Madras HC: Refund or Carry Forward of Pre-GST Tax Credits into GST Is Taxpayer’s Choice

The Madras High Court has made a crucial judgment in favour of a taxpayer who migrated from the erstwhile Tamil Nadu VAT regime.

The writ petition case was between M/s Easwaran Brothers India Private Limited and The Assistant Commissioner (ST) (FAC). A single-person panel of Justice M. Sundar gave the judgment in December 2022.

The HC bench cancelled the department’s order asking the writ petitioner to carry forward the Input VAT using TRAN into the GST regime since the taxpayer had already opted for a refund, which the department processed with the issue of Form- P and provisional refund order. The writ petitioner had yet to receive the refund amount as they encountered a technical problem at the time of the option. 

The Tamil Nadu Goods and Services Tax (TNGST) laws provided two options for the taxpayers registered from the state to use the balance input VAT credit when GST subsumed the Tamil Nadu Value Added Tax (TNVAT) in 2017.

The first option allowed them to apply for a refund of such tax credits under the TNGST law. The second option allowed them to carry forward the tax credit by filing the TRAN forms as laid down in the CGST law. 

The department must not compel such eligible taxpayers to choose a particular option but be free to choose any of the two options. Meanwhile, the government extended the window for taxpayers to carry forward their transitional tax credits into the GST regime up to 31st October 2022 after the Supreme Court verdict.

The writ petitioner contested against the order of the GST department to change their option to carry forward the tax credits using TRAN forms. They reiterated that since the provisional refund order has been issued after processing their application, the department cannot reverse the stand.

Accordingly, the Madras HC has given a landmark judgment that can bring similar litigations about any transitional input tax credit to a favourable end for businesses.

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