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Retrospective tax amendments take away pre-GST benefits

  • Jun 22, 2020 | Divita S Gupta

Retrospective tax amendments take away pre-GST benefits

In December 2018, the GST council announced that GST is only a tax on value addition. So interest can be demanded either only for late payment of GST on the value addition or the portion of the GST payable after adjusting input tax credit. While this clause was later amended, the amendment has not been declared officially. As such, taxpayers continue to pay large sums of interest in entire or gross output tax liability. Section 128 of the Finance Act of 2020 amends Section 140 of the GST act empowering the Centre to prescribe a time limit for taxpayers to carry forward the ITC available to them under pre-GST tax laws. In the pre-GST time, the credit represented the tax that was paid on purchases - this credit later became available for utilisation against future tax liabilities. Laws under GST provided a mechanism to transition this credit and continue its usage against GST output tax liability. But the implementation of a time limit, that too a time limit of just a few months, will cause many taxpayers to lose out on benefiting from this mechanism. Judicial bodies have spoken up against this new rule stating a violation of earned rights. The High Court of Gujarat held that such a restriction to be arbitrary, violative of a person’s fundamental right to do business and the constitutional right to property. Several taxpayers have approached High Courts of various States claiming that the government has introduced retrospective amendments to GST law either to deny benefits or overturn court judgments that have been favourable to the taxpayer. 


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Avalara Author
Divita S Gupta
Avalara Author Divita S Gupta
Divita has served as a writer and editor for top financial services organizations in India. She has written on topics like mutual funds, insurance, taxes, SME financing for globally recognized banking and financial organizations including ICICI, Aditya Birla Group, News Corp. With a Masters in Business Administration from Symbiosis International University, she currently owns a small business in Mumbai.