The Supreme Court of India stayed Delhi High Court Judgment directing GST Department to open the facility to file GST Tran-1 till 30th June 2020. It is a big setback to businesses that were expecting some relief by availing themselves of accumulated credit as on June 30, 2017.
Transition Form of TRAN-1 is filed by those taxpayers who are eligible to claim the credit on the tax already paid in the pre-GST regime. In order to claim the complete amount as a credit, TRAN-1 is to be filed along with the particulars of stock carried forward.
Many assessees alleged that technical glitches at the Tax Department end prevented them from claiming the transitional credit, and approached courts. Among rulings by various High Courts, the one by the Delhi High Court dated May 5 was the most important as it allowed not just the petitioner but all other affected assessees to file a claim by June 30. This order was challenged by the GST Administration in the Supreme Court.
The above ruling of the Delhi High Court and various other High Courts have held already held that the provision in the GST Act, prescribing a time limit to file TRAN-1 is ultra vires to the Constitution. The Courts were of the view that transitory credit is a vested right and any time limit cannot be fixed to avail that right. The Government, in order to override the effects of these judgments, introduced.
The Central Government amended section 140 of the CGST Act, 2017, through Finance Act, 2020 with retrospective effect from 1st July 2017 and provided that transitory credit taken after due date will be disallowed.
A two-judge bench of the Delhi High Court had directed 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. Last month, the Central Board of Indirect Taxes and Customs (CBIC), notified the above provision in the Finance Act which in effect, nullified the effect of the judgment.
“The judgment was a great relief to all those who could not file TRAN-1 and claim the input tax credit as the direction would apply in rem,” said Advocate Ruchir Bhatia, the counsel appeared for one of the petitioners.