2023 (12) TMI 1287 - HC - GST

Refund claim/Claim of input tax transition of credit - TDS amount remitted by the contractor of the petitioner - whether such amount can only be claimed through a refund application and is ineligible to be transitioned to GST regime credit, and such amount cannot be claimed in TRAN-1 as credit? - HELD THAT - Section 17(5) which has been placed reliance does not have applicability in respect of the claim of input tax transition of credit in TRAN-1. Section 17(5) is only in respect of non-availability of the input tax credit in certain transactions, it has nothing to do with the claim of input tax credit on eligible transaction. The TDS which is tax deducted by the contractor on execution of the contract of the petitioner, cannot be said to be input tax credit. Such tax deducted at source is reflected in the electronic cash register and not in the electronic credit ledger. Only the amount which is reflected in the electronic credit ledger is to be treated as input tax credit and not any amount of tax which is reflected in the electronic cash register can be treated as the input tax credit. The two judgments relied by the learned Counsel for the petitioner of other High Courts, i.e. one by the Madras High Court in the case of DMR Constructions v. Assistant Commissioner, Commercial Tax Department 2021 (4) TMI 261 - MADRAS HIGH COURT does not take note of the proviso to Section 140, and without taking note of the proviso to Section 140, the judgment has been rendered. Therefore, the said judgment would not be applicable while reading the provisions of the GST Act, including the definition as provided in Sections 2(62) and 2(63), as well as the proviso to Section 140 of the CGST/SGST Act - The next judgment of Jharkhand High Court in M/s Subhash Singh Choudhary and M/s Bhilai Engineering Corporation Ltd v. The State of Jharkhand, Joint Commissioner of State Tax (Administration) 2023 (1) TMI 1023 - JHARKHAND HIGH COURT Jharkhand High Court also does not take into account the definition of input tax and input tax credit . Section 140 of the CGST/SGST Act is in respect of the transitional credit of input tax and not every tax paid under the VAT regime. Therefore, there are no much substance in the present writ petition, which is hereby dismissed. However, the petitioner may apply for a refund of TDS in accordance with the law if he is so advised, and such claim shall be processed in accordance with the law - petition dismissed.

Summary

Issues involved:
The issue involves the interpretation of Section 140 of the CGST/SGST Act 2017 regarding the transitional credit of input tax, specifically in relation to the treatment of Tax Deducted at Source (TDS) as input tax credit for the purposes of giving transitional credit. Additionally, the issue pertains to the applicability of the definitions of 'input tax' and 'input tax credit' as provided in Sections 2(62) and 2(63) of the Act.

Interpretation of Section 140 and Definitions of Input Tax and Input Tax Credit:
The petitioner, a dealer transitioning from the Kerala Value Added Tax Act to the CGST/SGST Act, filed a writ petition questioning the rejection of their claim for treating TDS on outward supply as input tax credit for transitional credit. The Assessing Authority declined the claim, stating that TDS can only be claimed through a refund application and is ineligible to be transitioned to GST regime credit. The Authority emphasized that TDS does not fall within the definition of 'input tax' and 'input tax credit' as defined in Sections 2(62) and 2(63) of the Act.

Provisions of Rule 117 of the GST Rules:
Rule 117 of the GST Rules outlines the procedure for claiming input tax credit under Section 140. It mandates that every registered person entitled to take credit of input tax must submit a declaration electronically in FORM GST TRAN-1 within ninety days of the appointed day. The rule also provides for extensions of the submission period under certain circumstances, ensuring compliance with the prescribed procedures for claiming input tax credit.

Precedents and Applicability of Section 140:
The judgment highlights two cases from other High Courts, emphasizing that they did not consider the proviso to Section 140 of the CGST/SGST Act. The court notes that the judgments failed to account for the specific provisions of the Act, including the definitions of 'input tax' and 'input tax credit.' Additionally, the court clarifies that Section 17(5) is not applicable to the claim of input tax transition of credit in TRAN-1, as it pertains to the non-availability of input tax credit in certain transactions, rather than the eligibility of input tax credit on valid transactions.

Decision and Dismissal of Writ Petition:
The court concludes that TDS deducted by the contractor cannot be considered as input tax credit under the GST regime, as it is reflected in the electronic cash register and not the electronic credit ledger. Section 140 of the CGST/SGST Act specifically pertains to transitional credit of input tax, and not every tax paid under the VAT regime. Consequently, the court dismisses the writ petition, advising the petitioner to apply for a refund of TDS if desired, with the assurance that such a claim will be processed in accordance with the law, without being limited by time constraints.