Madras HC has Held that Time Limit Under GST Transactional Credit, Mandatory

The High Court of Madras has held that the time limit under GST Transactional Credit is not a directory but mandatory. This ruling is the opposite of that issued by Bombay HC, which the Supreme Court has ut under stay.

Transactional credit is the credit collected from central excise and service tax (the older indirect tax regime) till June 30, 2017, the last day of the tax regime. After the end of the regime, a new provision was made to deal and transfer the credit from the older indirect taxes like Value-Added Tax (VAT), excise duty and service tax to the newer regime of GST. But, some conditions were set to deal with the transfer. The credit will be available for the returns file in the previous 6 months starting January 2017 ending June 2017 and by December 27, 2017, Form TRAI I (form to be filed by the assessees registered under GST, whether registered under the older regime or not) should be filed to carry forward the input tax credit (ITC).

After numerous changes, the government had extended the last date for submission of the declaration, electronically, till March 31, 2020. Numerous assessees who were denied the credit, as they could not file the declaration by the due date, sought the ruling of various high courts. PR Mani Electronics, a petitioner who is a retail trader of mobile phones, electrical and electronic items, informed that he was entitled to receive a total transitional credit on approx Rs. 4 lakhs but was denied as he could not file the declaration till the last date. He further clarified that he had submitted a hardcopy to the department for the same which was also acknowledged by the officials but still he was denied any credit and no response was received by him in this matter.

The Court made a reference of Section 16(4) of the CGST Act Get to know about GST levy terms on disposal of the company’s capital goods under the CGST Act 2017. Also, we mentioned GST on the disposal of capital assets, if no ITC is claimed on capital goods. Read more which says, “A registered person shall not be entitled to take the input tax credit in respect of any invoice or debit note for the supply of goods or services or both after the due date of furnishing of the return under Section 39 for the month of September following the end of the financial year to which such invoice or debit note pertains or furnishing of the relevant annual return, whichever is earlier.” the court defended that the provision is indicative of the time limits imposed on ITC and its legislative intent. It also said that Section 19(3)(d) of the TNVAT Act itself had the provision that ITC would lapse if not availed by the last date.

Court said that the Input Tax Credit (ITC) A complete guide for understanding the basics of input tax credit and it calculation with detailed examples under GST (Goods and Services Tax) India is not a vested right but a concession for the assessees and time limit is always attested to such concessions. If it was to be considered a vested right, then it would affect the revenue collections and the working of the government and the predictability thereof. Dismissing the petition, the court concluded, “On weighing all the relevant factors, which may not be conclusive in isolation, in the balance, we conclude that the time limit is mandatory and not a directory,” the court concluded and dismissed the petition.”