New Delhi, September 22, 2017

Rs 65,000 cr out of Rs 95,000 cr tax collections in July had been claimed as transitional credit by taxpayers

The government has come out with an estimate that valid transitional credit claims of taxpayers in July — the first month of GST — are just Rs 12,000 crore and not Rs 65,000 crore as previously claimed.

As much as Rs 65,000 crore out of the about Rs 95,000 crore tax collections in July had been claimed as transitional credit by taxpayers, but a close scrutiny has brought down the valid claims to Rs 12,000 crore, a finance ministry official said.

Even these claims could be adjusted in future months, a statement by the finance ministry suggested.

The Goods and Services Tax (GST) regime, which kicked in on July 1, allows tax credit on stock purchased during the previous tax regime. This facility is available only up to 6 months from the date of GST rollout.

The high credit claim prompted the Central Board of Excise and Customs (CBEC), the body that deals with formulation and implementation of policy concerning the levy and collection of indirect taxes, to verify GST transitional credit claims of over Rs 1 crore each made by 162 entities.

"Tax authorities are only verifying transition credit claim. They are not going after any taxpayer," the official said.

No credit on education cess, telecom towers, as claimed by some, is allowed, he said while explaining the figure.

Earlier in the day, the finance ministry issued a statement to allay concerns about high transitional credit claims, saying the Centre's revenue kitty will not go down because of these claims.

Over 46 lakh businesses have paid taxes to the tune of Rs 95,000 crore in July.

However, businesses also claimed credit for the past taxes paid in the form of excise and service tax worth Rs 65,000 crore.

This figure of transition credit claimed is also "not incredibly high" since Rs 1.27 lakh crore of credit of central excise and service tax was lying as closing balance as on June 30, 2017, the statement said.

It clarified that the credit claimed by taxpayers in the TRAN-1 form does not mean they would have used all of this credit for payment of their output tax liability for July 2017. Also, some of the credits that are claimed in TRAN- 1 form may be under litigation and therefore, it may not be available to the assessee to carry forward or for utilisation.

"It is from this angle that the CBEC is examining the transition credits, which are claimed by assessees in TRAN-1 form in certain cases," the ministry stated.

In the transitional credit form TRAN-1 filed by taxpayers along with their maiden returns for July, businesses have claimed a credit of over Rs 65,000 crore for excise, service tax or VAT paid before GST was implemented from July 1.

According to the ministry, Rs 95,000 crore collected as July GST are the amount actually paid in cash, other than availing credit.

The ministry said Rs. 65,000 crore is the credit claimed by the taxpayers in the TRANS 1 form as their balance of credit. It does not mean that they would have used all of this credit for payment of their output tax liability for the month of July 2017. This means that the credit, which has now drastically come down, would be adjusted in a stagerred basis.

When asked how the government stagger the adjustment as it depends on assessees when they want to take claim for it,

Abhishek Rastogi of Khaitan & Co. cited the example of banking services. In earlier regime, banks have to pay one centralised service tax. Under GST, they will be paying state-wise tax as well. So adjusting credit for pre-GST stocks may take some time since tax liability in one Centre which used to pay earlier taxes may not be as huge this time.

The statement said some assessees would have committed a mistake in filing the form TRAN-1 and hence, the government will allow facility of revision of TRAN-1 by the middle of October.

The GST Council has already extended by a month the date for filing TRAN-1 form till October 31.

Archit Gupta, CEO of ClearTax said while the move to extend the deadline is a good step, there would be confusion to reconcile the credit available in the old regime with the one in the GST system.

[The Business Standard]