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Recently the authority for advance ruling delivered a sock on the assesses who have transferred the credit under earlier indirect tax regime to the new GST regime by clarifying that the credit of Krishi Kalyan Cess is not allowed under GST.

The AAR in its order delivered in response to the application filed by the Kansai Nerolac Paints Ltd sighted the following reasons:

  • The KKC is a cess and not a tax; credit of cess is not covered under section 2(62) of the CGST Act 2017.
  • KKS is neither a Service tax nor excise duty, the same held by the Delhi High Court. As the Service Tax used to levy under Finance Act 1994, Excise Duty used to levy under The Central Excise Act, 1944 and KKC used to levy under the Finance Act, 2015.
  • KKC is not a free credit due to restrictive setoff conditions as the credit of KKC can be utilized only for the payment of KKC only.
  • CENVAT credit as referred in section 140(1) of the CGST Act 2017 does not include the credit of KKC.

Nor as the department has started scrutinizing the transitional credit this ruling has given one permanent disallowance to the department.

This ruling is no surprise to the thinkers, on the other hand, it has completely socked the assesses who has availed the transitional credit and their case fall under the scrutiny and the auditors who have to sign the balance sheet as on 31st March 2018 as they may be required to make some extra disclosure.

This ruling has given one more area for litigation and hence the litigation free GST regime has taken another hit.


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Category GST, Other Articles by - CA Pradeep Kumar Rajput 



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