We refer to a recent Circular
No. 33/07/2018-GST dated 23 February 2018 issued by the Central Board of Excise
and Customs (CBEC) regarding non-utilization of disputed CENVAT credit
transitioned under the Goods and Services Tax (GST) and non-availability of
CENVAT credit carried forward but not eligible under GST.
Some of the key points discussed in the circular are
summarized below:
· Non-utilization
of Disputed Credit carried forward: In relation to any CENVAT
credit, pertaining to which a show cause notice was issued under rule 14 of the
CENVAT Credit Rules, 2004, which has been adjudicated and in the last
adjudication order or the last order-in-appeal, as it existed on 1st July,
2017, it was held that such CENVAT credit is not admissible, then if such
CENVAT credit has been credited to the electronic credit ledger (e-credit
ledger) in terms of Section 140 of the Central Goods and Services Tax Act, 2017
(CGST Act), the same shall not be utilized by registered persons
for discharging the GST liability till the existence of such order. In case the
said disputed credit is utilised, the same shall be recovered from the tax
payer along with interest and penalty as per the provisions of the Act.
· Non-transition
of Blocked Credit: Registered person shall not carry forward in their
e-credit ledger any CENVAT credit that is blocked under Section 17(5) of CGST
Act. If such credit is carried forward in contravention, it shall not be
utilized for discharging the tax liability under GST, and the same will
be recovered from the taxpayer with interest and penalty.
· Where
disputed credit or blocked credit as referred above is higher than INR 10
Lakhs, the taxpayer shall submit an undertaking to the jurisdictional officer
of the Central Government that such credit shall not be utilized or has not
been availed as transitional credit, as the case may be. In other cases of
transitional credit, with amounts below INR 10 Lakhs, while there will be no
requirement to submit an undertaking, the above provisions of blocked credit
and disputed credit shall continue to apply.
Our Comments :
· The
Circular, denying the benefit of utilization of disputed CENVAT credit against
the GST liability, seems to be in supersession of the position under the law
and hence it could invite litigation.
· Till
recently, the GSTN portal did not give the option to the taxpayer to retain part
of the credit without utilizing it fully while computing GST liability
exceeding such credit. This could result in the recovery of credit with
interest and penalty getting triggered in all such cases where a taxpayer had
utilized the credit, as the tax authorities will be bound to follow the
Circular.
· Directions
to submit an “undertaking” for non-utilization of disputed or blocked credits
is unwarranted and requires reconsideration as it would add to the compliance
burden of the taxpayer.
We will need to await for any further clarity which may be issued by
the government on the matter and will keep you posted on the same. The relevant
circular and our EY Tax alert on the same has been attached herewith for your
reference.
Trust the above update helps. Do let us know a convenient time in case
you wish to discuss the same.
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