GST TRAN -1 is filed by those taxpayers, who are eligible to claim the credit on the tax already paid in the pre-GST regime as per section 140 of the CGST Act, 2017 read with Rule 117 [CHAPTER – XIV- TRANSITIONAL PROVISIONS] of the CGST Rules, 2017. The credit can be by way of VAT or Service Tax or Excise Duty.
In order to claim the complete amount as a credit, TRAN-1 is to be filed along with the particulars of stock carried forward. All the persons registered under the Goods and Services Tax (GST) Acts who may or may not be registered under the pre-GST regime were permitted to file GST TRAN-1. It involves all those who migrated to GST and have an input tax credit [ITC] on closing stock.
Taxpayers who do not have a VAT or excise invoice for stocks held by them on 30th June 2017, can use GST TRAN –2. However, certain classes of taxpayers including the composition dealers under the GST need not claim the said credit. As per Rule -117 of the GGST Rules, 2017 the taxpayers should have filed the application in TRAN-1 or TRAN-2 within 90 days from 1st July 2017 [which was again extended from time to time up to 31st March 2020 for the persons who could not file the form, due to technical issues on the GST Portal].
However, a number of taxpayers could not file the same not only due to technical glitch on the portal but also owing to other technical difficulties at the end of the dealers. Consequently, a large number of taxpayers who could not furnish FORM TRAN -1 within the stipulated time either due to technical glitches on the GST portal or due to technical difficulties experienced by them. In many cases, the taxpayers could not even access the system to get uploaded the said application.
However, the time limit for filing TRAN -1 was extended only for the persons who could prove that they have attempted to upload TRAN -1 within the prescribed time limit but failed to do so. Practically it is impossible for those taxpayers. Under these challenging circumstances, a large number of taxpayers across the country had approached jurisdictional high courts challenging the time limit prescribed under Rule -117 of the GGST Rules, 2017 and almost all cases [except in one case where the High Court of Bombay in NELCO Ltd. vs. UOI & Ors has upheld the validity of Rule 117 of the CGST Rules, 2017] are decided in favor of the taxpayers, in which it is held that “Accordingly since all the Petitioners have filed or attempted to file Form TRAN-1 within the aforesaid period of 3 years they shall be entitled to avail the Input Tax Credit accruing to them.
They are permitted to file relevant TRAN-1 Form on or before 30th June 2020. Respondents are directed to either open the online portal so as to enable the Petitioners to file declaration TRAN-1 electronically or to accept the same manually. Respondents shall thereafter process the claims in accordance with the law.
Respondents are directed to publicize this judgment, including by way of publishing the same on their website so that others who may not have been able to file TRAN-1 till date are permitted to do so on or before 30th June 2020”.
The High Court of Delhi has ruled that the stipulation of a time limit in Rule -117 is a directory in nature since there are no supporting provisions in the CGST Act. In the absence of any specific provisions under the Act, the provisions of the Limitation Act is applicable and as such the period of 3 years [as prescribed in the Limitation Act, 1963] should be the guiding principle and thus, a period of 3 years from 1st July 2017 would be the maximum period for availing of an input tax credit on opening stock.
Therefore, the Court has allowed all taxpayers in the country to furnish fresh FORM GST TRAN-1 within 30th June 2020. In most judgments delivered by various high courts, it was held that transitory credit is a vested right and any time limit cannot be fixed to avail that right.
By an amendment in section 140 of the CGST Act through Finance Act, 2020 the effect of various High Court judgments allowing further time for filing GST TRAN 1 is nullified. It can be noted that as per the judgment, High Court of Delhi has allowed all taxpayers in the country to furnish fresh FORM GST TRAN-1 within 30th June 2020 online or through manually as the case may be. In the circumstances, all persons who have a eligible claim of transitional credit as on 1st July 2017 [but not availed the same yet] to file GST TRAN-1 afresh within 30th June 2020 as directed by the High Court of Delhi.