Transitional GST credit includes VAT TDS carry-forward, and Rule 117 cannot narrow the parent provision.

The Jharkhand HC held that unadjusted tax deducted at source under the earlier VAT regime formed part of the "credit of amount of value added tax" eligible for migration as transitional credit into the GST electronic credit ledger. It applied a purposive construction of the transitional provision to preserve unutilised tax paid under the old regime for adjustment against GST output liability, and read the proviso as confined to credits expressly blocked under GST law. The Court further held that Rule 117 could not narrow the scope of the parent provision by restricting migration only to input tax credit, and it noted the absence of any separate practical mechanism under the earlier return format for carrying forward the TDS amount otherwise than as excess credit.

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Issues: Whether the amount deducted towards tax deducted at source under the Jharkhand Value Added Tax regime constituted credit of value added tax capable of being migrated to the electronic credit ledger under the goods and services tax transitional provisions.

Analysis: The transitional provision was construed purposively as a mechanism to carry forward unadjusted tax paid under the erstwhile regime so that it could be adjusted against output tax liability under the new regime. The expression credit of amount of value added tax was held to include the unadjusted TDS amount reflected in the VAT returns, because under the earlier regime such amount was treated as part of the excess credit carried forward and would otherwise have become refundable on repeal. The proviso to the transitional provision was read harmoniously and was confined to credits that were expressly blocked from being taken as input tax credit under the GST law, such as those covered by the blocked credit provision. Rule 117, being subordinate legislation, could not curtail the scope of the parent transitional provision, and the Court declined to enforce it to the extent it restricted migration only to input tax credit. The Court also noted that the petitioners had no separate practical mechanism under the earlier return format except to carry forward the unadjusted TDS as excess credit.

Conclusion: The amount deducted as TDS under the Jharkhand Value Added Tax Act was held to be migratable transitional credit under section 140(1) of the Jharkhand Goods and Services Tax Act, and the denial of such migration was set aside.

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