Supreme Court: GSTN must set up a 60-day window for taxpayers to claim pre-GST ITC

The Supreme Court gave a landmark verdict allowing pre-GST tax credit claims on 22nd July 2022. The decision frees up a huge amount blocked as accumulated Input Tax Credit (ITC) for migrated taxpayers under GST. 

The Apex Court has allowed all affected taxpayers to avail of any tax credits accrued from the Service Tax, VAT, Octroi, and Excise Duty regime within 60 days ending on 30th October 2022. The recent development has relieved thousands of taxpayers whose transitional credit was stuck as they had missed the earlier deadlines or faced technical glitches.

Initial data indicates that an estimated Rs.500 crore of genuine tax credit allowable to taxpayers could be released under this 60-day window. About 7,000-10,000 aggrieved taxpayers whose transitional tax credits could not be passed on from the pre-GST era into the GST regime.

Accordingly, the Apex Court has directed the GST Network (GSTN) to set up a facility on the GST portal for all the migrated taxpayers to claim transitional credit from 1st September 2022 to 30th October 2022. In turn, the SC disposed of around 400 appeals in a single shot. The benefit is available to all such taxpayers whether they have submitted a writ petition.

Moreover, the SC has given a further 90 days to the GST officers to verify the authenticity of the credit claimed on a merit basis and pass an appropriate order. The Central Board of Indirect Taxes and Customs (CBIC) will issue relevant directions to field officers. 

Many industry experts across India have lauded the decision taken by the supreme judicial authority of India as they consider that the transitional credits are vested rights of the taxpayers.

Previously, the Delhi High Court had further held that the benefit should be limited to the writ petitioners and all the aggrieved taxpayers. With the SC’s verdict, the judgment becomes binding on the tax authorities and taxpayers across India.

The migrated taxpayers from the pre-GST regime must report any transitional credits in Form TRAN-1 or TRAN-2 for every GSTIN. If you earlier missed transitional credits, now is an opportunity to claim the pre-GST ITC dues. You can file TRAN-1 and TRAN-2 where any pre-GST invoice documents for credits relating to stock as on transitional date are not in your possession. The designated transitional date is 30th June 2017. Such tax credits must qualify as ITC under the GST laws. Care must also be taken that TRAN-1 can be revised only once, and no further changes are allowed.

These developments can lead to complications in GST reporting closed for 2017-18. The GST audits of FY 2017-18 are mostly closed at this point. Hence, the tax authority should clarify this aspect to taxpayers and allow them to readjust their previous records while accounting for it in the current financial year.

For any clarifications/feedback on the topic, please contact the writer at annapoorna.m@clear.in