A bitter fight between the Indian government and the taxpayers has come to an end. With Supreme Court Decision in Union of India & Anr vs Filco Trade Center Pvt Lts & AnrThe Honorable Apex Court put an end to the long pending issue of transitional credit under the new GST scheme.
As can be recalled, when the Goods and Services Tax (“GST”) was introduced in 2017, it encompassed different types of levies (both central and state) such as central excise, on services, value added tax, etc. To allow for a smooth transition, the new GST legislation provided a transition mechanism allowing taxpayers to carry over to the GST input tax credits accrued under the previous indirect tax regime. To enable such a benefit, Section 140 of the Central Goods and Services Tax Act 2017 (“CGST Act”) provided for the filing of Form Tran-1 whereby taxpayers could carry over their tax credits. taxes accrued on the new GST system.
Although the provisions have been beneficial to taxpayers by allowing for an easy transition, the implementation has not been as smooth and easy. Various technical issues have hampered the transition of several taxpayers to the new GST network (“GSTN”). What was more difficult – the tax administration was not really cooperative or responsive to such difficulties from taxpayers, leaving the taxpayer with no alternative but to knock on the doors of various High Courts.
Most of the High Courts in India took cognizance of the plight of the taxpayers by granting relief in the form of opening the GSTN for filing or filing, but there were also differing views. It was not until the litigation escalated and the High Courts expressed dissenting opinions that the Central Board of Excise and Customs (“CBIC”) took action and issued Circular No. 39/ 13/2018-GST dated April 03, 2018 for the establishment of a computer complaints mechanism. However, despite providing such a mechanism, the onus was still on the taxpayer to demonstrate that the non-filing of Form Tran-1 was due to a technical issue on the GST portal, and this required the taxpayer to submit the evidence. necessary to prove his claim. . In this regard, the aforementioned circular provided:
“The problems that it is proposed to solve through this mechanism would essentially be those related to the common portal (TPS portal) and which affect a large proportion of taxpayers. Where the issue is with an individual taxpayer, due to localized issues such as unavailability of internet connectivity or power failure, this mechanism will not be available. »
Thus, taxpayers were always at the mercy of the tax administration to determine what would be considered a technical problem on the GST portal, and what would be considered a localized problem (in accordance with the aforementioned circular). This led to another round of litigation in various High Courts, again with varying results.
Ultimately, the case went to the Supreme Court for review. Not that this is the first time the issue has been before the Supreme Court. Also in the past, there have been cases where the Honorable Supreme Court has granted relief to taxpayers on this issue. However, in the latest decision, the Honorable Supreme Court issued general relief for all taxpayers who could not either file Form Tran-1/Form Tran-2 or could not revise it, regardless of the problem. computer and , regardless of whether the taxpayer has filed a petition for writ or has filed such a petition with the GST authorities.
The Supreme Court has ruled that all taxpayers can file or revise their returns within the prescribed 60-day deadline, which is between September 01, 2022 to October 31, 2022. During the said period, the GSTN will open the GST portal for such filing, and the authorities have been requested to ensure that there are no technical problems in the portal during the said period.
It is important to note that the input credits will not be automatically transferred and that the decision will rest with the authorities who will verify each application on the merits. In addition, this verification exercise must be carried out in a time-limited manner, i.e. within 90 days from the date of filing of these declarations. GST authorities are required to pass the orders on the merits after granting appropriate reasonable opportunity to the parties concerned.
While the above decision by the Honorable Supreme Court is a welcome decision, there are still some areas, listed below, that may cause taxpayers some discomfort and lead to further litigation:
– Technical issues: Although it was requested that the GSTN Portal be free from technical issues, the past 5 years experience has been otherwise. If technical problems persist, the whole exercise can be extended; and
– Approach of the tax authorities: it is no secret that wherever the tax authorities have the discretion to decide a matter on the merits, the likely outcome is (usually) against the taxpayer
It is likely that the GST Board may issue guidelines for the implementation of the directions of the Honorable Supreme Court and hence an eye can be kept for such instructions which may assist in completing the prescribed forms.
In conclusion, the Supreme Court’s decision is a great relief to taxpayers who have been forced to run from pillar to post to claim their rightfully accrued input tax credit. Taxpayers who were unable to pass the input tax credit from the former indirect tax regime are strongly recommended to avail themselves of this facility within the prescribed two-month period. Preparatory work should start as soon as possible so that companies (facing this problem) can have the necessary information/documents ready to be filed as soon as the GSTN portal reopens on September 1, 2022.