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Carry forward of KKC, EC etc., into GST – implications of recent Delhi High court decision

Goods and Services Tax - GST - By: - CA Venkata prasad Pasupuleti - Dated:- 10-3-2018 - Education Cess was being levied on Central Excise and Service Tax from 10.09.2014. Education Cess paid on the purchase was available as a credit against payment of education cess on payment on the output removal. The credit of cess was not able to use for the payment of duty. Later when the rate of excise duty was increased from 12% to 12.5%, cess was rescinded. Thereby the accumulated credit was not able to .....

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of Hon ble Delhi High Court in case of Cellular Operators Association of India and Others Vs UOI and Others 2018 (2) TMI 1264 - DELHI HIGH COURT . In this background, an attempt has been made in this article to explain the Delhi High Court decision and its implication on the KKC/EC carried forwarded into GST. Background of the Case: Under the CENVAT Credit Rules, 2004 (CCR, for short), CENVAT credit of EC and SHE Cess can be availed and utilised for payment of EC and SHE Cess on manufactured go .....

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do with the unutilized credit of EC/SHEC lying as on 01.03.2015/01.06.2015 whether it lapses or can be sought as a refund or used for the payment of tax/duty? A writ petition has been filed inter alia seeking direction that the credit accumulated as on 01st June 2015 on account of EC and SHEC should be allowed to be utilised for payment of service tax. Contentions: The petitioners claim a vested right to avail benefit of the unutilized amount of EC or SHE credit, which was available and had not .....

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/2015-TRU dated 28th February 2015. Decision: The court has held that Manufacturers and Service providers are entitled to avail and utilize EC and SHEC against the liability of EC and SHEC before the cut-off dates i.e, 01st March 2015 in case of Goods and 01st June 2015 in case of Services, as the EC and SHEC was ceased to be applicable after the said dates. The provisos added to Rule 3, sub-rule (7) in clause (b) allowing utilization of EC and SHEC (availed on inputs, capital goods or service r .....

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14 was not offended. Further, the Hon ble High Court held that there is no provision in the law which states that EC and SHEC are subsumed into Service Tax and Excise Duty to allow the cross-utilisation of credit. Thereby decision concluded that the credit of EC and SHEC cannot be used for the payment of excise duty. Implications on the Credit carried forwarded into GST: The decision of the Hon ble High court restricted to the subject of cross-utilisation of EC and SHEC against the payment of C .....

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ules issued thereunder. By virtue of Rule 3(1)/(1A) of CCR, 2004, EC, SHEC and KKC are treated as CENVAT credit . Though EC, SHEC, and KKC (for brevity Cess ) are ceased to be applicable, there is no corresponding provision in the old laws for the lapse of such credits (unutilised portion). Therefore, as per Section 140 of CGST Act, 2017, the balance of Cess lying as closing balance in the last return can be carried forward to GST. Rule 3(4) or 3(7) of CCR, 2004 provides restriction for utilisat .....

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