Govt to unfold scrapping policy for automobiles sooner: FMFM announces change in auto policy - BS-IV vehicles registered prior to March 31, 2020 to be allowed full shelf life + Addl 15% Depreciation to be allowed till March 2020 + Ban on purchase of new cars replacing old vehicles by Govt Departments liftedGovt working on solutions for home buyers and real estate promoters stuck with fund problemsFM says tax officials to be instructed not to overreach taxpayers to meet targetsNBFCs to be allowed to use Aadhar-authenticated KYC of banks: FMGovt to amend MSME Act to give ONE definition for MSME; Cabinet approval to be taken soonBank loans - Online tracking option to be given to customers for ease of knowing status + Banks to introduce one time loan settlement policyGovt decides to withdraw Surcharge on capital gains made by FPIs + Surcharge on domestic investors also guillotinedFM says All notices, including summons, by Income Tax Department to be centralised & computer-generated from October 2019 + Old notices to be either clears before Oct or to be re-generated with DIN + all notices to be cleared within 3 monthsGST - Amritsar CGST holds Annual Return Mela with practitionersSC grants relief to Chidambaram in ED case till Monday but no succour in CBI casePradhan to launch commencement of work ceremony for 10th CGD Bidding Round (See 'TOG News')TP - Company engaged in manufacturing, assembling, servicing & software cannot be held as good comparable to trading segment: ITAT (See 'TOG Latest')I-T - Where 71% of the receipts of a trust are used in furtherance of its stated objectives the same is sufficient to infer that such trust exists: HC (See 'TOG Latest')Customs - Where assessee requests for speaking order & pays duty under protest, it cannot be inferred that assessee accepted enhanced value: CESTAT (See 'TOG Latest')Central Excise - Where assessee harbored bona fide belief in respect of an issue due to conflicting precedent judgments, then extended limitation cannot be invoked: HC (See 'TOG Latest')Sabka Vishwas Legacy Dispute Resolution Scheme to be effective from Sept 01 (See 'TOG News')TP - Similarity of functions/characteristic of services rendered by comparables are indispensable for their selection for purposes of benchmarking: ITAT (See 'TOG Latest')I-T - Holding more than 20% shares in two companies is in itself insufficient to infer that loan given by one company to the other is commercial transaction: HC (See 'TOG Latest')Central Excise - Clean Energy Cess bears nature of fee & is not any duty; hence assessee is not entitled to Cenvat credit on the same: CESTAT (See 'TOG Latest')Service Tax - If assessee claims refund in bona fide before wrong authority, then reasonable course of action is to transfer such claim to that authority having jurisdiction: CESTAT (See 'TOG Latest')EPF Board to move proposal for amend scheme (See 'TOG News')Naidu urges nations to adopt Comprehensive Convention on International Terrorism (See 'TOG News')
Tax on Go
Budget 2015
Click the banner to download Documents


Transitional Credit and GST TRAN-1 issue: Way Forward
By Pawan Arora (Joint Partner); Gaurav Gupta (Associate) Advs. ALA Legal
Aug 08, 2019

LOSS of transitional input tax credit due to genuine reasons and restrictive transitional provisions has been a big issue since introduction of the GST Law in India. Various High Courts in plethora of judgments have provided relief to the assessees on these issues.

Recently, the Hon'ble Delhi High Court has provided reliefs to various taxpayers/ Petitioners who could not file GST FORM TRAN-1 within the due date due to technical difficulties or any other genuine reasons.

In one such case, namely Uninav Developers Pvt. Ltd. v. Union of India W.P.(C) 13772/2018 decided on 29.07.2019 - TOG-503-HC-DEL-GST-2019, the Hon'ble Delhi High Court observed that "The entire GST system is still in a trial and error phase and it will be too much of a burden to place on the Assessees to expect them to comply with the requirement of the law where they are unable to even connect with the system on account of network failures or other failures". The factual background of the case was that the Petitioner was unable to carry forward its CENVAT credit to its electronic ledger due to failure to file TRAN-1. IT Grievance Redressal Committee rejected the application of the Petitioner requesting for reopening the TRAN-1 on the ground that it attempted TRAN-1 filling but no error/ no valid error reported. In absence of evidence of a failure of system error, re-filing was not allowed. The Hon'ble Court directed the Respondents to reopen the portal or to accept the manual TRAN-1.

