Gujrat High court notice on GST Transitional credit

Gujrat High court notice on GST Transitional credit:

In its recent observation in the case of M/s Jay Chemical Industries Limited. The honorable high court sent the notice to the central government and GST council. This case may become a landmark for the issues related to GST transitional credit.

Facts and ground of case for  ultra vires act restricting GST transitional credit:

The petition stated that section 140(5) of CGST Act provide for the availability of GST transitional credit. It covers the case when the supply is received after GST but the tax was paid in earlier tax laws.Tax on those supplies was paid in any existing law. The section also provides the time limit of 30 days to enter the transaction in books of accounts. But rule 117 of CGST rules requires the filing of Tran 1 to avail any transitional ITC. Although section 140(5) don’t extend any right to make rules for any procedural aspect.

Section 140(5) provide for the substantive and procedural part for transitional credit covered in that part. There is no right to the board to make rules and restrict the benefit given under section 140(5).

This is ultra vires on the part of the board to require the taxpayer to file Tran1. The taxpayer in this case inadvertently skipped the ITC on goods on transit although they were entered in books of accounts in the prescribed time period. Their entry in books of accounts in 30 days fulfills the condition is given in section 140(5) of CGST Act and no further action is required for eligibility of ITC.

Many taxpayers have lost their right on transitional ITC due to non- filing of FORM GST Tran 1. It is indeed a good news for all those taxpayers. 

The next hearing of the case will be on 25th July.

Let us wait and see what 25th July will bring us all. To get in touch with us pls send an email at info@consultease.com