HC relief on transitional GST

After Delhi HC relief on transitional GST

“Therefore, the press release nudges the businesses to carefully look at their claims and revise it if needed. Large claims would most likely be scrutinized by the authorities in next few months,” says PwC’s Jain.

The Delhi High Court has given relief to petitioners and allowed them to avail input tax credit(ITC) on pre-GST stocks lying for more than 12 months. Importers of fast-moving consumer goods, among others, are going to benefit from the interim order.

“Taxpayers who have claimed transitional credit erroneously are advised to avail of the opportunity to revise Form TRAN 1 by 27th December 2017 and ensure that only correct and bonafide credit is availed in transition, failing which the tax administration would be constrained to initiate audit and enforcement action against the identified units,” says the government release.

 

In the pre-GST regime, importers used to get tax credits on the payment of countervailing duties. However, these benefits were allowed for pre-GST stocks only if stocks lying for more than 12 months prior to the roll-out of the GST.

The new indirect tax system was rolled out on July 1.

The government response could have been triggered by the Delhi High Court order earlier in the day. “The Delhi Court’s ruling to grant interim relief by allowing ITC on pre-GST stock procured prior to 1 year, maintains and upholds the principles of justice,” says Abhishek Jain, Partner with tax advisory firm, EY even as he summarises the existing provisions.

“While the GST law contemplates restrictions on availing of input tax credit (ITC) for pre-GST stock procured prior to 30 June 2016 in scenarios where the tax invoice was available, similar restrictions had not been manifested for cases where the invoice was not available,” adds EY’s Jain.

The order is likely to put pressure on government revenues by allowing more claims. “Quantum of opening credit claimed has been a concern for the Government,” points out Pratik Jain, Leader – Indirect Tax at the tax consultancy, PwC. Transitional credit claims are in the range of Rs 65,000 crore according to some estimates.

“Therefore, the press release nudges the businesses to carefully look at their claims and revise it if needed. Large claims would most likely be scrutinized by the authorities in next few months,” says PwC’s Jain.

For companies and entrepreneurs filing credit claims, the advice is clear. “One has to be careful with the large claims since they can be scrutinized,” says Ansh Bhargava, Head Growth, and Strategy at GST Suvidha Provider, Taxmann.

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