Thus, in cases where assessee was unable to connect with the system on account of network failure or other failures and failure in attempting filing of GST TRAN-1, he may approach to the authorities to request for re-opening of filing of GST-TRAN 1.

In another recent judgment in Bhargava Motors v. Union of India W.P. (C) No. 1280/2018 2019 SCC OnLine Del 8474 decided on 13.05.2019 - TOG-322-HC-DEL-GST-2019, wherein the Hon'ble Delhi High Court observed that GST system is still in a ‘trial and error phase' as far as its implementation is concerned. The factual background of the case was that the dealer had successfully filed TRAN-1 but his credit was not getting reflected in the Electronic Ledger. The Court directed the Respondents to reopen the portal or to accept the manual TRAN-1.

In another recent case namely Blue Bird Pure Pvt. Ltd. v. Union of India W.P. (C) 3798/2019 decided on 22.07.2019 - TOG-511-HC-DEL-GST-2019, the Petitioner inadvertently filed TRAN-1 showing available stock of goods in column 7(d) instead of column 7(a). The Hon'ble Delhi High Court observed that due to such inadvertence, the Petitioner cannot be denied credit and observed that the Petitioner was entitled to get the TRAN-1 rectified.

The taxpayers who could not file TRAN-1 within the due date due to one reason or another were offered another beacon of hope by the decision of the Hon'ble Madras High Court (Madurai Bench) in the case of Tara Exports v. Union of India W.P. (MD) No. 18532 of 2018 - TOG-301-HC-MAD-GST-2018 wherein the Court found that genuine efforts made by the Petitioner to file TRAN-1 entitled him to relief. The Court categorically held that the

"The due date contemplated under the laws to claim the transitional credit is procedural in nature. In view of the GST regime and the IT platform being new, it may not be justifiable to expect the users to back up digital evidences. Even under the old taxation laws, it is a settled legal position that substantive input credits cannot be denied or altered on account of procedural grounds."

Thus, assessees who were not be able to file GST TRAN-1 within the due date may also approach to the authorities to request for re-opening of filing of GST-TRAN 1.

Ineligibility to claim Transitional credit due to Arbitrary Transitional Provisions

There are many instances where the assessees were not eligible to avail the transitional credit due to restrictive transitional provisions such as:

i. Where credit was reversed on or before 30.06.2017 due to non-payment to vendors, and not eligible to re-avail the same in case of non-payment to vendors upto 30.09.2017 [S. 140(9)].

ii. Credit of Duties paid on Capital Goods in Transit as on 30.06.2017 [S. 140(5)].

iii. Restriction to carry forward the Credit of Cesses [S. 140(1)] – Recently writ admitted by various High Courts.

iv. Limitation of 1 Year to claim the credit on duties paid on inputs in stock/ contained in semi-finished stock or Closing Stock [S.140(3)] – Held as unconstitutional by Hon'ble Gujarat High Court in the matter Filco Trade Centre Pvt. Ltd. v. Union of India - TOG-215-HC-GUJ-GST-2018. However, the judgment is challenged by department and pending before Hon'ble Supreme Court.

Way forward

It is important to note that the Hon'ble Delhi High Court has suggested the Government/ GST Network for providing robust grievance redressal mechanism to address the genuine grievances of traders instead of compelling every trader to approach the Court for relief. [Blue Bird (supra)]

Thus, in our view, the taxpayers who were not able to carry forward/ take the input tax credit in TRAN-1 due to technical glitches, or unable to connect with the system on account of network failure or other failures, or were not able to file within due date, or for any other genuine reasons, may request the authorities to allow them to claim such credit in light of the judgments passed by various High Courts of the country.

Further, ineligibility of claiming the transitional credit due to arbitrary transitional provisions restricting the transitional credit is also open to challenge before the writ courts.

[The views expressed are strictly personal.]