transitional credit carried forward in gst

[Richa Goyal]

we had a balance of central excise credit which we carried forward in CGST in the TRANS -1 form. We did not utilize the CGST balance due to an ongoing litigation in the matter. Eventually , we reveresed the CGST credit in GSTR- 3B. Now the department states that we will have to pay the whole credit in cash as ongoing credit cannot be considered due change in regime from central excise to GST... Please guide.

[KASTURI SETHI]

I do not agree with the department's view point. Once credit balance has been properly carried forward in TRANS-1, thereafter, no question of cash payment. You have not mis-utilized in any way. Rather you have reversed the same due to ongoing litigation and this proves that you have acted in a bona fide manner.

This is my view and interpretation.

[Ganeshan Kalyani]

The credit is not utilised by you. The reversal is as good as payment. Separate payment would mean double payment. I agree with Sri Kasturi Sir's view.

[KASTURI SETHI]

"Credit reversed amounts to credit not taken".It has been held by a plethora of Courts. One case law based on the judgement of Supreme Court, various High Courts is appended below:-

2017 (358) E.L.T. 825 (Tri. - Ahmd.) = 2017 (4) TMI 217 - CESTAT AHMEDABAD COMMISSIONER OF C. EX. & S.T., SURAT-II Versus ATUL LTD.

​​​​​​​Though above case laws pertain to pre-GST period, these are equally relevant and applicable to the GST regime.

Recently, I have read a case law on this issue pertaining to GST regime which will take time to trace out.

[CSSANJAY MALHOTRA]

Please go through Circular No. 42/2018 CGST dated 13.04.2018

4.1 Recovery of central excise duty, service tax or wrongly availed CENVAT credit thereof under the existing law and inadmissible transitional credit:

(a) The CENVAT credit of central excise duty or service tax wrongly carried forward as transitional credit shall be recovered as central tax liability to be paid through the utilization of amounts available in the electronic credit ledger or electronic cash ledger of the registered person, and the same shall be recorded in Part II of the Electronic Liability Register (FORM GST PMT-01).

(b) The arrears of central excise duty, service tax or wrongly availed CENVAT credit thereof under the existing law arising out of any of the situations discussed in para 3 above, shall, unless recovered under the existing law, be recovered as central tax liability to be paid through the utilization of amounts available in the electronic credit ledger or electronic cash ledger of the registered person, and the same shall be recorded in Part II of the Electronic Liability Register (FORM GST PMT-01).

[Richa Goyal]

Thanks a lot for your promt reply and guidance. I shall deal with the issue in the said manner

[KASTURI SETHI]

Sh.Sanjay Malhotra CS,

Yes, Sir. Board's circular mentioned by you is more relevant and forceful as compared to case laws pertaining to pre-GST era.

AI Summary

Transitional credit reversal: reversal may denote non utilisation, but recovery follows electronic ledger adjustment procedures. A registrant reversed carried-forward transitional credit in GSTR-3B during litigation; forum contributors argue reversal denotes non-utilisation and avoids double payment, while administrative Circular guidance mandates recovery of wrongly carried transitional credit as a central tax liability payable through the electronic credit or cash ledger and recorded in Part II of the electronic liability register (FORM GST PMT-01).