Delhi High Court Orders Reflection of ITC on GST Portal for Clyde Pumps Pvt. Ltd.

GST Transitional Credit to Be Reflected in Electronic Credit Ledger Following Technical Glitches

In a significant decision, the Delhi High Court has directed the Delhi GST Department to ensure that the Input Tax Credit (ITC) amounting to Rs.99,18,972/- for Clyde Pumps Private Limited is reflected in the Electronic Credit Ledger (ECL) within three months. The judgment, delivered by a division bench comprising Justice Prathiba M. Singh and Justice Shail Jain, addressed the technical challenges faced by the petitioner during the transition to the Goods and Services Tax (GST) regime.

Clyde Pumps Private Limited, a Delhi-based company, faced difficulties in transferring their CENVAT credit as input tax credit due to technical glitches in the GST portal. The petitioner, registered as an Input Service Distributor (ISD), was unable to reflect the transitional credit in their ECL, despite repeated representations to the authorities. The petitioner argued that the credit should have seamlessly transitioned under Section 140 of the Central Goods and Services Tax Act, 2017, but was hindered by technological issues.

The court emphasized that legitimate ITC, which the petitioner is entitled to distribute to its sub-offices, cannot be denied due to technical shortcomings. The court further noted that the procedural issues in the GST system should not penalize taxpayers and that technical limitations should not override substantive rights under the law.

Drawing upon previous judgments, including cases involving Siemens Ltd. and Vision Distribution Pvt. Ltd., the court highlighted the need for a holistic approach to ensure that the transitional provisions for ITC are effectively implemented. The court directed the Delhi GST Department and the GST Network (GSTN) to cooperate in implementing the order, ensuring the reflection of ITC in the ECL.

The court's decision underscores the importance of addressing technological challenges in the GST system to uphold the rights of taxpayers and facilitate seamless transitions under the GST regime. The judgment is expected to impact other businesses facing similar challenges, reinforcing the need for robust IT systems to support tax transitions.

Bottom Line:

GST Law - Transitional Credit - Input Tax Credit (ITC) legitimately entitled to by the Input Service Distributor (ISD) cannot be denied due to technical glitches in the GST portal, and must be allowed to be reflected in the Electronic Credit Ledger (ECL).

Statutory provision(s): Section 140 of the CGST Act, 2017, Section 20 of the CGST Act, Section 2(61) of the CGST Act, Rule 39(1)(a) of the CGST Rules, 2017

Clyde Pumps Private Limited v. Union of India, (Delhi)(DB) : Law Finder Doc Id # 2820803