GST laws – the return of retrospective amendments

After the uproar caused by the retrospective amendment following the Vodafone judgment, it might have been thought that retrospective amendments of tax laws were a thing of the past. Unfortunately, they have reappeared, this time in the context of the goods and services tax (GST).

The retrospective amendment of section 140 of the Central Goods and Services Tax Act, 2017 (act), by the Central Goods and Services Tax (Amendment) Act, 2018, has caused disruption in that it was intended to restrict only the transition of input credits of cesses. However, it has ended up restricting transition of input credits of (1) service tax on input services, (2) excise duty paid on inputs that were not held in stock on the appointed day, and (3) excise duty paid on capital goods. The amendment, once notified, will retrospectively be in force on 1 July 2017.

Pre-amendment: Pre-amendment, section 140 of the act allowed assessees to transition to GST, “amount of CENVAT credit” carried forward in the last return under the old tax laws.

As the expression “amount of CENVAT credit” was not qualified, most assessees took the position that balance of total CENVAT (Central Value Added Tax) credit carried forward in the last return under the old tax laws, including CENVAT credit of excise duties paid on inputs or capital goods, service tax on input services and cesses (including education and Krishi Kalyan) was eligible for transition into the GST regime.

Sudipta Bhattacharjee is a partner in the tax controversy management and contract documentation practice of Advaita Legal.