The Central Board of Indirect Taxes and Customs (CBIC) issued a notification announcing May 18, 2020, to be the effective date for the implementation of the provisions pertaining to Transitional credit for unavailed CENVAT – Amended under Section 128 of the Finance Act, 2020. The Budget 2020 inserted section 128 in the Finance Act providing a retrospective amendment in section 140 of CGST Act, granting power to prescribe a time limit for transitioning credit.
The notification is issued by the Board after two weeks of Delhi High Court judgment directing the Central Government to allow the taxpayers to claim an input tax credit under Form GST TRAN-1 till 30th June 2020 since the statutory time limit for the same is a directory and therefore, the period of limitation of 3 years under the Limitation Act would apply.
“The Central Government hereby appoints the 18th day of May, 2020, as the date on which the provisions of Section 128 of the Finance Act, 2020, shall come into force,” the notification said. Section 128 of the Finance Act, 2020 amended Section 140 of the CGST Act, 2017, which elaborates on transitional arrangements for the input tax credit. Section 140(1) mentioned only cenvat credit, the meaning of which was to be taken according to Rule 3 of the Cenvat Credit Rules, 2004 which also included cesses, the addition of words ‘cenvat credit of eligible duties’ has been resorted to by the government.
The notification emphasis on the provision of transitional credit of Input Tax Credit (ITC) in electronic credit ledger for unavailed CENVAT– Amended, which will come into force from May 18, 2020. CBIC has appointed May 18, 2020, from which retrospective amendment in Section 140 of the CGST Act, 2017 prescribing the time limits for taking transitional credits as per Section 128 of the Finance Act 2020 shall come into force. The amendment is made effective retrospectively from July 1, 2017.
In many cases, High Courts had allowed transitory credit even when required returns were not filed before the due date. The amendment was done to get over these judgments and provided that transitory credit taken after the due date will be disallowed if return filed beyond the due date. This amendment is with retrospective effect to nullify judgments of various High Courts section 140 of the CGST Act amended with retrospective effect.
