Subject: Guidelines for verifying the Transitional Credit in light of the order of the Hon'ble Supreme Court in the Union of India vs. Filco Trade Centre Pvt. Ltd., SLP(C) No. 32709-32710/2018, order dated 22.07.2022 & 02.09.2022

Attention is invited to the directions issued by Hon'ble Supreme Court vide order dated 22.07.2022 in the matter of Union of India vs. Filco Trade Centre Pvt. Ltd., SLP(C) No. 32709-32710/2018. The operative portion of the judgment is as follows:-

"1. Goods and Service Tax Network (GSTN) is directed to open common portal for filing concerned forms for availing Transitional Credit through TRAN-1 and TRAN-2 for two months i.e. w.e.f. 01.09.2022 to 31.10.2022.

2. Considering the judgments of the High Courts on the then prevailing peculiar circumstances, any aggrieved registered assessee is directed to file the relevant form or revise the already filed form irrespective of whether the taxpayer has filed writ petition before the High Court or whether the case of the taxpayer has been decided by Information Technology Grievance Redressal Committee (ITGRC).

3. GSTN has to ensure that there are no technical glitch during the said time.

4. The concerned officers are given 90 days thereafter to verify the veracity of the claim/transitional credit and pass appropriate orders thereon on merits after granting appropriate reasonable opportunity to the parties concerned.

5. Thereafter, the allowed Transitional credit is to be reflected in the Electronic Credit Ledger.

6. If required GST Council may also issue appropriate guidelines to the field formations in scrutinizing the claims. The Special Leave Petitions are disposed of accordingly. Pending applications, if any, also stand disposed of."

1.2 Subsequently in Miscellaneous Application No. 1545-1546/2022 in SLP(C) No. 32709-32710/2018, Hon'ble Supreme Court vide order dated 2nd September, 2022 has inter-alia ordered as follows:-

"The time for opening the GST Common Portal is extended for a further period of four weeks from today.

It is clarified that all questions of law decided by the respective High Courts concerning Section 140 of the Central Goods and Service Tax Act, 2017 read with the corresponding Rule/Notification or direction are kept open."

2. As is clear from the above, the Hon'ble Court has directed that the common portal be opened for filing prescribed forms for availing Transitional Credit through TRAN-1 and TRAN-2 for two months from 01.10.2022 to 30.11.2022 for the aggrieved registered asseesee (henceforth, referred as 'applicant'). The said Transitional Credit shall be admissible in the electronic credit ledger of the applicant subject to the necessary verifications carried out by the jurisdictional officer. As per the Hon'ble Court's order, the said verification has to be carried out within 90 days after completion of the above window of two months, i.e. within 90 days from 01.12.2022 i.e. upto 28.02.2023.

2.1 It is to be noted that while allowing the applicant to file/revise TRAN-1/TRAN-2 during this window of 2 months, Hon'ble Supreme Court has kept all questions of law open.

2.2 It may be mentioned that Hon'ble Supreme Court has only allowed filing of TRAN 1/TRAN-2 or revising the TRAN-1/TRAN-2 already filed by the applicant and has not allowed the applicant to file revised returns under the existing laws.

3. Reference is also invited to Public's Circular No. GSL/GST/S.168/B.119 dated 17.09.2022 vide which guidelines have been issued for the applicants for filing new TRAN-1/TRAN-2 or revising the already filed TRAN-1/TRAN-2 on the common portal.

4. To ensure uniformity in the implementation of the directions of the Hon'ble Supreme Court across field formations, the Chief Commissioner of State tax, in exercise of the powers conferred by section 168 of the Gujarat Goods and Services Tax Act, 2017 (hereinafter referred to as "GGST Act"), hereby issues the following guidelines for verifying the Transitional Credit:

5. Verification of the Transitional Credit

5.1 The jurisdictional tax officers can access the TRAN-1/TRAN-2 filed/revised by the applicant on their back office systems (i.e. BO portal). Further, a self-certified downloaded copy of TRAN-1/TRAN-2 filed/revised by the applicant shall also be made available to the jurisdictional tax officer by the said applicant as mentioned in Para 4.5 of Circular No. GSL/GST/S.168/B.119 dated 17.09.2022.

5.2 The verification of the transitional credit shall be conducted by the jurisdictional tax officer who will pass an appropriate order regarding the veracity of the claim filed by the applicant, based on all the facts and the provisions of the law. In respect of TRAN-1/TRAN-2 filed/revised by the applicant under the administrative control of the state tax authorities, such verification and issuance of order shall be done by the jurisdictional officer of state tax, whereas in respect of TRAN-1/TRAN-2 filed/revised by the applicant under the administrative control of the central tax authorities, the same shall be done by the jurisdictional officer of central tax. The jurisdictional tax officer shall start the verification process immediately on availability of TRAN-/TRAN-2 filed/revised by the applicant on the back office system or on receipt of self-certified downloaded copy of the same from the applicant, whichever is earlier. It is needless to mention that principles of natural justice shall be followed in the process of passing the order relating to allowance or disallowance of the Transitional Credit.

