CBIC issues guidelines for claim of transitional credit pursuant to SC ruling

This Tax Alert summarizes recent Circular issued by Central Board of Indirect Taxes and Customs (CBIC) providing guidelines for filing/ revising TRAN-1/TRAN-2 pursuant to the Supreme Court (SC) ruling. Reference is invited to our earlier tax alerts dated 26 July 2022 and 5 September 2022.

The key clarifications are:

• The facility for filing or revising TRAN-1/TRAN-2 on Goods and Services Tax (GST) common portal will be available from 1 October 2022 to 30 November 2022 and the same would be a one-time opportunity.
  
  
• Transitional credit shall not be claimed in respect of forms (C-Forms etc.) issued after the due date of filing the original TRAN-1 i.e., 27 December 2017. 
  
  
• Applicant shall submit to jurisdictional tax officer copy of TRAN-1/TRAN-2 along with declaration in “Annexure A” to the Circular and copy of TRANS-3, if applicable, within 7 days of filing.
  
  
• In case adjudication or appeal proceedings are pending, or proper officer has rejected the claim of credit partially or wholly, filing of a fresh declaration in TRAN-1/TRAN-2 would not be the appropriate course of action.
    
• Proper officer shall verify the TRAN-1/TRAN-2 filed by the taxpayer and pass an order after giving an opportunity of being heard. Post issuance of order, the amount shall be credited in the Electronic Credit Ledger.
  

Comments:

• In view of the clarity on timelines to make fresh claims of transitional credits, the industry should make every effort to identify and collate all missed tax credits and take benefit of one-time window opened by the Government.
    
  
• Many State VAT authorities had issued statutory forms like C-Form, F-Form, etc. post 27 December 2017. Restricting the claim of credit in such cases would cause undue hardship to taxpayers. 
  
  
• Industry may have to evaluate the appropriate course of action for cases pending before the Adjudicating or Appellate authority as such credits cannot be routed through the revised transitional forms.
    
• The Circular does not address the situation where the proper officer does not verify the claim of credit within a period of 90 days. In such cases, credit should be allowed without any further verification. 
  
  
• While CBIC has issued guidelines for TRAN-1/TRAN-2, clarification on a few procedural aspects such as transition of credit by ISD and its further distribution, may help remove ambiguity and avoid litigation.  There is a Bombay High Court ruling in this regard.