Aim of digitization is for convenience of taxpayers and not to harass them – Bombay HC
Introduction of GST is considered to be a significant step in the reform of indirect taxation in India. Amalgamating of various Central and State taxes into a single tax would help mitigate the double taxation, cascading, multiplicity of taxes, classification issues, taxable event, and etc., and leading to a common national market. On introduction of GST, the credit of taxes under the previous laws, predominantly Central Excise, Service Tax and Value Added Tax, was allowed to be carry forwarded vide the transitional provision either as Central Goods and Service Tax (CGST) or State Goods and Service Tax (SGST) as the case may be. Accordingly, taxpayers did carry forwarded the credit by filing transactional credit by filing Form TRAN -01.
Let us refer to the case of BMW India Financial Services Pvt Ltd vs Union of India, where the Petitioner is aggrieved by denial of transitioning the credit of Rs.17,07,673 after the submission of declaration in Form GST TRAN-1 in time on GSTN.
Facts of the Case:
- Petitioner is a Non-Banking Financial Company registered under the RBI Act, 1934 and is registered under GST.
- Petitioner is engaged in financing automobiles in the form of loans and financial leases to various customers in addition to acting as a corporate insurance agent for some insurance companies.
- Petitioner had entered into leasing contracts with various customers in the erstwhile indirect tax regime, which were continuing post introduction of GST Act, 2017, i.e. post 01.07.2017.
- On such contracts, the Petitioner had paid Service tax on 10% of the interest portion of such contract and had upfront deposited 100% Value Added Tax (VAT) in the first month of the contract itself, on the entire value of rentals as per specific provisions.
- It was entitled to carry forward the VAT paid in terms of section 142(11)(c) of the GST Act, 2017 as State Credit/VAT.
- The transitional VAT credit was also required to be reflected in FORM GST TRAN-1 as set out under rule 118 read with rule 117 of the GST Rules 2017.
- It was submitted that the proportionate VAT amount of Rs.17,07,673 pertaining to the period post 01.07.2017, but paid upfront before 30.06.2020 was to be transitioned to GST regime.
- The amount was reflective of the VAT paid which was eligible to be carried forward as State Tax Credit in terms of Section 142(11) (c) of the GST Act.
Submission by the Petitioner:
- The Petitioner stated that it had submitted declaration in Form GST TRAN-I for the unit in Maharashtra for transitioning credit and had also received acknowledgment of the same.
- Post filing of the Form, Petitioner also received a confirmation e-mail from ‘email@example.com’ in confirming the successful filing of the transition Form by the Petitioner.
- However, the entire credit of VAT/State tax as reported in the Form GST TRAN 1 was not reflected on the electronic credit ledger as the credit could not be transitioned despite submitting the form on time on the GSTN – common electronic portal in time.
- Petitioner submitted that the said failure was due to the technical glitches in the Respondents GSTN portal which had defeated the Petitioner’s substantive right to transition tax credit for no fault of the Petitioner.
- Petitioner submitted that to resolve this issue, it raised query/ entered into correspondence with GST Help Desk, CEO GSTN, GSTN as well as correspondence with GST Maharashtra Commissionerate, Mumbai.
- Petitioner had also set out the sequence of relevant dates and events from the filing of the TRAN -1 form and the various correspondence exchanged between the Petitioner and the Respondents/ Help Desk along with Screen Shots as a follow up for resolution of its grievance.
- Petitioner had faced similar grievances in the States of Delhi and Haryana at the time of filing of TRAN-1 forms.
- However, the portal was re-opened for filing Form of GSTN TRAN-1 by the authority in those States upon grievances raised by the Petitioner.
- Petitioner submitted that the technical glitches faced by the Petitioner in the State of Maharashtra were identical to what was faced in Delhi and Haryana and thus when the appropriate relief was given to the Petitioner in those States, the same could be extended to the Petitioner in State of Maharashtra as well.
- Petitioner is, therefore, seeking a Writ of Mandamus as above, directing the Respondents to take such actions as may be necessary for transitioning the credit of Rs.17,07,673/- as filed by the Petitioner in Form GST TRAN-1 on 27.12.2017 to avail the credit of Rs.17,07,673/- either electronically or manually.
Observations of the High Court
- It was not disputed that Petitioner’s Form GST TRAN-1 filing was successful. The only issue was that the credit of Rs.17,07,673 was not transitioned in the Petitioner’s electronic credit ledger despite the successful filing.
- It was also not in dispute that after filing TRAN-1 successfully, the credit of Rs.17,07,673 was not appearing in the Petitioner’s electronic credit ledger/ register.
- Despite making grievance to the authorities, the Petitioner did not receive any positive response.
- HC was unable to comprehend that even though, admittedly, the filing was successful, the credit was not reflected in the Petitioner’s ledger and merely on the ground that no technical error was found on the GSTN, the grievance of the Petitioner was not addressed.
- In this case, HC was concerned with is that despite the admitted successful filing of Form TRAN-1 by the Petitioner, the request of the Petitioner for transitioning of credit was not approved merely on the basis that there were no technical glitches on the GSTN side.
- There was no further explanation, clarification or evidence on the issue by the Respondents.
- The whole objective of digitization was to convenience the tax payers and not to harass them.
- HC was conscious that the GST system was still evolving in its implementation.
- Merely because there were no technical glitches in the GSTN with respect to the Petitioner’s TRAN-1 which was admittedly filed in time, the claim of the Petitioner, if it was otherwise eligible in law, could not be rejected for no apparent fault on the part of the Petitioner.
- This could not be the objective of the GST system or digitisation. Such a situation cannot be permitted as it would be wholly unfair and unjust.
Accordingly, HC directed the Respondents to consider the case of the Petitioner and after looking into the merits of the claim and physically or otherwise verifying the amount of VAT as claimed by the Petitioner to take such actions as may be necessary for transitioning the credit of such amount into the Petitioner’s credit ledger/ electronic credit ledger within four weeks from the date of this order. HC also made it clear that they had not examined the merits of the case nor the Petitioner’s claim to VAT credit.