“Unutilised Cess” can not be carry forward under GST regime

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Sutherland Global Services Private Limited Vs Assistant Commissioner, Central Tax

The issue raised was, Whether the Assessee is entitled to utilise and set off the accumulated unutilised amount of Education Cess (EC), Secondary and Higher Education Cess (SHEC) and Krishi Kalyan Cess (KKC), all referred to as the “Cess” against the Output GST Tax Liability after the switch over of Indirect Taxation System to GST Regime with effect from 01.07.2017, which GST (Goods and Services Tax) levy subsumed within 16 indirect taxes earlier leviable like Excise Duty, VAT etc.

The cross utilization of Education Cess and Secondary and Higher Education Cess was not allowed against Excise Duty and other duties under existing law prior to GST Regime and they could be set off only against the Output Education Cess and Secondary and Higher Education Cess liability, once the levy itself ceased and dropped in 2015, the question of their carry forward and utilization becomes only academic

The set off and such adjustments could be allowed only if it clearly fell within the definition of “Eligible Duties” or “Eligible Taxes and Duties” as defined in Sec 140. On the contrary, Explanation 3 clearly excluded Cess to be so eligible for carry forward and set off. Therefore, there is no doubt that Cess of any kind except National Calamity Contingent Duty (NCCD), which was so specified in Explanations 1 and 2 specifically could be allowed to be carried forward and adjusted against Output GST Liability. It may be noted here that this NCCD is allowed to be transitioned not as CENVAT credit, but because it is specifically included as “Eligible Duties” in Section 140 of the Act.

Transition of unutilised Input Tax Credit could be allowed only in respect of taxes and duties which were subsumed in the new GST Law. Admittedly, the three types of Cess involved, namely Education Cess, Secondary and Higher Education Cess and Krishi Kalyan Cess were not subsumed in the new GST Laws, either by the Parliament or by the States. Therefore, the question of transitioning them into the GST Regime and giving them credit under against Output GST Liability cannot arise.

The Assessee is not entitled to carry forward and set off of unutilised Education Cess, Secondary and Higher Education Cess and Krishi Kalyan Cess against the GST Output Liability with reference to Section 140 of the CGST Act, 2017.

The details can be accessed here : Sutherland-1 copy

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