HC rejects revenue dept arguments, allows pre-GST credit till June 30

Court says 90-day limit after GST rollout under rule 117 of CGST Act, on which revenue dept relied, is directional, not mandatory

Businesses having tax credits lying for pre-GST period would be able to claim them up to June 30 this year with the Delhi high court rejecting the revenue department's arguments that these could have been taken within three months of the rollout of the indirect taxation regime. 

The case relates to the rule 117 of the CGST Act, which imposed the time limt of 90 days for claiming transitional Cenvat credit, said Abhishek Rastogi, partner at Khaitan & Co, and counsel for the petitioner. GST was rolled out on July 1, 2017.

However, the court held that the time limit prescribed by the rule is directional and not mandatory. 

In a virtual hearing, the court held that the period of three years would be available for claiming these credits in line with the provisions of the Limitation Act. 

The court also ruled that the period of three years would be available to not only the petitioner but to all the entities which have CENVAT credit till June 30, 2017. 

According to industry experts, there are up to 10,000 such entities. 

Rastogi argued that the Rule 117 under the CGST Act is arbitrary, unconstitutional and violative of the right to equality enshrined under the article 14 of the Constitution to the extent that it imposes a time limit to carry forward tax credit from the erstwhile indirect tax regime.