There is no embargo on carry forward of credit on account of Education Cess, Secondary and Higher Education Cess and Krishi Kalyan Cess under the GST regime

FACTS

Credit pertaining to Education Cess, Secondary and Higher Education Cess and Krishi Kalyan Cess was rejected from being carried forward to the GST regime on the ground that the same could be set off only against specific duties and taxes provided in explanation to section 140(1) of the Central Goods and Services Tax Act, 2017 read with Rule 117 of the Central Goods and Services Tax Rules. Since the Rule does not cover any cess, the same could not be carried forward. Therefore, the present writ petition is filed.

HELD

The High Court primarily noted that there is no notification / circular / instruction expressly stating that the credit would lapse. The provisions of sub-section

(1)    read with sub-section (8) of section 140 and the Explanation thereunder state that the assessee is entitled to the amount of CENVAT credit carried forward in the return relating to the period ending with the date preceding the appointed date and this, in the present case, includes accumulated credit on account of the cesses. Thus it is more than clear that all available credit as on the date of transition would be available to an assessee for set-off. Instructions issued by the CBEC dated 7th December, 2015 reveal a policy decision not to allow utilisation of accumulated credit of Education Cess, Secondary Higher Education Cess and Krishi Kalyan Cess but nowhere states that the credit has lapsed. The High Court further noted the amendment in section 28 of the amended act, 2018 to exclude cesses from the ‘eligible duties and taxes’ from retrospective effect, (and) stated, however, that the same is not yet notified.