In a sign of relief to first stage dealers, the Gujarat High Court has allowed the transition of excise duty credits on purchases made before 30th June 2016. However, the GST law doesn’t allow the facility of credit of invoices for more than one year that means the invoices which were issued before 30th June 2016.
Under the Filco, Trade Centre in Contrast with the Union of India has founded a clause iv) of sub-section (3) of section 140 unconstitutional, and therefore, struck down the same.
As per, “Clause (iv) of sub-section (3) of section 140 imposes a condition that excise duty credits of stock in hand could be availed in relation to invoices issued not earlier than 12 months prior to July 1, 2017”.
Under Section 140 there is the legal provision which allows the transitional facility for input tax credits. Furthermore, the court has permitted the transition of excise duty credits on invoices made before 30th June 2016.
Abhishek Jain, who is a Tax Partner at Ernst & Young ( EY) stated, “While this is quite a positive ruling for registered importer traders and excise registered dealers, for the real benefits to accrue various other aspects would as well need to be seen. To illustrate, the mechanism for transitioning this credits, final verdict by Supreme Court if this order is appealed against, verdicts by other High Courts, compliance with anti-profiteering provision for such additional credits, etc.”
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In the previous tax regime, the first stage dealers were not liable to pay excise duty on local goods or the countervailing duty paid on imports they were just treated just like manufacturers. A first stage dealer is one who buys the goods directly either from the manufacturer or an importer.
Officials stated that the main aim of implementing GST regime in India to eliminate the cascading effect and 12- month restriction has imbalanced the system of free flow of credits.
Abhishek A Rastogi, the partner at Khaitan & Co reported: “The decision of Gujarat High Court is very pragmatic especially after the Bombay High Court upheld the constitutional validity of restrictions imposed for transitional credits”.
