Jharkhand High Court Allows Migration Of The TDS Amount Under GST

The Jharkhand High Court has held that the unadjusted TDS amount has to be treated as an input tax credit amount and is required to be carried forward in the next succeeding months.

The division bench of Acting Chief Justice Aparesh Kumar Singh and Justice Deepak Roshan has observed that the unadjusted TDS amount would have been otherwise refundable to the petitioners if it were not allowed to be carried forward as excess input tax credit in the statutory format of a quarterly return (Form JVAT 200).

The court noted that the petitioners, at the time of filing their returns, were left with no option but to forward the unadjusted TDS amount as excess input tax credit in the succeeding months and were not required or compelled to claim a refund of the unadjusted TDS amount.

The petitioner/assessee is in the business of supplying machinery and providing engineering, commissioning, and operational support services across the country and in the State of Jharkhand.

The petitioner was duly registered under the provisions of the Jharkhand Value Added Tax Act, 2005, and after implementation of the Goods and Services Tax Act, 2017, it was also registered under the GST Act.

The petitioner filed its returns for the quarter ending June 30, 2017, i.e., immediately before the appointed date, and had an excess input tax credit. The amount consisted of excess ITC and unadjusted TDS deducted at source under Section 44 of the JVAT Act. The cumulative amount in the return filed was carried forward as excess ITC to the next period as per Statutory Form JVAT-200 prescribed for filing quarterly returns.

The GST regime was implemented with effect from July 1, 2017. In terms of Section 140(1) of the JGST Act, the petitioner was entitled to carry forward "credit of value added tax," which it reflected in its return immediately preceding the appointed date. Accordingly, the petitioner claimed the transition of the amount of credit for VAT by filing GST TRAN-1 online in the GSTN Portal on September 28, 2017.

However, the department issued a Summary of Show Cause Notice in Form GST-DRC-1 alleging that the petitioner was not entitled to migration of the amount of credit for VAT and directed the petitioner to show cause why the entire claim of migration be not disallowed and interest and penalty be not imposed upon the petitioner for wrongful availment of ITC.

Even if it is assumed that Section 140 read with Rule 117 only allows for the migration of the amount of ITC, the petitioner claims that the unadjusted TDS deducted has always been treated as the amount equivalent to the input tax credit. Thus, the petitioners are even otherwise entitled to migrate the amount of TDS in their electronic credit ledger under the GST regime.

The department contended that the provision to Section 140(1) specifically restricts the migration of credit where the said amount of credit is not admissible as an input tax credit under the GST Act.

The court reasoned that proviso Clause (i) to Section 140(1) of the JGST Act only restricts credit migration where there is an express prohibition on claiming an input tax credit under Section 17(5) of the GST Act.

The court held that the action of the department in passing the orders denying migration of TDS amounts and, consequently, levying interest and penalty is not sustainable in the eye of the law and is liable to be quashed. The petitioners are entitled to a migration of the TDS amount in terms of Section 140(1) of the JGST Act.

Case Title: M/s Subhash Singh Choudhary Versus The State of Jharkhand

Citation: W.P.(T) No. 2404 of 2020

Citation: 2023 LiveLaw (Jha) 5

Date: 09.01.2023

Counsel For Petitioner: Sumeet Gadodia, Aakansha Mittal, Ranjeet Kushwaha, Surbhi Agarwal

Counsel For Respondent: Amrita Sinha

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