The Madras High Court held that the transitional Input Tax Credit (ITC) can’t be availed of except within the stipulated time limit.
The Petitioner, M/s.P.R.Mani Electronics is a proprietary concern involved in the retail trade of mobile phones, electrical, electronic, and other items. When the CGST and SGST Acts were introduced, as a transitional measure, the carry forward of credit for taxes paid on inputs under previously existing indirect tax laws, which may be referred to as transitional ITC, was enabled by making provision in respect thereof.
In terms thereof, according to the Petitioner, he is entitled to avail Transitional ITC of Rs.4,62,496/- under the head of CGST and Rs.7,512/- under the head of SGST under the respective GST laws.
The petitioner has challenged the validity of Rule 117 of the Central Goods and Service Tax Rules, 2017 on the grounds that it is ultra vires Section 140 of the Central Goods and Services Tax Act, 2017 (the CGST Act) and infringes Articles 14 and 300A of the Constitution.
The petitioner further pleaded before the court that the Respondent-authority should be directed to permit the Petitioner to file Form GST TRAN-1 either electronically or manually to claim the transitional input tax credit of Rs.4,70,008/-.
It was noted by the court that as is evident on perusal of Rule 117(1), a registered person is required to submit a declaration, electronically, in Form GST TRAN-1 on the common portal within 90 days or, if applicable, the extended period not exceeding 180 days from the appointed date in order to make a claim for Transitional ITC.
The division bench headed by the Chief Justice A.P. Sahi held that the transitional Input Tax Credit (ITC) can’t be availed of except within the stipulated time limit.
“If construed as mandatory, the substantive rights of the assessees would be impacted; equally, if construed as directory, it would adversely impact the Government’s revenue interest, including the predictability thereof. On weighing all the relevant factors, which may not be conclusive in isolation, in the balance, we conclude that the time limit is mandatory and not a directory,” the bench noted.
However, the beach stated that if any dispensations are granted by the tax authorities with regard to availing of Transitional ITC, whether by filing Form GST TRAN-1 or otherwise, and to which the Petitioner may be entitled, this order will not preclude the Petitioner from making a claim for Transitional ITC.
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