From UPSC perspective, the following things are important :
Prelims level : Transitional Tax Credit
Mains level : Not Much
Taxpayers who had missed out on getting the benefit of transitional tax credits during India’s switchover to the Goods and Services Tax (GST) regime five years ago, will now get a fresh window to avail them.
What is Transitional Tax Credit?
- A tax credit is a component of a company’s tax payment that can be applied to offset a subsequent tax obligation.
- When India moved to the GST regime in 2017, companies had to transition the credit sitting on their books.
- So, the closing balance in the old tax regime would become the opening credit balance under GST.
- When India moved from the old indirect tax regime to GST, a one-time transition of credit was allowed.
- That is, companies could set off part of the taxes paid during the old tax regime against future GST liabilities.
- Many companies claimed that they had simply forgotten to claim the transitional credit.
Why in news?
- The Supreme Court has directed the revenue authorities to facilitate such credits.
- The move is likely to benefit hundreds of GST assessees who had hitherto not been able to avail such credits.
- They will be given two-month window to claim during September and October.