Tax credits are part of a company’s tax payment and can be used to offset subsequent tax obligations.
When India switched to the GST regime in 2017, companies had to switch credits on their books. Therefore, the closing balance in the old tax regime will become the opening credit balance under GST.
A one-time bridge credit is allowed when India moves from the old indirect tax regime to GST. This means the company can set off some of the tax paid during the old tax period against future GST liabilities.
Many companies claim they simply forgot to apply for the bridge credit.
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The case reached the Delhi High Court, which ruled in favor of the taxpayer.
On Friday, Supreme Court Justice Abdul Nazeer and Justice JK Maheshwari ruled in the Brand Equity Treaties Limited vs Union of India case that all companies should be able to access bridging credit, whether they have gone to court or not.
The court also directed the government to open a common portal for all taxpayers to apply for the credit within 60 days from Sept. 1 to Oct. 30.
“The judgments and guidelines set out therein will now guide thousands of cases assessed by writ courts across the country to a logical conclusion,” said Abhishek A Rastogi, a partner at Khaitan & Co., which represented the firm in the case.
Many companies argue that the bridging credit is their vested right, and just because they forget to declare it doesn’t mean the right should be withdrawn.
“The Supreme Court upheld the principle of fairness in a groundbreaking decision … by allowing the inheritance of vested rights in GST returns. The decision will now set a precedent for cases pending in various High Courts. Officials will now need These TRAN-1 applications are processed in a time-bound manner,” Rastogi said.
Companies can apply for bridge credit through the TRAN form. SC says Tran 1 and Tran 2 are GST forms that allow assessors to transition from pre-GST credits to the GST regime.
“The decision was made in light of the ongoing controversy in which various taxpayers have argued that due to technical glitches, the forms could not be filed in a timely manner, and even if this were not the case for them, their right to switch credit cannot be taken away,” KPMG India Tax Partner Abhishek Jain said. “This presents a once-in-a-lifetime opportunity for industry players, whether or not they are a party to a writ petition, for all businesses to look at any pre-GST credits that have not been properly transitioned in light of the SC’s judgment.”
Brand Equity Treaties is a business of Bennett, Coleman & Co Ltd (BCCL), publisher of the Economic Times.