Taxpayers, subject to certain conditions, could transition un-utilised input tax credits under the erstwhile laws say, Central excise, Service Tax and State VAT laws into GST by filing Form GST TRAN-1.

In regard to transitional credits, intense legal battles were fought on certain contentious issues like is it a vested right or a conditional right, parent (Act) v. delegated legislation (Rule), validity of retrospective amendment, technical (complexities in the form) and technological (GSTN portal) glitches. Various High Courts have examined these matters comprehensively and given rulings majorly in favour of the taxpayers.

Lately, the challenge to the prescription of time limit in Rule 117 had gathered steam and the Hon. Delhi High Court gave series of decisions in assessee’s favour. Some of the most talked about decisions were Brand Equity Treaties Ltd, SKH Sheet Metal Components and Mangla Hoist Pvt. Ltd wherein it was held that the time limit prescribed for claiming transition credits under Rule 117 is only directory & not mandatory despite the retrospective amendment to Sec.140 since the consequences of non-compliance not indicated in the Act & Rules. As the time limit prescribed in Rule 117 is only directory, the outer limit for claiming transitional credit shall be 3 years as per the Limitation Act which expires on 30.06.2020 and allowed petitioners to claim transitional credits by filing Form GST TRAN-1 on or before 30.06.2020. Further, directions were also given to the Revenue to publicize the Brand Equity decision and enable the portal for filing by 19.06.2020 or to accept the form manually.

Similarly, Hon. Punjab & Haryana High Court in the case of Amba Industrial Corporation following its own decision of Adfert Technologies Pvt. Ltd and the Hon. Delhi High Court decision in the case of Brand Equity Treaties Ltd directed the Respondents to permit the Petitioner to upload TRAN-1 on or before 30.06.2020 and in case the Respondents fails to do so, the Petitioner would be at liberty to avail input tax credit in question in GSTR-3B of July 2020.

Despite these rulings, the Revenue somehow reluctant to concede and allow this benefit which had accrued to the taxpayers under the erstwhile laws easily but chose to litigate relentlessly and keep this issue burning. The Revenue’s arguments all through this saga are that time limit for filing return is required for effective administration and smooth functioning of the administrative machinery, reasons for non-filing not attributable to technical difficulties on common portal and further, the Limitation Act cannot override the time limit prescribed in GST.

Now, this high pitched battle has reached the Supreme Court which has stayed the operation of Brand Equity ruling. Final judgment is awaited.

Given the circumstances, it seems highly unlikely that CBIC may enable the portal for online filing. Therefore, it is advisable for those taxpayers who have missed the bus / who wish make amends to their earlier claim may avail this opportunity by filing TRAN-1 form manually on or before 30.06.2020. However, this claim is not free from litigation until final the verdict by the Hon. Supreme Court.

DISCLAIMER: The views expressed are strictly of the author and NNR & Co. The contents of this article are solely for informational purpose. It does not constitute professional advice or recommendation of firm. Neither the author nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this article nor for any actions taken in reliance thereon.

Author Bio

Qualification: CA in Practice
Company: NNR & Co.,
Location: Bengaluru, Karnataka, IN
Member Since: 20 Jun 2020 | Total Posts: 3
A practicing Chartered Accountant | Partner at NNR & Co., Bengaluru | Specializes in the field of Indirect Tax Laws | Past President of Karnataka State Chartered Accountants Association (KSCAA) | ICAI IDT Faculty View Full Profile

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February 2024