TDS amount remitted by contractor cannot be transitioned to GST credit through TRAN-1 under Section 17(5)

Kerala HC dismissed petition seeking to transition TDS amount remitted by contractor to GST regime credit through TRAN-1. Court held Section 17(5) inapplicable to input tax transition credit claims in TRAN-1, which only restricts input tax credit availability in certain transactions. TDS deducted by contractor cannot constitute input tax credit as it reflects in electronic cash register, not electronic credit ledger. Only amounts in electronic credit ledger qualify as input tax credit. Court distinguished judgments from Madras HC and Jharkhand HC, noting they failed to consider proviso to Section 140 and definitions under Sections 2(62) and 2(63). Section 140 covers transitional credit of input tax, not all VAT regime taxes. Petitioner advised to seek TDS refund through proper legal channels.

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Issues involved:
The issue involves the interpretation of Section 140 of the CGST/SGST Act 2017 regarding the transitional credit of input tax, specifically in relation to the treatment of Tax Deducted at Source (TDS) as input tax credit for the purposes of giving transitional credit. Additionally, the issue pertains to the applicability of the definitions of 'input tax' and 'input tax credit' as provided in Sections 2(62) and 2(63) of the Act.

Interpretation of Section 140 and Definitions of Input Tax and Input Tax Credit:
The petitioner, a dealer transitioning from the Kerala Value Added Tax Act to the CGST/SGST Act, filed a writ petition questioning the rejection of their claim for treating TDS on outward supply as input tax credit for transitional credit. The Assessing Authority declined the claim, stating that TDS can only be claimed through a refund application and is ineligible to be transitioned to GST regime credit. The Authority emphasized that TDS does not fall within the definition of 'input tax' and 'input tax credit' as defined in Sections 2(62) and 2(63) of the Act.

Provisions of Rule 117 of the GST Rules:
Rule 117 of the GST Rules outlines the procedure for claiming input tax credit under Section 140. It mandates that every registered person entitled to take credit of input tax must submit a declaration electronically in FORM GST TRAN-1 within ninety days of the appointed day. The rule also provides for extensions of the submission period under certain circumstances, ensuring compliance with the prescribed procedures for claiming input tax credit.

Precedents and Applicability of Section 140:
The judgment highlights two cases from other High Courts, emphasizing that they did not consider the proviso to Section 140 of the CGST/SGST Act. The court notes that the judgments failed to account for the specific provisions of the Act, including the definitions of 'input tax' and 'input tax credit.' Additionally, the court clarifies that Section 17(5) is not applicable to the claim of input tax transition of credit in TRAN-1, as it pertains to the non-availability of input tax credit in certain transactions, rather than the eligibility of input tax credit on valid transactions.

Decision and Dismissal of Writ Petition:
The court concludes that TDS deducted by the contractor cannot be considered as input tax credit under the GST regime, as it is reflected in the electronic cash register and not the electronic credit ledger. Section 140 of the CGST/SGST Act specifically pertains to transitional credit of input tax, and not every tax paid under the VAT regime. Consequently, the court dismisses the writ petition, advising the petitioner to apply for a refund of TDS if desired, with the assurance that such a claim will be processed in accordance with the law, without being limited by time constraints.

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