Many companies that had not been able to claim transitional credit have dragged the government to court over a retrospective amendment of Section 140 under the Goods and Services Tax (GST) framework.

An amendment has been made in Section 140 retrospectively with effect from July 1, 2017, vide Notification No. 43/2020-CT.  By this retrospective amendment the words “within such time” which were earlier not there have been added in sub-section of section 140 whereby the Rulemaking authority has been given the power to specify the time within which form GST TRAN-1 for claiming the transitional credit is to be filed.

The companies claim the government amended the law prohibiting companies to avail tax credit if they had “forgotten” about it only after a few companies started claiming it and even approached the courts. Many companies had claimed that when the new tax regime was introduced in July 2017, they forgot to claim the transitional credit.

The question that is disturbing the minds of the assesses as well as the Professionals is that “is everything over after this retrospective amendment in Section 140 of the CGST Act? Do the judgments of the various high courts and Delhi High Court in particular in the case of Brand equity nullified?

Many companies claimed that they had simply forgotten to claim the transitional credit. Legal experts say that the government brought in an amendment only after a Delhi High Court judgment which seemed to favor the taxpayers.

“It is very important for the court to decide at some stage on the validity of the retrospective amendment carried out in section 140 of the CGST act as this amendment has come into effect after a Delhi High Court decision on transitional credit. The retrospective amendment to tax laws can happen only in the rarest of rare cases to remove the anomalies of law”, said Abhishek A Rastogi, Partner at Khaitan & Co, who is arguing for petitioners.