GST Update No 247 on SC granting last chance to file TRAN-1 by 31.10.2022

The implementation of the revolutionary tax reform being GST was not as smooth as was perceived as there have been number of disputes as regards the transition of erstwhile credit into the GST regime. With the passage of time, there had been plethora of cases wherein assessees have been denied the carry forward of the transitional credit into GST regime. This update seeks to discuss the latest decision rendered by the Apex Court in the case of UNION OF INDIA V/S FILCO TRADE CENTRE PVT. LTD. & ANR. which seeks to open the window for filing transitional return for all the assessees from 01.09.2022 to 31.10.2022. It is not the first time that the extension to file transitional credit to all the assessees has been granted by the Court by exercising their discretionary powers. On earlier occasion also, the hon’ble Delhi High Court in the case of BRAND EQUITY TREATIES LIMITED VERSUS UNION OF INDIA had held that the period of 90 days for claiming input tax credit in TRAN-1 is directory and therefore, the period of limitation of 3 years under the Limitation Act would apply. The Delhi High Court had directed the department to allow all assessees to claim input tax credit in TRAN-1 by 30.06.2020. This decision was remarkable as it provided extended time limit for filing transitional credit to all the assessees. However, it appears that the tussle regarding carry forward of transitional credit is alive even after 5 years of GST implementation which has led to intervention by the Supreme Court on this matter. The hon’ble Apex Court has directed the GSTN to open the GST common portal for filing Tran-1 and Tran-2 for 2 months w.e.f 01.09.2022 to 31.10.2022 thereby allowing all the taxpayers to file their transitional returns irrespective of the fact that they have approached the Court of Law or not. The extended time period is also applicable for revising the already filed transitional credits. Furthermore, in past, various High Courts have allowed the assessees to file transitional returns after the expiry of time limit on the grounds that proof regarding technical glitches faced by them was produced. However, the present judgment does not require that the benefit is to be granted only if there was technical glitch faced by the assessee and rather the benefit is available to all the taxpayers unconditionally. The Supreme Court has also stated that the GSTN is under a liability to ensure that they are no technical glitch during the said time for filing the transitional credit. The concerned officers are given 90 days thereafter to verify the claim of transitional credit and pass appropriate orders on merits after granting appropriate reasonable opportunity to the parties concerned. The Apex Court also mentioned that the GST Council may also issue appropriate guidelines to the field formations in scrutinizing the claims, if required. It is worth mentioning over here that now the above stated judgement will grow as a benchmark for thousands of cases which are pending and brining them to a logical end. Further, the above decision supports the basic principle that legitimate credit earned by the taxpayers is their vested right and therefore, should not be denied and withdrawn merely because of procedural lapses. The above ruling has well established the principle of equality thereby treating all the taxpayers who have claimed or failed to claim credit at equal footings. The above decision has proved to be a silver lining in the clouds for the business houses. Although, it is worth noting that 5 years have passed down the road since inception of GST regime, yet the assessees are struggling to transition their credit of erstwhile regime to the GST era. However, the Apex Court should have also deliberated on the burning issue regarding claim of credit of tax paid under reverse charge mechanism after implementation of GST regime as there is no express provision to either avail input tax credit or claim refund in such scenarios. Although, there are favourable decisions rendered by High Courts that have allowed credit of such tax in electronic credit ledger of the assessee or have granted refund of the said amount to the assessee. Similarly, the issue regarding re-credit of the amount debited by the assessees for claiming refund under Rule 5 of Cenvat Credit Rules, 2004 which has been subsequently rejected post implementation of GST needs to be considered with possible remedy to the taxpayer. Nonetheless, since the facility to revise the transitional credit has been granted, the assessees should be allowed to report such peculiar transactions so that the legitimately earned credit is not being lapsed for absence of express provision in the statue.

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GST Update No 247 on SC granting last chance to file TRAN-1 by 31.10.2022

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