GST Act: Tax department grapples with writs filed against clauses

By: | Updated: December 17, 2018 4:46 AM

Tax officials say unfavourable rulings in some of these cases could have adverse revenue implications for the government.

gst, gst actIn petitions admitted by the Delhi High Court, petitioners have argued that assessees should be allowed to claim transitional credit on pre-GST goods purchased more than a year before the GST rollout.

The indirect tax department is currently grappling with notices from courts issued in response to writ petitions filed against several clauses of the GST Act. Tax officials say unfavourable rulings in some of these cases could have adverse revenue implications for the government.

In petitions admitted by the Delhi High Court, petitioners have argued that assessees should be allowed to claim transitional credit on pre-GST goods purchased more than a year before the GST rollout. The GST law restricts such credit for invoices issued not before June 30, 2016. However, it has been argued that such restrictions go against the stated motive of the GST to avoid cascading of taxes.

Last year, the government had launched a probe into what it termed as ‘unusually high’ claims of transitional credit, as it suspected large-scale frauds. An unfavourable order could see the government facing higher credit claims.

Further, the Uttarakhand High Court has admitted a petition challenging the government notification disallowing transitional credit on capital goods for firms operating under the erstwhile area-based excise exemption scheme. If this is allowed, the government may have to pay a hefty bill.

“The objective of the GST is no tax cascading, and as a corollary we filed a petition to seek proportionate credit on capital goods used in area-based exempted zones”, Abhishek A Rastogi, partner at Khaitan & Co, who filed the petition, said.

Separately, a few petitions have been filed against the methodology used by the anti-profiteering watchdog to compute profiteering in some cases. The National Anti-profiteering Authority has fined several dealers and firms over the last 12 months, but it hasn’t spelled out the procedure to determine the price cuts needed to avoid charges of profiteering. “There is a need to formulate consistent provisions to determine the quantum of profiteering. While Section 171 talks about two important factors, these are not the only two factors to reach the commensurate reduction of prices,” Rastogi said.

Also read: Good news! GST led to household savings as tax rates came down

Additionally, the government may have to review its rules regarding appointment of members of the Appellate Authority for Advanced Ruling (AAAR) if the Delhi High Court agrees with the petitioner’s contention. The court has sought a response from the government on the challenge that the GST Act allows the AAAR to have two members from the tax department and one from judiciary. This violates the Supreme Court judgment that mandates majority members in such authorities are to be from the judiciary.

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