5.3 The jurisdictional state tax officer, shall on the basis of declaration made by the applicant in the format specified in Annexure-A to Circular No. GSL/GST/S.168/B.119 dated 17.09.2022, and on the basis of data available on the back office system, shall check whether the applicant had earlier filed TRAN-1/TRAN-2 or not. In cases, where TRAN-1/TRAN-2 had already been filed by the applicant earlier, the tax officer shall check whether there is any change from the earlier filed TRAN-1/TRAN-2 or not. In case, there is no such change from the earlier filed TRAN-1/TRAN-2, then such claim of transitional credit is liable for rejection by the tax officer, through a reasoned order, after providing due reasonable opportunity to the applicant.

5.3.1 In other cases, the jurisdictional tax officer shall proceed for verification of claim of transitional credit made by the applicant in form TRAN-1/TRAN-2. In this regard, in respect of transitional credit pertaining to state tax, he may refer to the guidelines detailed in Annexure-I to this circular.

5.3.2 There may be cases where the transitional credit claim filed/revised by the applicant may have components of both state tax and central tax. In such cases, where the applicant is under the jurisdiction of state tax officer and where the transitional credit claimed has component of central tax also, the jurisdictional state tax officer shall refer the said claim for verification of component of central tax to his counterpart central tax officer. For this purpose, he shall share the list of GSTINs/ARNs with the counterpart officer, in respect of which verification report is needed from him, on a weekly basis, along with an intimation of the same to the Nodal officer of state tax as well as central tax referred in Para 6.1 below through his official email ID or physically.

5.3.3 The jurisdictional state tax officer shall parallely, continue the verification of the remaining portion of the transitional credit at his end.

5.3.4 The jurisdictional state tax officer shall verify the transitional credit claimed under the SGST, by referring to the guidelines detailed in Annexure-I to this circular for transitional credit pertaining to state tax. While conducting the verification, the officer must also check whether any adjudication or appeal proceedings in TRAN-1/TRAN-2 related matter are pending/concluded against the applicant. In such cases, where any adjudication or appellate proceedings have been initiated against the applicant in respect of TRAN-1/TRAN-2, the officer should take a note of the relevant facts in the notice/order, and the grounds/reasons for inadmissibility of transitional credit, if any, in the said notice/order.

5.3.5 In cases where the applicant is under the jurisdiction of central tax officer and where the transitional credit claimed has component of state tax, the jurisdictional state tax officer shall verify such claim when referred by the central tax officer, and, after verification, he shall prepare a verification report, in the format detailed in Annexure-II of this circular, specifying the amount of transitional credit which may be allowed to be credited to the electronic credit ledger of the applicant and the amount which is liable for rejection, along with detailed reasons/grounds on which the said amount is liable to be rejected. Such duly signed verification report shall be sent by the state tax officer to the counterpart jurisdictional central tax officer at the earliest, though generally not later than ten days from the date of receipt of the request from the counterpart jurisdictional officer. In case, where the adjudication or appeal proceedings in respect of TRAN-1/TRAN-2 related matter are pending/concluded against the applicant, the state tax officer shall categorically bring out the relevant facts in his/her verification report along with his detailed findings, admissibility/inadmissibility, reasons of inadmissibility thereof and the copy of the relevant notice and/or orders.

5.3.6 For the purpose of verification of the claim of the transitional credit, the jurisdictional tax officers, if required, may call for relevant records including requisite documents/returns/invoices, as the case may be, from the applicant.

5.3.7 After receiving the verification report from the counterpart central tax officer, the jurisdictional state tax officer shall decide upon the admissibility of the credit claimed by the applicant. In case the jurisdictional tax officer finds that the transitional credit claimed by the applicant is partly or wholly inadmissible as per the provisions of Act and the rules thereof, then a notice shall be issued by the jurisdictional tax officer to the applicant preferably within a period of seven days from the receipt of report from the counterpart central tax officer, seeking explanation of the applicant as to why the said credit claimed by him should not be denied wholly/partly, as the case may be. The applicant shall also be provided an opportunity of personal hearing by the jurisdictional tax officer in such cases. If required, the jurisdictional tax officer shall also seek comments of the counterpart central tax officer on the submissions made by the applicant in so far as said submission relates to the tax (i.e. central tax) being administered by such counterpart officer.

