Missing service tax credit in GST update


The retrospective amendment to Section 140 (1) of the CGST Act 2017 that empowers assessees to transition the closing balance of cenvat (central value added tax) credit in the erstwhile indirect tax regime to the GST regime.

While the intention was to ensure that the credit of various cesses was not transitioned, the amended section replaces “amount of cenvat credit” by “amount of eligible duties.”

“Though unintended, absence of ‘service tax’ under eligible duties under explanations to Section 140, would mean that eligible credit of service tax transitioned under GST, can now be denied (as this is a retrospective amendment,” said Harpreet Singh, partner, indirect taxes, KPMG.

This means that only the amount of eligible duties carried forward in the returns can be transitioned to GST and claimed as opposed to the previous provisions allowing the transition of entire amount of cenvat credit.

Singh said: “As the CGST (Amendment) Act, 2018 is now effective, the government would need to come up with further amendment in the law to overcome this assumingly inadvertent mistake.” 

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