T&AP HC issues notice in plea challenging time limit on claiming input tax credit under GST regime

A Division Bench of the High Court of Judicature at Hyderabad for Andhra Pradesh and Telangana has issued notice to the Union Ministry of Finance and the Goods and Services Tax (GST) Council among others, in a petition challenging the time limit prescribed to claim input tax credit under the GST regime..A challenge was made to the time limit to file Form Tran 1 under Rule 117(1) of the Central Goods and Services Tax (CGST) Rules, and the Telangana Goods and Services Tax Rules. The TRAN 1 form allows individuals and organisations to transition their tax credits from old laws to the Goods and Service Tax (GST) legislation, which came into effect on July 1, 2017..Those who wished to transition their credits were given 90 days to do so, extendable by a further 90 days. All transition forms were required to be completed and submitted online. The facility was withdrawn from the GST website on December, 28, 2017..Karan Talwar, a former Partner at Lakshmikumaran and Sridharan, has filed the petition. It is argued that a right to credit already earned under the old indirect tax laws was a vested right, provided for in the transition provisions under the GST Act, which could not be taken away on account of time limits..He also said that Section 140, which is the provision which deals with transition under both the CGST and the State GST Acts, allows for governments to prescribe the manner in which a transition may be effected..Relying on a full bench judgement of the Supreme Court in Sales Tax Officer v KI Abraham, Talwar argued that “prescribed manner” only accounted for the “mode” in which the transition was to be effected, and that it did not authorise the rule-making authority to prescribe a time limit..If the legislature intended to prescribe a time limit, the phrase “the time within which” should necessarily have been incorporated into the section, says Talwar..He also argued that on a true interpretation of Rule 117(1), the time limit prescribed is at best directory and not mandatory. This stood fortified by Circular No. 39/13/2018-GST dated April 3, 2018, which permits filing of Form TRAN 1 even after the last date provided in the Rule, but only due to IT problems, and without any statutory sanction to that effect..The High Court Bench of Acting Chief Justice Ramesh Ranganthan and Justice J Uma Devi proceeded to issue notice in the matter.