Input Tax Credit Cannot Be Reduced Retroactively Under Rule 21(8) For Pre-Amendment Stock Purchases

Dispute centered on Rule 21(8) of Punjab VAT Rules regarding input tax credit (ITC) calculations following tax rate reduction on iron and steel goods. SC upheld HC's ruling that Rule 21(8), introduced from 01.02.2014, could not be applied retroactively to reduce ITC on existing stock purchased at higher tax rates before the enabling provision in Punjab VAT Act came into effect on 01.04.2014. Following Eicher Motors precedent, SC affirmed that right to ITC accrues when tax is paid on inputs and cannot be diminished retroactively. Court emphasized that allowing retroactive application would cause prejudice to taxpayers who had legitimately claimed ITC at higher rates and could lead to revenue loss. Appeal dismissed, confirming that Rule 21(8) applies only to transactions from 01.04.2014 onwards. .....

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