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

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.