Indirect Tax Alert - Supreme Court decision on transition of tax credit (TRAN-1/TRAN-2)

Many taxpayers could not claim the ‘Transitional Credit’ under the legacy law within the statutory time limit of December 27, 2017, due to technical glitches in GST portal. Many had knocked the doors of the judiciary by approaching High Courts seeking more time/specific relief citing vested right. While there were specific directions of the Courts in some cases, directing authorities to enable the option to claim it within specified timelines, there were many unsettled cases too.

In this regard, the Hon’ble Supreme court, in Writ petitions filed by M/s. Filco Trade Centre Private Limited and other taxpayers, have pronounced the following critical directions with respect to availment of Tran-1 and Tran-2 credit that were not filed (or incorrectly filed) before the statutory deadline:

  1. Considering the judgments of the High Courts under the then prevailing peculiar circumstances, any aggrieved registered taxpayer may file the relevant form or revise the already filed form, irrespective of whether the taxpayer has filed Writ petition before the High Court or whether the case of the taxpayer has been decided by Information Technology Grievance Redressal Committee (ITGC).
  2. Access to common portal should be open in the GSTN to claim transitional credit within the 60-day window from 01 September 2022 to 30 October 2022.
  3. GSTN to ensure that the common portal is opened with no technical glitch during the above timeline.
  4. The officers have been given 3 month’s (90days) time thereafter to verify the claim of Tran credit based on merits and pass appropriate orders.
  5. In the event of successful order, the Tran credit so availed should be reflected in the Electronic Credit Ledger of the Taxpayer.
  6. GST council may issue appropriate guidelines to the field formations in scrutinizing the claims, if required.

BDO Comments

The 60-days window to claim the transitional credit is a major relief to many Taxpayers, who were stuck with GSTIN technical glitches and various other operational challenges to reflect the credit in the Electronic Credit Ledger. The decision, prima facie, looks to address genuine concerns in claiming the transitional credit, for the reasons stated in the order. However, credit missed/unavailable on account of legal interpretations or cases where it is specifically restricted under the law, needs careful evaluation to ascertain whether this opportunity if at all is available or continue the legal route.  Operational guidelines are expected to be released by the GST Council, which needs to be evaluated for suitable compliance while opting for this limited window.

Please feel free to reach out to us for any clarifications around this.

Subscribe to receive the latest BDO News and Insights

Please fill out the following form to access the download.