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.
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