High Court holds transitional credit can be carried forward only within stipulated time limit (after retrospective amendment)

by | Jul 21, 2020 | Insight

In another twist to tale of transitional credit, the Madras High Court in the case of P.R Mani Electronics v. UOI, 2020-VIL-308-MAD has held that transitional credit can be carried forward only within time limit prescribed under law. This judgment assumes relevance post retrospective amendment brought vide the Finance Act, 2019 read with Notification No. 43/2020-Central Tax dated May 16, 2020 which empowered the Central Government to prescribe time limit under the Central Goods and Services Tax Rules, 2017 (‘CGST Rules’).

Brief Facts:

  • The Petitioner had credit of VAT lying unutilized in its last return filed as on June 30, 2020. 
  • The Petitioner could not carry forward such transitional credit due to technical glitches, evidence of which was not available nor placed on record before the High Court. 


The High Court rejected the Petitioner’s contention on the following grounds: 

  • ITC is a concession which can be claimed subject to fulfilment of conditions.
  • Rule 117(1) of CGST Rules uses term ‘shall’ which indicates that prescribed time limit is mandatory and not directory.
  • Prior to retrospective amendment, prescription of time limit to carry forward transitional credit in the CGST Rules was traceable under Section 164 of the Central Goods and Services Tax Act, 2017. Section 164 is widely worded and imposes no fetters on rule making power.

 NITYA Comments: 

The ruling distinguishes judgment of the Delhi High Court in the case of SKH Sheet Metal Component v. UOI, 2020-VIL-255-DEL wherein the Court allowed transition of pre-GST credits even after retrospective amendment. It will be interesting to see as to which way issue will be finally decided by the Supreme Court.