Pre-GST CENVAT credit available till 30th June revised

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Pre-GST CENVAT credit available till 30th June revised

On Tuesday, Delhi’s High Court allowed people enlisted under the Goods and Services Tax to claim outstanding CENVAT credits from the pre-GST system before 30 June, 2020. The advantage of the transitional credit will extend for a term of three years, which is the duration laid down in the Limitation Act. Businesses with pre-GST tax credits will be entitled to claim them by 30 June of this year. The Delhi High Court rejected the arguments of the revenue department that they should have been considered within three months of introduction of the indirect taxation system.


Timeline and benefits:

Abhishek Rastogi, partner of Khaitan & Co., refers to Rule 117 of the CGST Act, which placed a time limit of 90 days to claim a transitional CENVAT credit. The court concluded that the deadline laid down in the law was clear and not compulsory. At a virtual hearing, the court concluded that a timeframe of three years will be available to claim these credits under the terms of the Limitation Act. By filing the TRAN-1 form, taxpayers were permitted to bear input tax credits from the excise and service tax system, under the GST Act. Even though the first cutoff time terminated in September 2017, a few augmentations were given by the Government until December 27, 2017.

Taxpayers were permitted to claim due till 31 March 2020 that were unable to do so due to technical issues. The Court also said that the three-year extension will apply not only to the applicant but also to all persons with CENVAT credit until 30 June 2017. According to market analysts, there are as many as 10,000 such entities. Rastogi claimed that Rule 117 of the CGST Act is unfair, unlawful, and in breach of the right to equality established in Section 14 of the country’s constitution. It is to the point that it places a time limit on the allocation of tax benefits from the existing indirect tax system. Although, Rule 117 of the GST Act requires a time limit to obtain a refund. Taxpayers protested in court that an input tax credit was a privilege and not a tax compromise.


Relief to taxpayers:

At the simulated hearing conducted today by the Delhi High Court, it was specifically mentioned that the specified time limit would not apply because it is a directory and not a compulsory one. The court also ruled that the prolonged duration of three years would refer not only to petitioners but also to all those petitioners who are experiencing problems with transitional credits. The Government has ensured since the launch of the GST that an enormous amount of transitional credit has been misused. An examination of almost Rs 2 lakh crore of transitional credits was announced before the underlying cutoff time was completed by the indirect tax department.



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