Can the arrears of CST for pre-GST period be paid through ITC register

[Rangaswamy R]

As per April 2018 circular, arrears of central excise and service tax can be paid through ITC register. similarly arrears of VAT, entry tax, Luxury Tax of Karnataka can be paid through ITC register. Can the arrears of Central Tax Act arising out of assessment finalization in February 2020 for pre-GST period be paid through ITC register?

[Rajagopalan Ranganathan]

Sir,

Please see Circular No. 42/16/2018-GST, dated 13-4-2018 (issued from F. No. CBEC-20/16/03/2017-GST).

Para 4.1 (b) of the said circular provides that "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).

Para 4.2 (a) of the same circular provides that "The arrears of interest, penalty and late fee in relation to CENVAT credit wrongly carried forward, arising out of any of the situations discussed in para 3 above, shall be recovered as interest, penalty and late fee of central tax to be paid through the utilization of the amount available in 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).

In view of the above arrears of central excise and service tax can be paid through ITC register can be paid through the utilization of amounts available in the electronic credit ledger or electronic cash ledger of the registered person.

Regarding arrears of VAT, entry tax, Luxury Tax of Karnataka you may refer to the circular issued by Government of Karnataka.

[Rangaswamy R]

Dear sir,

1. Thanks for your quick response.
2. The issue at hand is whether the arrears of Central Sales Tax ( CST) for pre-GST period can be paid through electric ITC register of central tax.
3. April 2018 circular of CBIC does not mention about CST.
4. Hence the question.

[KASTURI SETHI]

You will have to search Notifications/Circulars of Central Sale Tax Act issued on 30.6.17 or after 30.6.17, the date of implementation of GST Act on google. There must be some.

[Alkesh Jani]

Shri

In this regards, my point of view is that, the Circular quoted is with regards to transitional credit and reversal thereof. the arrears of duty/tax is required to be clarified in the matter.

Thanks

[KASTURI SETHI]

Yes. It talks of transitional credit.

[Kashish Gupta]

Hi Rangaswamy R,

Kindly refer the definition of "existing law" given under clause (48) of section 2 of Central Goods and Services Tax Act, 2017, which reads as under:

"existing law” means any law, notification, order, rule or regulation relating to levy and collection of duty or tax on goods or services or both passed or made before the commencement of this Act by Parliament or any Authority or person having the power to make such law, notification, order, rule or regulation;"

Since, Central Sales Tax Act, 1956 was passed by Parliament, said enactment shall be covered under the term "existing law".

Now, coming to transitional provisions, section 142(8)(a) provides that any amount recoverable under existing law shall be recovered as an arrear of tax under this Act. The verbatim of the section is as under:

"(8) (a) where in pursuance of an assessment or adjudication proceedings instituted, whether before, on or after the appointed day, under the existing law, any amount of tax, interest, fine or penalty becomes recoverable from the person, the same shall, unless recovered under the existing law, be recovered as an arrear of tax under this Act and the amount so recovered shall not be admissible as input tax credit under this Act;"

Kindly note that procedure for recovery of taxes is provided under section 79 of the CGST Act, 2017. Now, before proceeding to the procedure of recovery, a registered person has all rights to pay off said liability as a liability under this Act i.e. CGST [this spirit has been taken from above quoted Circulars by other experts]. Therefore, arrears of CST Act can be paid from balance lying in electronic credit ledger. The challan can be prepared in Form DRC-03 showing liability under the head "CGST" which can be utilised from credit ledger as per rule 88A of CGST Rules, 2017.

[Rangaswamy R]

Dear Kanish Guptha,

1. Thanks for your detailed response.

2. Expression " unless recovered" in 142(8)(a) of CST Act is of high relevance

3. CST officer says he will use this clause and that he will insist the Payment of arrears of CST under CST laws which are not repealed as of now.

4. How to counter using this clause is the question now.

Thanks

[Kashish Gupta]

That expression is to be interpreted in sense that if any refund is pending under repealed Act, then the demand shall be adjusted from said dues. That’s why it has been mentioned that “unless the same is recovered”.

They cannot compel you to make payment by way of CST Challan. If an assessee is not paying the demand, then it means that officer has failed to recover under the Act and therefore, recovery as per CGST Act shall be initiated.

[YAGAY and SUN]

On specific goods only, CST Act is not repealed as yet, for almost all other goods this CST is subsumed in GST.

AI Summary

Input Tax Credit ledger can discharge central sales tax arrears under transitional recovery as arrears of central tax.
Whether pre-GST CST arrears may be discharged via the electronic input tax credit ledger is debated. CBIC Circular No. 42/16/2018 allows arrears of central excise and service tax not recovered under existing law to be recovered as central tax liabilities payable through electronic credit or cash ledgers. The CGST Act's definition of existing law and its transitional provision provide that amounts recoverable under existing law, if not recovered thereunder, shall be recovered as arrears under CGST, enabling utilization of electronic ledger balances to pay such arrears, though CST officers may still seek recovery under legacy CST procedures where applicable.