Revenue authorities must allow input tax credit benefits to bona fide Input Service Distributors under Section 140(7) CGST Act 2017 The Bombay HC held that revenue authorities must allow input tax credit benefits to bona fide Input Service Distributors under Section 140(7) of CGST Act, ...
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Revenue authorities must allow input tax credit benefits to bona fide Input Service Distributors under Section 140(7) CGST Act 2017
The Bombay HC held that revenue authorities must allow input tax credit benefits to bona fide Input Service Distributors under Section 140(7) of CGST Act, 2017, as part of transitional provisions. The court emphasized that revenue should take a holistic view and not defeat substantive provisions of the Act that permit such credits. Each case requires individual scrutiny to determine credit availability. The court noted anomalies where issues arose only in Maharashtra and Goa despite the Act's pan-India effect and uniform electronic portal operation. The application was disposed of, directing revenue to appropriately consider proceedings before further hearings.
Issues: Interpretation of transitional provisions under Section 140 of the Central Goods & Services Act, 2017 regarding input tax credit for Input Service Distributors. Allegation of denial of credit benefit by the revenue to bonafide Input Service Distributors in Maharashtra and Goa.
Summary:
1. The High Court of Bombay took up the proceedings for hearing on merits based on the Supreme Court's order in a specific case.
2. The petitioners' counsels highlighted the importance of Section 140(7) of the CGST Act, emphasizing the non-obstante provision allowing Input Service Distributors to claim Input Tax Credit even if invoices were received after the appointed date. They argued that the revenue's interpretation and control over this provision were hindering the rightful credit claims.
3. The petitioners contended that the revenue's approach was nullifying the provision, thus preventing registered Input Service Distributors from availing the credit benefit permitted by law.
4. The court observed that there should be no dispute against the provisions of Section 140(7) and that the Revenue must consider the holistic view to avoid defeating the substantive provisions of the Act.
5. Before further proceedings, the court requested the revenue to assess if there would be any serious dispute regarding the implementation of Section 140(7) and emphasized that the benefit of credit should align with the law and be decided on a case-to-case basis.
6. The court noted the anomaly where issues regarding Input Service Distributors were specific to Maharashtra and Goa, creating a potential discriminatory situation compared to other states, possibly violating Article 14 of the Constitution.
7. Based on their observations, the court left the decision to the revenue to address the issues raised before proceeding with the case.
8. The proceedings were adjourned for three weeks to allow the Revenue to consider the aspects highlighted during the hearing.
9. The court directed for the filing of reply affidavits and completion of pleadings to prepare for the final hearing if necessary.
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