Kerala GST Tribunal Allows ₹1.76 Lakh Transitional Credit On Truck Chassis Bought Before GST, Though It Was Put To Use After GST Began Without A Form 25 Application

In brief

The question

1. Whether the appellant could claim, as transitional credit under Section 140 of the CGST/KGST Act, VAT paid on the truck purchased under the KVAT regime where the truck was put to use after 1 July 2017 and the credit was not reflected in the KVAT return as at 30 June 2017.

The court held

The Tribunal answered in the affirmative the question whether the appellant could claim transitional credit for the VAT paid on the truck.

It also directed

It upheld rejection of the ₹84,500 claim but set aside the appellate order to the extent it rejected the truck-related credit of ₹1,75,916.79. The appeal was therefore partially allowed, with consequential relief.

01Facts

The appellant, a scrap dealer, purchased a truck chassis with engine on 2 June 2017 for ₹12,13,219.21, paying VAT of ₹1,75,916.79.

pp. 1–3, 4–5

It declared the purchase in Part C of its June 2017 KVAT return and claimed the VAT as transitional credit through TRAN-1 after GST commenced on 1 July 2017.

pp. 1–3, 4–5

The credit was rejected because it was not reflected in Part E of the VAT return/Form 25 and no Form 25 application had been filed within 30 days.

pp. 1–3, 4–5

The appellant maintained that the truck was not ready for commercial use until after GST commenced.

pp. 1–3, 4–5

It also claimed ₹84,500 as KVAT credit carried forward; its June 2017 return showed the carried-forward balance as “NIL”.

pp. 1–3, 4–5

The Joint Commissioner (Appeals) upheld the rejection, and the appellant appealed to the Tribunal.

pp. 1–2

02Issues

i.1. Whether the appellant could claim, as transitional credit under Section 140 of the CGST/KGST Act, VAT paid on the truck purchased under the KVAT regime where the truck was put to use after 1 July 2017 and the credit was not reflected in the KVAT return as at 30 June 2017.

p. 3

ii.2. Whether the appellant could carry forward ₹84,500 as transitional credit when its June 2017 KVAT return showed no credit balance.

pp. 4–5

03Law Applied

Section 140 of the CGST/KGST Act permits transitional credit of eligible credit admissible under the existing law; the Tribunal considered whether the truck-related VAT credit was substantively admissible under the KVAT regime and could be claimed through TRAN-1.

pp. 2–3, 5

Under Section 11(2) of the KVAT Act and Rule 13(1B) of the KVAT Rules, credit on qualifying capital goods was subject to statutory conditions, including an application in Form 25 and sanction in Form 25B.

p. 3

In P.K. Joseph v. Commercial Tax Officer, W.P.(C) No. 15559 of 2014 (T), decided 25 August 2014, the Kerala High Court held that the 30-day period for applying for capital-goods credit runs from the date the goods are put to commercial use, not the date of purchase.

p. 2, 5

Provisions in the judgment · 1 · Linked ones open on LawLens

Central Goods and Services Tax Act, 2017 Section 140

04Reasoning

The Tribunal treated the ₹84,500 claim separately: because the appellant’s June 2017 return recorded “NIL” as the balance VAT credit, and the appellant did not contest or justify that entry, the amount was not available for carry-forward.

p. 4

For the ₹1,75,916.79 truck-related claim, the Tribunal found that the purchase was disclosed in Part C of the return and supported by an invoice and purchase statement.

p. 4

Applying P.K. Joseph, it reasoned that the Form 25 application period would run from when the truck was ready for commercial use; the truck required body-building work and was not put to use before GST commenced.

p. 5

The Tribunal considered the appellant substantively eligible for credit under the former VAT regime and for credit on goods used to transport goods under GST, and regarded the failure to complete the former regime’s procedure before the transition as a procedural difficulty rather than a bar to the claim.

pp. 5–6