5.3.8 After considering the facts of the case, including verification report received from the counterpart central tax officer, submissions made by the applicant and the comments, if any, of the counterpart officer on the same, the jurisdictional state tax officer shall proceed to pass a reasoned order, preferably within a period of fifteen days from the date of personal hearing, specifying the amount of transitional credit allowed to be transferred to electronic credit ledger of the applicant and upload a pdf copy of the said order, on the common portal for crediting the amount of allowed transitional credit to the electronic credit ledger of the applicant. In any case, such order shall be passed within a period of 90 days from 01.12.2022 i.e. upto 28.02.2023.

5.3.9 Where the amount credited to the electronic credit ledger pursuant to the originally filed TRAN-1/TRAN-2 exceeds the amount of credit admissible in terms of the revised TRAN-1/TRAN-2 filed by the applicant, such excess credit is liable to be demanded and recovered from the applicant, along with interest and penalty, in accordance with the provisions of Chapter XV of the Act and the rules made thereunder.

6. Modalities of coordination between central tax authorities and state tax authorities:

6.1 The nodal officers of the state tax are appointed vide Order No. CST/Admin/VVT-5/F.N.38/Tran-1 & 2 Nodal Officers/2022-23/O.W.3048/61 dated.14/12/2022, for proper co-ordination between state and central authorities for verification of transitional credit claims. The details of such nodal officers along with their phone numbers and email IDs are also made available to the central tax authority. The nodal officers shall ensure that the verification reports/comments sought by the jurisdictional tax officers of central tax are being sent in a timely manner by the state tax officers. The details of nodal officers of the central tax authority will also be circulated to the state tax officers, shortly.

6.2 It is responsibility of the Divisional Joint Commissioners of State Tax to regularly monitor the progress made in this regard so that the timelines mentioned in the Hon'ble Supreme Court's order dated 22.07.2022 and 02.09.2022 are strictly adhered to by the field formations.

7. Difficulties, if any, in implementation of these instructions may be informed to the Chief Commissioner of State tax (addlcctadm-ct@,gujarat.gov.m).

-sd-

(Milind Torawane)

Chief Commissioner of State Tax,

Gujarat State, Ahmedabad.

Annexure-I

Guidance note for verification of SGST transitional credit claimed by the applicant in TRAN-1/TRAN-2

1. Details of the table given in Form TRAN-1

2. Verification of table entries of TRAN-1:

As a matter of assistance, following checks/verifications are suggested in relation to the entries provided in various tables of TRAN 1. The list of checks is not exhaustive but is indicative only based on provisions of law, the likely error and the inputs received from the field formations.

2.1 Verification of Table 5(b) and 5(c)

2.1.1 Check that the returns for six months prior to the date of GST implementation (i.e. for the tax periods from 01st January, 2017 to 30th June, 2017) have been furnished under the GVAT Act and the CST Act, as the case may be.

2.1.2 Verify that the credit carried forward in return/annual return/final return/audit report/any order is same as credit claimed in TRAN-1. If any discrepancy found, check the reason for discrepancy and, if requires, communicate the same to taxpayer for satisfactory clarification.

2.1.3 Check whether any refund order has been issued for the said credit under existing laws, as the credit related to goods, sold under notification no. (GHN-51) GST-2001 S.49 (355) TH, dated the 31st December, 2001, (GHN-24) VAT-2013/S.40(1)(8)-TH dated the 11th October, 2013 and any other notification claiming refund of VAT paid, is not admissible.

2.1.4 Check details of the statutory forms received under the Central Sales Tax Act in respect of transactions for the period 01/04/2015 to 30/06/2017. Where statutory forms are not received, whether tax payable and reduction of ITC figures shows correctly in Table 5(b)? Only those Statutory Forms will be allowed which are issued not later than 27/12/2017.

2.1.5 Ensure that the tax credit claimed in TRAN-1 is admissible under both of the GVAT Act and GGST Act.

2.1.6 The taxpayer is not entitled to avail tax credit in TRAN-1 which is subject to section 11(8A) of the GVAT Act. Therefore, officer shall verify,-

(i) whether dealer has reversed or not, the tax credit in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock, when he has opted for composition under section 10 of GGST Act. In case of non-reversal, whether dealer has paid amount of tax equal to such non-reversed tax credit or not?

(ii) whether dealer has reversed or not, the tax credit in respect of capital goods not used for five years, when he has opted for composition under section 10 of GGST Act. In case of non-reversal, whether dealer has paid amount of tax equal to such non-reversed tax credit or not?

2.2 Verification of Table 6 (b)

2.2.1 Check that in Table 6, only tax credit on capital goods not availed earlier under the GVAT Act, is claimed.

2.2.2 Ensure that the tax credit pertaining to capital goods claimed by taxpayer in TRAN-1 is admissible under both of the GVAT Act and GGST Act.

2.2.3 Documents like tax invoice, transit documents, tax paying documents may be verified and it may also be verified that capitalization in books of account is made without tax component.

