Tran-1 Credit - Closing Input tax credit of Last month VAT Return

[Praveen Kumar]

Dear Experts,

I have come across a situation, where one of my client has received a notice from the GST department that the TRAN-1 credit is ineligible as the conditions u/s 140 were not satisfied.

i.e., (ii) where he has not furnished all the returns required under the existing law for the period of six months immediately preceding the appointed date;

Client has registered under VAT regime on Mar-2017 and file the VAT returns upto Jun-2017 (i.e., 4 months). However, the department are of view that since 6 months returns were not filed, the closing Input tax credit in Jun-2017 VAT returns becomes ineligible.

I seek your assistance in clarification

[Ganeshan Kalyani]

Sir, in my view, the department is not correct in their view. It is obvious if the registration was taken in the month of March, 2017 then one cannot file return for the months prior to that month. I think you will have to emphasize this point again to the officer.

[Mr Rao]

Dear querist,

I agree with Shri Ganeshan Kalyan ji's reply.

[KASTURI SETHI]

I agree with the views of Sh.Ganesh Kalyani Ji.

[Shilpi Jain]

Hillarious!! This is the issue with literal interpretation.

See if you can escalate the matter to the senior officer in case this officer does not understand what you are trying to explain.

[KASTURI SETHI]

Dear Querist,

I think you have received a simple letter and not Show Cause Notice. The matter will be closed by filing reply to that letter.

It has happened in a hurry. Anyhow reply must be filed. If your problem is not sloved by filing reply, then you should meet higher officer.

[KASTURI SETHI]

Read, 'solved'.

[Ganeshan Kalyani]

The transitional credit claim is being inquired by officers in almost all the States. Initially, documents were verified and now legally it is being checked. And initial observation of theirs is to reject the claim and then it becomes our job to justify correctness of our claim.

[KASTURI SETHI]

Sh.Ganeshan Kalyani Ji,

Your reasoning is full of substance.

[Shilpi Jain]

Yes Ganeshji. You have explained the practicality of this issue, but it is high time department takes care and reduces the hassle that it is creating for the assessees.

Now - a -days there are all automated letters going to assessees, who are required to reply to them within the short time made available. Is the business man required to carry on his business or reply to the frivolous department letters. Sometimes the officers themselves are not aware of the letters being issued to assessee since it is automated.

These kind of hardships to the trade affects the 'ease of doing business'

AI Summary

Transitional input tax credit eligibility challenged when pre-appointed-period returns cannot be filed; reply to notice and seek escalation.
The department challenged transitional input tax credit under Section 140 for failure to furnish six months' prior-law returns, but the taxpayer's VAT registration began in March 2017 so returns for months before registration could not be filed. Practitioners advise filing a formal reply explaining the registration timing, distinguishing the communication from a show cause notice, and seeking escalation if necessary; they also observe widespread scrutiny of transitional claims and problems from automated notices.