In its recent ruling on September 9, 2020, the Andhra Pradesh High Court has reached a judgment out of a writ petition filed under Article 226 of the Constitution and ordering the respondent authority to permit acceptance of GST TRANS-1 to form either electronically or manually within a period of 30 days.

Facts of the Case-

The writ petition was heard by honored Justices C. Praveen Kumar and Justice Lalitha Kanneganti who instructed the respondent authority to allow the Writ Petitioner to submit GST TRAN-1 Form either electronically or, manually, by setting a cut- off date, within a period of 30 days from the date of receipt of judgment, in which event, the same may be dealt with, in accordance with the law.

The petitioner is a partnership concern functioning in the business of dealing in pulses and turmeric prayed to the court through the means of a writ petition of Mandamus with a view to obtain an order from the court to provide a direction to accept his Form GST TRAN-1  which will, in turn, enable him to claim the transitional credit of the entitled taxes in respect of the excess input tax credit of Rs.1,92,095/ till the cut-off date i.e., July 1, 2017, decided by the GST Council in terms of Section 140(1) and (3) of the SGST / CGST Act, 2017 along with Rule 117 of the Central Goods and Services Tax Rules, 2017 to the respondent authority.

The petitioner party also provided that it could not submit the form GST TRAN-1  due to technical glitches in terms of poor internet connectivity and other technical difficulties on the GST common portal for the earlier cut-off date decided by the respondent party in terms of the decisions of GST & GST Council.

Further, it also pleaded that the Writ Petitioner also tried to meet the concerned GST officer by meeting him time to time and also addressed letters to the concerned for allowing him to file online Form GST TRAN-1 in terms of the decision of the GST Tax Council and Circular.

The Counsel arguing on behalf of the Writ Petitioner placed on record the documentary evidence of the Photostat copies of screenshots of GSTN common portal indicating the efforts made by the Writ Petitioner trying to submit the TRAN-1 Form. However, he was neither provided with an assurance for the problem nor any opportunity to re-submit his form.

What is GST TRANS-1 Form?  Who needs to file the form?

1. GST TRAN -1 is filed by those taxpayers who are qualified to entitled to avail credits on the taxes paid already in the pre-GST regime in accordance with the provisions of section 140 of the CGST Act, 2017 read with Rule 117 of the CGST Rules, 2017.

2. The credit can be by way of VAT/Service Tax/Excise Duty. For the purpose of claiming the complete amount as a credit, the form was to be submitted along with the particulars of stock carried forward. All the persons registered under the Goods and Services Tax (GST) Acts may or may not be registered under the pre-GST regime were allowed to file the form.

3. It includes all those migrated to GST and have a stock of input tax credit [ITC] on the remaining stock. Taxpayers not possessing any VAT or excise invoice for stocks possessed by them till 30th June 2017, can use GST TRANS-1.

The problem behind claiming of credits till cut- off date-

The taxpayers were given a period of ninety days from the cut-off date to claim their credits. However, a large number of taxpayers were unable to do so due to not only due to technical glitches on the portal but also due to other technical difficulties on the parts of dealers

Though the GST department stretched the time-limit further to file the form, but only for taxpayers who were capable to prove technically that they tried to upload TRAN -1 within the prescribed time limit but were unable to do so, which seemed practically impossible for taxpayers.

Consequently, a large number of taxpayers approached their jurisdictional High Courts maintaining the insufficiency of the earlier prescribed time-limit under Rule -117 of the GGST Rules, 2017.

The Hon’ble High Court of Bombay in ref. Brand Equity Treaties Ltd Vs, The Union of India & Others, where the judge held that  “Since all the Petitioners have filed or attempted to file Form TRAN-1 within the aforesaid period of three years they shall be entitled to avail the Input Tax Credit accruing to them. They are thus, permitted to file relevant TRAN-1 Form on or before 30.06.2020”. Nevertheless, there are still cases pending where the taxpayers are facing difficulties to file and submit forms even after that date.

Conclusion:

Most of the judgments acknowledged the fact that the “Transitory credit is a vested right and any time limit cannot be fixed to avail that right”. Still, section 140 of the CGST Act, 2017 is amended through Finance Act, 2020 on 27th March 2020 with retrospective effect from 1st July 2017 and provided that transitory credit taken after the due date will be disallowed. Therefore, the ruling by Andhra Pradesh HC provides that there lies a need to adopt a harmonious system to solve the problems of such taxpayers and to promote better corporate governance in the country.

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