2.2.4 It is noteworthy that the second hand plant and machinery is not considered as capital goods under the GVAT Act.

2.3 Verification of Table 7 (b)

2.3.1 Verify that taxpayer has not availed the tax credit under the GVAT Act in respect of inputs received on or after 01st July, 2017.

2.3.2 Documents like tax invoice, documents related to movement of goods, and tax paying documents may be verified.

2.3.3 The documents regarding recording of transactions in the books of account of taxpayer shall be verified as provided for in sub-section (5) of section 140 of the GGST Act.

2.4 Verification of Table 7 (c)

2.4.1 In order to verify the details of stock as on appointed day, the returns furnished under the GVAT Act/Excise Act and books of account may be analysed properly.

2.4.2 Check whether the inputs held in stock and inputs contained in semifinished or finished goods held in stock on the appointed day are used for making taxable supplies under the GGST Act or not.

2.4.3 Check that the taxpayer is in possession of invoice or other documents evidencing payment of tax under the existing law in respect of such inputs. Further, verify that such invoice/documents have not been issued earlier than twelve months immediately preceding the appointed day.

2.4.4 Verify that the taxpayer is not paying tax under section 10 of the GGST Act.

2.5 Verification of Table 10(a) and (b)

2.5.1 The agent is entitled to take credit of tax paid on goods or capital goods belonging to the principal which are lying at the premises of the agent on the appointed day subject to the following conditions as specified in section 142 of the GGST Act:-

(i) the agent is registered under the GGST Act;

(ii) both the principal and the agent declare the details of stock of goods or capital goods lying with such agent on the day immediately preceding the appointed day;

(iii) the invoice for such goods/capital goods had been issued not earlier than twelve months immediately preceding the appointed day;

(iv) the principal has either reversed or not availed of the input tax credit in respect of such goods/capital goods.

2.5.2 The officer shall ensure that the above conditions have been duly fulfilled by the taxpayer.

2.6 Verification of Table 11

2.6.1 Check that the tax claimed as credit was indeed paid under the existing law by supplier and supplies were made after 1st July, 2017.

2.6.2 Verify that such tax credit has not been availed under the GVAT Act.

2.6.3 Check that the credit of service tax is not taken as credit of SGST head and credit of VAT is not taken as credit of CGST head.

2.7 Some other General Checks:

2.7.1 Verify that credit which is being claimed through TRAN 1 is not taken through return in FORM GSTR-3B. This can lead to double credit being taken.

2.7.2 Clarifications issued vide Circular No. GSL/GST/S.168/B.A23 (33/07/2018-GST) dated 23.02.2018 regarding disputed credit and blocked credit may be followed during the verification process of the transitional credit.

2.7.3 Special care should be taken in case where refund order has been issued or appeal has been filed or any other proceedings are pending under the GVAT Act.

2.7.4 Further, detailed verification should be done in case where any adjudication, appeal or any other proceedings are pending/completed under the GST Act and the issues raised in such adjudication/proceedings must be incorporated in the verification of input tax credit

2.7.5 A reasoned order must be made based on the findings derived considering all of the points referred in this circular.

ANNEXURE-II

VERIFICATION REPORT FOR TRAN-1/TRAN-2 TO BE SUBMITTED BY THE STATE TAX OFFICER TO THE COUNTERPART JURISDICTIONAL CENTRAL TAX OFFICER

1. Basic information:

2. (a) Whether SCN/Adjudication order issued in respect of credit availed through TRAN-1/TRAN-2 filed earlier; if "Yes", provide reference number and date:

(b) If answer to (a) above is "Yes", then amount of transitional credit disallowed/proposed to be disallowed out of total claim filed by the applicant earlier:

Notes:

1) Add additional rows if required

2) *Specify the serial number of the Table (of earlier filed TRAN-1/TRAN-2), the credit in respect of which has either been disallowed through an order or is proposed to be disallowed through an SCN

3) #Specify the amount which has been disallowed/proposed to be disallowed

4) @Specify the grounds for disallowance of the said credit

5) $Specify whether amount has been recovered, either in cash or debit to credit ledger

6) Attach copies of the relevant notice/ adjudication order

3. (a) Whether appeal has been filed against the adjudication order, if any, specified in serial number 2 above; if "Yes", provide appeal number and date of filing appeal.

(b) If appeal has been disposed of, then provide order number and date:

(c) Details relating to Appellate Order:

Notes:

1) Add additional rows if required

2) *Specify the serial number of the Table (as mentioned in Table at serial number 2 above) and the amount of tax the claim in respect of which has been adjudicated and the appeal has been decided.

3) $Specify whether amount has been recovered, either in cash or debit to credit ledger

4) Attach copies of the order of the appellate authority

4. Amount of credit claimed afresh/revised (as per TRAN-1/ TRAN-2 filed/ revised during the present window of two months)by the applicant, the amount admissible, the amount inadmissible, if any, along with the grounds/ reasons for non-admissibility thereof: