The Form GST TRAN-1 has been the subject matter of all the controversies from the beginning of the transition into GST.
Transition Form or TRAN-1 is filed by those taxpayers who are eligible to claim the credit on the tax already paid in the pre-GST regime. The credit can be by the way of VAT/Service Tax/Excise Duty. In order to claim the complete amount as a credit, TRAN-1 is to be filed along with the particulars of stock carried forward.
There will be issues in the Trans 1 notice in Form 603 as it is now sent by the department to everyone making it troublesome for the real taxpayers. As the notice requires all the previous records to be available making it a tiresome issue for the taxpayer to provide the details again.
2. Imposition of stringent timelines is unreasonable to claim transitional credit
Under the GST regime, every registered person was required to file electronically FORM GST TRAN-1 concerning availment of unutilised input tax credit of duties and taxes paid under the erstwhile tax regime. Further, appropriate rules were framed for its revision as per the time and manner prescribed.
Vide Finance Act, 2020 wherein relevant amendments were made under the GST Act, 2017 w.e.f. July 1, 2017 to facilitate the relevant rules to determine timelines for filing FORM GST TRAN-1.
Imposing stringent timelines is unreasonable and ultimately leads to deprivation of such ITC to such a person. Reasonableness is an important consequence of the right of quality which is violated in the instant case. Further, deprivation of ITC will have direct impact on their business which will render them incapable to practice their business which is a breach of right to freedom.
3. Failure to file Tran-1 due to technical glitches on GST portal
There is no term ‘technical glitch’ defined in the GST Act or Rules made thereunder. However, the GST Network and the department in the umbrella of technical glitch are making the taxpayers suffer as they are unable to file TRAN-1 on time.
The GST Council is not heeding to the orders of the various High Court directions to re-open the portal for filing TRAN-1 or to accept the manual TRAN-1. The department is very much sitting on the proof of ‘technical glitch’ to allow the taxpayers to file or revise the TRAN-1.
The Supreme Court in the case of Brand Equity Treaties Limited stayed the Delhi High Court Judgment directing the GST Department to open the facility to file GST Tran-1 till 30th June 2020. 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.
The Delhi High Court, in the case of SKH Sheet Metal Components V/s UOI went on to criticize the functioning of the department as under, “We may just add that we do not derive any pleasure when we make such observations, as comments of the Court affect the reputation of the administration in the country. Such remarks are made only when we are constrained to do so. The case before us is one where there is a complete lack of understanding and fairness on the part of the Tax Department. The fact that Respondents have done nothing to solve the problem faced by the Petitioner, fueled with the adamant stand before us, contributes to skepticism of GST technical infrastructure, which we feel should and can be easily avoided. Only if Respondents were to engage with the taxpayers with a genuine intention to solve the problems, confidence in the system can be built up and such matters would not reach courts.”
The Delhi High court in the case of National Internet Exchange of India while allowing the petition directed the GST Authority to open the online portal so as to enable the Petitioner to re-file the rectified TRAN-1 form electronically, or, accept the same manually with the corrections within a period of three weeks.
The Delhi High Court in the case of Chogori India Retail Ltd V/s Union of India And Ors held that there have been numerous glitches on the GST Portal in making it difficult for uploading of the TRAN-1 Forms. The Court has itself issued orders in numerous cases permitting Petitioners to be afforded one more opportunity to either file the TRAN-1 Form electronically or manually. Accordingly, a direction is issued to the Respondent to either re-open the portal to enable the Petitioner to file its TRAN-1 Form electronically failing which to permit it to file manually on or before 13th September, 2019.
The Chhattisgarh High Court directed the Commissioner to refer the matter to the GST Council so as to allow TRAN-1 & TRAN-2 return filing if failure of Appellant was due to technical glitches on the common portal.
The Gujarat High Court in the case of M/s. Siddharth Enterprises V/s NODAL Officer said that the phrase “technical difficulties on the common portal” should be given a liberal interpretation because it is a settled principle of law that an interpretation unduly restricting the scope of a beneficial provision should be avoided so that it may not take away with one hand what the policy gives with the other.
