/“Retrospective amendment” in GST law: Time frame prescribed by tax department more of a direction says Delhi High Court

“Retrospective amendment” in GST law: Time frame prescribed by tax department more of a direction says Delhi High Court

MUMBAI: The tax department’s amendment around transition credit under the Goods and Services Tax (GST) framework was more of a direction, the Delhi High Court has said. The court would also hear more about 25 companies that had not been able to claim transitional tax credit had dragged the government to court over a retrospective amendment in GST framework. Time limit of 90 days prescribed by the government for taking transitional credit in cases where there was no technical glitch was more of a direction the court said. The tax department had approached the court after an order was passed in the case.

Delhi High court has agreed to hear petitions which challenge the retrospective amendment to section 140(1). The retrospective amendment introduced by the tax department attempts to remove the benefit granted by the Delhi High Court with respect to the restricted time period for availment of credit, said experts.

“While the Delhi High Court has decided that the time limit prescribed under Rule 117 is directory and not mandatory, it is important that the honourable High Court decides even on the retrospective amendment which has been incorporated in section 140(1) of the CGST Act”, said Abhishek A Rastogi, partner at Khaitan & Co, who was representing many companies in the case.

Many companies claim the government amended the law prohibiting companies to avail tax credit if they had “forgotten” about it only after few companies started claiming it and even approached the courts. Many companies had claimed that when the new tax regime was introduced in July, 2017, they forgot to claim the transitional credit.

When India moved from old indirect tax regime to GST, a onetime transition of credit was allowed. That is companies could set off part of the taxes paid during old tax regime against future GST liabilities.

Many companies claimed that they had simply forgotten to claim the transitional credit. Legal experts say that the government brought in an amendment only after a Delhi High Court judgment which seemed to favour the taxpayers.

“As one batch of petition is already before the Supreme Court and these petitions do not include averments on retrospective amendment, it becomes important for the High Court to decide on the constitutionality of even the retrospective amendment. The entire controversy will be put on rest on a holistic basis thereafter“, added Rastogi.

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