In a landmark decision that could help taxpayers of the indirect tax regime to claim their old dues stuck at several states and central government levels, the Supreme Court (SC) on July 22 allowed taxpayers to claim their credits which were stuck in transition as the country shifted to GST in 2017.
Ruling in favour of taxpayers, the apex court allowed registered taxpayers to claim transition credit which did not get cleared at the time the country was shifting from the erstwhile indirect tax regime to the new goods and services tax system.
According to the Supreme Court, the Central Board of Excise and Customs (CBIC) and Goods and Services Tax (GST) Council will have to facilitate and open a 60-day window to clear credit dues pending to taxpayers.
The 60-day window will open from September 1 to October 30, 2022, on GSTN, allowing taxpayers across the country to apply for their due credit pending with governments. Once the taxpayers apply for the credit claim, officers will have a window of 90 days to verify the claims and process them.
Taxpayers across the country had challenged stuck credits, seeking their rights to the old dues at various high courts. The credit in question here is the transitional credit of the old indirect regime, which could be either under octroi/service tax/excise/VAT etc, which were due and did not get credited to the taxpayers in the transition to GST.
To facilitate this, the GST Council will have to notify the SOPs to help the 60-day window operationalise smoothly.
When asked about the quantum of such stuck credits and the number of assesses who could get their pending due, a senior government official said, "As per the initial estimates, around Rs 500 crore of genuine credit due to taxpayers is likely to be released under this window. Around 7,000-10,000 such assesses exist where transitional credit could not be passed on."
Under these orders, the government will allow for Tran 1 and Tran 2 filing. Tran 1 and Tran 2 were GST forms that allowed the assesees to transition from the pre- GST credit to the GST regime. However, industry experts said the amount due could be much more than Rs 500 crore.
"The transitional credits are vested rights and these developments will help thousands of taxpayers across the country who were struggling to get the credit with respect to transitional rights due to technical or non-technical glitches," Abhishek A. Rastogi, Partner at Khaitan and Co, who was representing and arguing for the taxpayers, said.
"(The) Delhi High Court decision had taken significant steps ahead to hold that the benefit must not be restricted only to the writ petitioners but to all aggrieved taxpayers and this aspect has now become part of the Supreme Court order," added Rastogi, who had argued before Delhi High Court and now before the Supreme Court.
Further, lauding the move by the apex court, Anita Rastogi, Partner, GST and Indirect Taxes at PwC, said, "This is a great decision by Supreme Court. Transitional credits had become a huge pain point for the taxpayer. The rightful benefit was being denied due to procedural mistakes. Clearly, when such a major transformational change i.e. introduction of GST was being implemented by businesses, a softer approach should have been taken by authorities in granting the seamless transition of such credits."
Abhishek Jain, Tax Partner, KPMG in India, said, "This decision comes in light of the ongoing dispute wherein various taxpayers had contested that on account of technical glitches these forms could not be filed in a timely manner, and even otherwise their right to transition the credit cannot be denied to them. This is a golden opportunity for the industry players irrespective of whether they were a party to the writ petition or not, and all businesses should look at any pre-GST credit that was not duly transitioned, in light of this SC judgment."
