Refund and Carry Forward Tax Credit to GST Regime is Tax Payer’s Choice: Madras High Court

A taxpayer who migrated from the former Tamil Nadu VAT regime has benefited greatly from a significant ruling by the Madras High Court.

The Assistant Commissioner (ST) (FAC)and M/s Easwaran Brothers India Private Limited were the parties to the writ petition. The verdict was rendered in December 2022 by Justice M. Sundar’s lone member of the panel.

The HC bench reversed the department’s request that the writ petitioner carry over the input VAT using TRAN into the GST regime because the taxpayer had already chosen to receive a refund, which the department handled by issuing Form-P and a provisional refund order. As a result of a technical issue that they ran into at the time of the option, the writ petitioner had not yet received the refund amount.

When the Tamil Nadu Value Added Tax (TNVAT) was replaced by the Goods and Services Tax (TNGST) in 2017, the state’s registered taxpayers had two options for using the remaining input VAT credit.

They could apply for a refund of these tax credits under the TNGST law under the first option. The second choice allowed them to submit the TRAN forms in accordance with the CGST law and carry the tax credit forward.

Such eligible taxpayers must be allowed to select from either of the two options without the department being able to force them to do so. In the meantime, in response to the Supreme Court’s decision, the government extended the deadline for taxpayers to carry forward their transitional tax credits into the GST regime to October 31, 2022.

The GST department’s decision to change its option to carry forward tax credits using TRAN forms was challenged by the writ petitioner. They emphasised that the department cannot change its position because the provisional refund order was issued after processing their application.

As a result, the Madras High Court issued a precedent-setting decision that could help businesses win similar lawsuits involving any transitional input tax credit.