Transition of closing balance of ISD as on 30.06.2017 into GST

[SHREE CEMENT]

We had closing balance of ISD Credit under Service Tax as on 30.06.2017 and carried forwarded the same through TRAN-1 form under GST. Now the department is objecting the same by stating that ISD balance cannot be transferred to GST through TRAN-1 as Section 140(1) is not allowing transition of ISD credit into GST. Whereas Section 140(7) is allowing the distribution of ISD credit of Service Tax in GST regime and the same is having overriding effect of all other provisions.

Please have the considered opinion on the same.

[Shilpi Jain]

The rightly eligible credit is a vested right and its transition should not be denied under GST. A very good case to fight.

Below are relevant cases

Samsung India challenges SCN proposing transitional-credit recovery from ISD before P&H HC

2024 (4) TMI 410 - PUNJAB AND HARYANA HIGH COURT

P&H HC issues Notice of Motion, grants ad-interim stay over proceedings arising out of SCN issued to Samsung India - 2024 (4) TMI 554 - PUNJAB AND HARYANA HIGH COURT [(Input Service Distributor (ISD)] u/s 74 of the CGST Act r/w Rule 121 of the CGST Rules, seeking recovery of transitional credit; SCN proposed recovery of credit transitioned u/s 140 of the CGST Act by the Petitioner through Form TRAN-1 on the ground that ISD was not permitted to transition the credit under the GST Regime...

Recently, Bombay HC [2024 (3) TMI 272 - BOMBAY HIGH COURT], while hearing a batch of writs on whether Input Service Distributors (ISDs) are entitled to transition the undistributed credit lying with them as on June 30, 2017 has sought GST Council's assistance in taking appropriate view of the matter

[KASTURI SETHI]

Dear Querist,

Yes. Section 140(7) of CGST Act will have overriding effect. ISD credit of Service Tax  pertaining  to pre-GST era can be transitioned, even if invoices are received after 30.6.17

[KASTURI SETHI]

Also see the judgement of Bombay High Court in the case of Siemens India Ltd. Vs. UOI (2024 (3) TMI 272 - BOMBAY HIGH COURT). Stay already granted in favour of the party will continue. Next date of hearing 09.8.2024.

[Ganeshan Kalyani]

I agree with the view of the experts

AI Summary

ISD credit transition under Section 140(7): pre GST service tax ISD credits may be transitioned into GST despite objections. Whether undistributed Input Service Distributor (ISD) credit under service tax as on the transition date can be carried into GST via TRAN 1 is disputed: Section 140(1) is said not to permit such transition, but Section 140(7) contemplates distribution of pre GST ISD credit and is argued to have overriding effect. The practical position advanced is that eligible vested ISD credit may be transitioned and distributed under GST, including undistributed pre GST credits, subject to ongoing litigation and interim orders.