The CBEC justified the move on the grounds that the
verification exercise can only be done by the tax
authority, which had legal jurisdiction under the
erstwhile law and also has the requisite past record of
the taxpayer. According to an administrative
power-sharing arrangement between the Centre and states
approved by the GST Council, 90% taxpayers below the
turnover of Rs 1.5 crore are under the administrative
control of states and the rest is under the Centre.
Assessees with turnover higher than Rs 1.5 crore are
equally divided between the Centre and states.
According to the CBEC circular, the department will
undertake detailed verification of transitional credits
claimed by taxpayers since GST rollout. While the claims
are seen to be high, a preliminary enquiry, sources
said, revealed that only 5-7% of claims are invalid.
“This (verification only by Centre staff) could lead to
litigation between states and the Centre as it would
create a precedent even for future audits of such
taxpayers,” Rashmi Deshpande, associate director at
Khaitan & Co, said.
Additionally, the CBEC note directs officials that the
CGST Act would be amended to specifically exclude credit
of cesses paid in earlier regime as valid. “Appropriate
action in this direction would be taken whenever the
CGST Act is amended next. You may keep this direction in
view while verifying transitional credit,” the letter
said.
Experts said many taxpayers have claimed credit for
Swachch Bharat and education cess paid in the earlier
regime as the law doesn’t specifically prohibit it. In
the earlier regime, credit of cesses could be offset
against cess liability, but the CGST law doesn’t have
any provision for such accumulated credit, Deshpande
said. She added that any amendment to exclude cess
credit must provide a way forward for dealing with it.
However, Vishal Raheja, DGM at Taxmann, said the
government was well within its rights under the law to
issue these instructions.
Source::: Financial Express,
dated 20/03/2018.