The court was delivering judgment in the Godrej & Boyce case where a transitional credit of Rs 3.84 crore was taken. The tax department had issued a notice to the company claiming that the tax credit was wrongly availed.
When a company pays indirect tax it is known as tax credit. Tax credits can be used to set off part of future tax liabilities. When India moved to the Goods and Services Tax (GST), many companies were left in a situation where crores were sitting on their books in the form of tax credits.
There was always a question whether the tax credit availed under the erstwhile tax regime can be set off against the GST liability.
“The transition to pre-GST credit was highly in dispute and one such issue was the pre-GST cess credit. The High Court rightly allowed the transition of such credit. This decision will benefit many taxpayers facing such litigation, though the cases will be settled. Supreme courtPuneet Bansal, Managing Partner, Nitya Tax Associates said.
Earlier too, around 25 companies that were not able to claim transitional tax credit had dragged the government to court over retrospective amendments to the GST framework. The government had set a time limit of 90 days for availing transitional credit.