GST in Monsoon Session may see return of retrospective amendments

In the upcoming monsoon session of Parliament beginning 18 July, the government is likely to retrospectively amend laws governing the goods and services tax (GST) to deny transitional credit to taxpayers against cesses levied in the earlier indirect tax regime, said a LiveMint report.
 
The proposed amendment seeks to explicitly exclude cesses levied in a pre-GST regime from allowable transitional credit that can be claimed by companies, said the report, adding that under the transitional credit provision, companies were allowed to claim tax credit against levies such as value added tax and service tax on stock purchased before implementation of GST for a limited period.
 
According to the report, many companies availed the transitional credit facility seeking input tax credit also for cesses such as the Krishi Kalyan cess paid in the pre-GST regime through the TRAN-1 form. The central government, however, doesn’t want to give credit against the cesses. 
 
The Mint report did not reveal the exact amount of transitional credit claimed against cesses.
 
It accordingly proposes to specifically amend the transitional provision in the GST law to only allow input tax credit against eligible duties and insert an explanation excluding cesses from the list of eligible duties, the report said.
 
The amendments to the GST will reportedly be tabled in the monsoon session that begins from July 18.
 
“Excluding cesses from transitional credit will be the only amendment that will be retrospective as the transitional claims have already been filed through the TRAN-1 form. None of the other amendments proposed to the GST laws are retrospective,” a government official, who did not want to be named, told Mint.
 
The report said that companies had claimed nearly Rs 65,000 crore in transitional credit by mid-September, prompting the Central Board of Indirect Taxes and Customs (CBIC) to review the claims. The apex tax body had reportedly asked taxpayers to file revised claim forms by December 27, or face action for what they believe are exaggerated claims. 
 
The CBIC has also started the process of phase-wise examination of some of the highest transitional credit claims, said the report, adding the CBIC also warned taxpayers not to use disputed transitional credit against GST liability saying it will recover the amount with interest and penalty.
 
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If the government goes through with its plan, the Narendra Modi government will be going back on its promise of not making retrospective amendments to tax laws that have an adverse impact on taxpayers, Mint report added.