Benefit of ITC accrued under UP VAT Act to dealers after introduction of GST Act 2017 though having closing stocks – SC admits Petition
Supreme Court admits Petition on the issue whether after the introduction of the Goods and Services Tax Act from 1st July 2017, the registered dealers were entitled for the benefit of the un-utilised input tax credit accrued under the U.P. Vat Act though having closing stocks.
ABCAUS Case Law Citation:
4799 (2025) (10) abcaus.in SC
Recently, the Allahabad High Court had dealt with the question that whether after introduction of new GST Act from 01.07.2017, the registered dealers were entitled for the benefit of unutilized ITC accrued under the UP VAT Act though having closing stock.
In the said case, a dealer carrying on the business of purchase and sale of food-grains. In the assessment year in dispute, i.e., 2017-18, the opposite party had declared the closing stock on 30.06.2017 and ITC was claimed.
The Assessing Authority, reversed the Input Tax Credit (ITC). Feeling aggrieved by the order, the dealer party preferred an appeal before the first appellate authority, which was rejected. The dealer preferred second appeal before the Commercial Tax Tribunal, which allowed the credit of ITC claimed.
The High Court observed as per section 13(1)(a) of the VAT Act the earned ITC can be utilized on the sale, subject to the conditions as prescribed. Further, Rule 21(1)(y) of the UP VAT Rules contemplate that in the event ITC is unutilized and the registered dealer discontinued its business and the closing stock is there, then the dealer has to debit the unutilized ITC. The registered dealer cannot be permitted to utilize earned ITC for the said period.
The High Court noted that section 15(5) of UPVAT Act contemplated for refund of excess amount of admissible ITC, if it exceeds tax liability relating to last tax period of the assessment year during which the business has been discontinued.
The High Court observed that previously it had an occasion to consider as to whether the registered dealer under the Trade Tax Act will be treated as discontinued its business on introduction of new UP VAT Act and held that after introduction of VAT Act, the registered dealer of the erstwhile Act stood discontinued its business by operation of law. Therefore, similar analogy will be applicable in the case in hand. The opposite parties (registered dealers) discontinued its business under the VAT Act after 30.06.2017 by operation of law.
In view of the above observations, the High Court had set aside the judgements & order passed by the Commercial Tax Tribunal.
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