GST Circular on non-utilization of Disputed and Blocked transitional credit

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CBEC has issued a Circular No. 33/07/2018 – GST dated February 23, 2018, regarding non-utilization of blocked and disputed transitional credit taken in terms of Section 140 of the CGST Act, 2017. The following are  summarized pointers for your easy digest:

  • Non-utilization of Disputed Credit carried forward: If any show cause notice was issued under Rule 14 of Cenvat Credit Rules, 2004 which has been adjudicated vide last Order-in-Original (“OIO”) or Order-in-Appeal (“OIA”) which existed on July 1, 2017, holding the disputed credit as inadmissible, then such Cenvat Credit credited to E-Credit ledger, shall not be utilized by the registered person for discharging his tax liability till such OIO or OIA is in existence.

If such disputed credit is utilised, it shall be recovered from the tax payer, with interest and penalty as per the provisions of the CGST Act, 2017.

  • Non-transition of Blocked Credit: As per Section 140(1)(i) of the CGST Act, 2017, registered person shall not carry forward in his E-Credit ledger such credit which is not eligible under Section 17(5) of CGST Act, 2017 (containing Negative List of GST ITC). Where such blocked credit is carried forward in E-Credit ledger, then the same shall not be utilized by the registered person for discharging the tax liability in GST.

The amount of blocked credit shall be recovered from the tax payer, with interest and penalty as per the provisions of the CGST Act, 2017.

Undertaking in case of disputed/blocked credit amount exceeding Rs. 10 Lakhs – In all cases. where such disputed Cenvat Credit and Blocked credit is higher than Rs. 10 Lakhs, the taxpayer shall submit an undertaking to the jurisdictional officer of the Central Government that such credit shall not be utilized or has not been availed as transitional credit, as the case may be.