GST Transition ALERT- Not filed VAT Returns? -You will Lose Service Tax Credit & Even Vice Versa
by CA Ankit Gulgulia (Jain)
Yes, you read it right! If you have not filed a VAT Return then you lose your credit even in service tax /central excise and even vice versa. A person who is registered under service tax as well as under VAT and having unutilsed cenvat credit in Service Tax return / central excise to be carried forward as CGST but has not filed his VAT returns, then said person cannot carry forward that CENVAT Credit also as per the last Service Tax return filed or vice versa you cannot carry forward vat input if you have not filed service tax return for last six month period prior to appointed date.
Here’s the LAW,
As per Section 140(1) of CGST Act, 2017 (Governing sub section for transition and carry forward of ITC claimed in return filed to GST), a registered person under GST Act, other than a composition supplier, shall not be entitled to take Input Credit in GST regime, if he has not furnished all the returns required under the existing law for the period of six months immediately preceding the appointed date.
The “Existing law” is defined under section 2(48) of CGST Act, 2017 as “existing law” means any law, notification, order, rule or regulation relating to levy and collection of duty or tax on goods or services or both passed or made before the commencement of this Act by Parliament or any Authority or person having the power to make such law, notification, order, rule or regulation.
Further the same is even clarified by Institute of Chartered Accountants of India in their FAQ’s released under “Background Material on GST Act” suggesting that the Credit cannot be carried forward unless all the returns required under existing law (i.e VAT, Service Tax, Excise, Entry Tax etc) for the period of 6 months immediately preceding the appointed day is duly filed.
Before Parting…
Despite being different laws, i.e., VAT, Service Tax, Excise etc., governed by different bodies i.e., state and centre the Input Tax Credit transition and carry forward has been made interdependent upon each other.
All the returns applicable on the supplier under existing law should be filed in correct manner for the last 6 months preceding the appointed date to carry forward input credit to avoid any loss due to this legal transition.
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