2026-VIL-636-GUJ
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SGST High Court Cases

GST - Sections 54, 140, 142 of the CGST Act, 2017 - Refund of Transitional Input Tax Credit under Section 54(3) - Upon migration to the GST regime effective from 01.07.2017, the petitioner carried forward this accumulated credit through Form GST TRAN-1, which stood reflected in the Electronic Credit Ledger. Subsequently, the petitioner accumulated Input Tax Credit on account of inverted duty structure – The petitioner filed application for refund under Section 54(3) of the CGST Acts. The tax authority sanctioned only part refund and rejected the balance claim on the ground that it represented Transitional Credit not refundable under Section 54(3) - Whether a registered person who has carried forward the Transitional Input Tax Credit through Form GST TRAN-1 under Section 140 of the CGST Acts can claim refund of such transitional credit under Section 54(3) of the Act on account of accumulation arising from an inverted duty structure – HELD - The statutory framework governing transitional provisions, comprising of Sections 139 to 142 of the CGST Act, constitutes a complete code regulating migration from the erstwhile indirect tax regime to the GST regime. Section 140 was enacted as a beneficial provision to preserve accumulated credit and enable its utilization towards discharge of future GST liabilities. However, the legislature has consciously drawn a distinction between carry forward of ITC and refund of such credit. These are mutually exclusive remedies - A taxpayer can either seek a refund under the existing laws to be paid in cash under Section 142(3) of the CGST Act or choose to transit the credit. If the accumulated credit is carried forward, the statutory bar under the second proviso to Section 142(3) of the Act gets triggered, making refund impermissible. Taxpayers migrating to the GST regime cannot pursue both avenues concurrently or interchangeably - Merely because transitional credit is reflected in the Electronic Credit Ledger and is capable of utilization towards discharge of output tax liability under Section 49(4) of the Act does not mean such credit becomes refundable under Section 54(3). The Sections 49 and 54 operate in entirely different fields and serve distinct legislative purposes - The plain language of Section 54(3) contemplates accumulation of Input Tax Credit generated under the GST regime and does not extend to credit which merely migrated into the GST regime through the transitional mechanism; permitting refund of transitional credit under Section 54(3) would render the second Proviso to Section 142(3) of the GST Acts wholly redundant and defeat the legislative object underlying the transitional provisions – Further, the CBIC Circular No. 37/11/2018-GST clarifies that once the credit of the erstwhile regime is transitioned under the GST, no refund of such credit is granted or allowed – The prayer for refund is rejected. The prayer for re-crediting the rejected amount to the Electronic Credit Ledger is allowed - The writ petition is partly allowed
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