, rendered that the GST department for providing the amendment to Form GST TRAN-1 and filing Form GST TRAN-2 through making the essential arrangements. In contrast, the Bombay High court has allowed the late furnishing of the return. In the former time, various High courts along with Madras and Delhi provided relief to the taxpayer.
The same issues must be resolved in the subsequent meeting and suggest the amendments in the GST law, said experts.
Transitional credit refers to the usage of the tax credit collected up to June 30, 2017, i.e the last day of the older central excise and service tax compliance. After the start of GST, a provision was made for the credit collected beneath VAT, excise duty or service tax to be transited to GST.
But the interruptions were that the credit was available when the returns (VAT, excise, and service tax) for the former 6 months from January 2017 to June 2017 were filed in the previous regime. Form TRAN-1 is to be furnished by the enrolled persons beneath GST, who might be enrolled or unregistered beneath the traditional compliance need to be furnished till December 27, 2017, to carry forward the ITC. indeed Form TRAN-1 can be revised only once. The government allowed those enrolled individuals who filed the evidence of an attempt to load TRAN-1 up to December 27, 2017, to file GST TRAN-1 by March 31, 2019.
Nascent period: The Kerala HC bench observed that the period between 2017 and 2020 needs to be considered “the nascent period of legislation”. There were several mistakes, from the IT department, during that duration.
As per the law limitation mentioned amending the glitches that arrived at the start of the transition need not be used as an iron handle to refuse the legal claims of the assessee, specifically for the claims concerning the transitional ITC.
Genuine Error: Tax experts found that another judgment in favour of the taxpayer specified that it is not justified to reuse the ITC on the basis of the procedural and bona fide lapse.
“With the High Court’s ruling in favour of assessee, the GST Council should come up with standardised guidelines for processing of such claims by jurisdictional authorities,” he moreover mentioned that a genuine mistake in filling up TRAN-1 on the basis of the procedural lapse or accidental mistake must not avoid the taxpayer from claiming or being qualified to avail what is otherwise legally due to him.
Another tax expert mentioned that while the revenue council opposes that the right to transition credits was not effective and the time limitation beneath rule 117 is essential, several High courts in different cases acknowledge the transition phase as a “trial and error phase” towards the concern of the implementation of the statute.
“He added that The comments/suggestions of the Single Judge of the Kerala High Court in the case of G&C Infra Innovations — including treating period between 2017 to 2020 as a nascent period — will be helpful in future disputes also, including disputes related to levy of penalty,”
