In re Kansai Nerolac Paints Limited (GST AAAR Maharashtra)
Also Read AAR Ruling- No input tax credit for Krishi cess in GST Regime: AAR
The Appellate Authority held that the accumulated credit by way of Krishi Kalyan Cess (KKC) as appeared in the Service tax return of Input Service Distributor (ISD) on June 30, 2017 which is carried forward in the electronic credit ledger maintained by the Appellant under CGST Act 2017, shall not be allowed to be taken as admissible input tax credit. Accordingly the order of AAR stands confirmed in terms of the above order.
My commentary on the ruling would help to those taxable persons who have carried KKC balance to the GST regime as ITC credit, before it becomes too late for a likely dispute.
Issue in brief
M/s Kansai Nerolac Paints Limited (KNPL) are engaged in business of manufacture of paints and in provision of works contract service.
ARA, Maharashtra ruled that their balance of KKC as on 30th June 2018 is not eligible for ITC credit under GST. Aggrieved by the ruling, an appeal was filed by KNPL with the Appellate Advance ruling authority on the ground
- entry 92C of union list I, empowers to levy service tax, was deleted when GST was introduced and hence KKC is sub subsumed in GST and is an admissible credit.
- The ARA was relying on the Delhi High court order ruling on the dispute of cross utilization of EC and she chess which is completely different from the subject issue.
- ARA also relies on FAQ of CBEC which has no legal binding.
After due process of law, the appellate advance ruling authority observed, KKC was accumulated due to the restriction of utilization of KKC credit only to KKC liability under earlier law. It has upheld the ruling of AAR
- based on CGST act which has not defined CENVAT credit and the explanation provided at the end of transitional provision does not also come to rescue of the appellant as the list of duties and cesses which are admissible to the like appellants defined under Rule 3 of Cenvat credit Rules,2004 which do not include KKC.
- Subsequent amendment provides for KKC credit only to output service providers and its restrictions on it’s utilistion
- The cesses cannot be treated as excise duty and service tax as the objective of the levy is for specific purpose.
- The CBEC FAQ clarification is based on the above facts and can be relied upon.
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