Tax Insights
from India Tax & Regulatory Services
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High Court allows availing
transition credit in Form GSTR-3B, if the portal to file Form GST TRAN- 1 is not opened by 30 June 2020
June 26, 2020
In brief
Two writ petitions1 were filed before the Punjab and Haryana High Court seeking directions for opening the goods and services tax (GST) portal for filing Form GST TRAN-1 or allow to transition the input tax credit (ITC) balance as on 30 June 2017 (transitional credit).
In detail
Facts
• The petitioners failed to file Form GST TRANS-1 within the due date stipulated under the GST law, due to which the petitioners were unable to carry forward the transition credit to the GST regime.
• The petitioners contended that the issue in their case is covered by the Punjab and Haryana High Court decision in the case of Adfert Technologies Private Limited2 and the Delhi High Court decision in the case of Brand Equity Treaties Limited3, wherein the High Courts have permitted filing of Form GST TRAN-1 before 30 June 2020.
1 CWP No. 8213 of 2020 (O&M) & CWP No. 8215 of 2020 (O&M)
2 Adfert Technologies Private Limited v. Union of India [CWP No. 30949 of 2018 (O&M)]
3 Brand Equity Treaties Limited and others v. Union of India [W.P.(C) 11040/2018 and C.M. No. 42982/2018, W.P.(C) 196/2019 and CM APPL. 965/2019, W.P.(C) 8496/2019, W.P.(C) 13203/2019]
4 SKH Sheet Metals Components v. Union of India [WP(C) 13151 of 2019]
• The petitioners further argued that the Delhi High Court in the case of Brand Equity Treaties Limited had extended the benefit to similarly situated taxpayers and reiterated this in the case of SKH Sheet Metals Components4.
High Court’s decision The High Court allowed the writ petitions and directed opening of the GSTN portal for filing Form GST TRAN-1. The High Court also permitted the petitioners to claim the transition credit in Form GSTR-3B if the portal is not opened before 30 June 2020, after considering the factors below. However, the High Court did not declare Rule 117(A) of the Central GST Rules, 2017 (CGST Rules) as invalid, since the taxpayer is
entitled to carry forward the accrued Central Value Added Tax (Cenvat) credit.
Not allowing the petitioner to file Form GST TRAN-1 is violative of Article 14 and 300 A of the Constitution of India The High Court held that the time limit prescribed for availing transitional credit cannot be discriminatory and unreasonable. While the time limit for filing Form GST TRAN-1 was repeatedly extended whenever a technical glitch occurred as per the respondents, the same has been denied in the cases where the evidence of attempt to upload Form GST TRAN-I could not be produced. A rationale must be forthcoming, and in the absence thereof, it would be violative of Article
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14 and 300A of the Constitution of India.
Different yardsticks cannot be adopted to evaluate conduct of Government and taxpayer The High Court held that the Government cannot adopt different yardsticks while evaluating the conduct of the taxpayer and its own conduct, acts and omissions. The High Court relied heavily on the Delhi High Court’s decision in the case of Brand Equity Treaties Limited3 and others in this regard.
The takeaways
This judgement reiterates the fact
that the extension brought out vide Rule 117(1A) of the CGST Rules, suffers from arbitrariness and is discriminatory to
taxpayers, as the Government cannot apply differential
treatment for its own conduct and that of the taxpayers. The
taxpayers need to approach the jurisdictional GST authorities to open the portal and claim transitional credit. Now, they have another option to claim the credit in Form GSTR-3B of July 2020, as directed by the High Court, in case the portal is not opened before 30 June 2020.
This is a great relief to several taxpayers who have been unable
to claim transitional credit as it stood under the erstwhile laws.
Meanwhile, it is pertinent to note that the Supreme Court has granted stay to the operation of the Delhi High Court’s decision in the case of Brand Equity Treaties Limited and others3, which the High Court has relied upon heavily while allowing the present writ petition.
Let’s talk
For a deeper discussion of how this issue might affect your business, please contact your local PwC advisor
Tax Insights
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