The Central Board of Indirect Taxes and Customs (CBIC) on Saturday issued a notification announcing May 18, 2020, to be the effective date for the implementation of the provisions pertaining to Transitional credit for unavailed CENVAT – Amended under Section 128 of the Finance Act, 2020.

The Finance Ministry has notified the retrospective amendment in the Central Goods and Services Act (CGST Act 2017). With this amendment, the Centre has bought itself to disburse the pending input tax credit.

With this amendment in Section 140 of the Central Goods and Services Tax Act relating to transitional arrangements for the input tax credit has formally been made effective, so as to prescribe the time limit and the manner for availing input tax credit against certain unavailed credit under the existing law. This amendment shall take effect retrospectively from July 1, 2017.

The notification is issued by the Board after two weeks of Delhi High Court judgment directing the Central Government to allow the taxpayers to claim an input tax credit under Form GST TRAN-1 till 30th June 2020 since the statutory time limit for the same is a directory and therefore, the period of limitation of 3 years under the Limitation Act would apply.

Section 128 of the Finance Act, 2020 amended Section 140 of the CGST Act, 2017, which elaborates on transitional arrangements for the input tax credit. Section 140(1) mentioned only CENVAT credit, the meaning of which was to be taken according to Rule 3 of the CENVAT Credit Rules, 2004 which also included cesses, the addition of words ‘cenvat credit of eligible duties’ has been resorted to by the government.

This amendment is expected to pose problems to everyone except the petitioner of that ruling for claiming all pending transitional credit (technically known as an input tax credit or ITC) ) in electronic credit ledger for unavailed CENVAT till June 30. The Notification for the amendment says: May 18, 2020, is the date on which the provisions of section 128 of the Finance Act 2020, shall come into force.

In many cases, High Courts had allowed transitory credit even when required returns were not filed before the due date. The amendment was done to get over these judgments and provided that transitory credit taken after the due date will be disallowed if return filed beyond the due date. This amendment is with retrospective effect to nullify judgments of various High Courts section 140 of the CGST Act amended with retrospective effect.