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The Madras High Court has allowed transition of accumulated Tax Deducted at Source (TDS) under the TNVAT regime to set off GST liabilities.
The Court gave the order on a batch of 23 petitions filed by assesses under the Tamil Nadu Goods and Service Tax Act, 2017 (TNGST Act) challenging notices issued by the Commercial Tax Department proposing the denial of transition of credit in respect of TDS in terms of Section 13 of the Tamil Nadu Value Added Tax Act, 2006 (TNVAT Act) in ten cases, and orders confirming the proposals, in 13 cases.
Accumulated TDS credit
The common factual position is that all petitioners, in the era of Tamil Nadu VAT, have accumulated credit of TDS and have also been permitted to carry forward the same from year to year. However, the petitioners sought transition of the accumulated TDS into their respective accounts for set off against output tax - GST liabilities. This was denied.
The impugned orders have been set aside, and the petitioners held to be entitled to transition TDS under the TNVAT Act in terms of Section 140 of the TNGST 2017. Connected miscellaneous petitions are closed with no order as to costs, said an order by Justice Anita Sumanth.
The petitioners’ counsel submitted that TDS is nothing but tax and Section 13 of the TNVAT makes this position clear. Further, being a VAT for the purposes of Section 140(1) of the TNGST Act, it is entitled to be carried forward for set off. Also, deduction of tax at source is only a mechanism to ensure advance payment and collection of tax without leakage.
Quoting precedence
In Magma Fincorp Ltd V State of Telangana, the High Court at Telangana has considered this very issue, interpreting Section 140 purposively stating that, “Once it is admitted that credit was available to the petitioner on the date of switch over from VAT regime to GST regime and once it is admitted that the petitioner may be entitled to make a claim for this credit in other modes, we think that the second respondent ought to have given a purposive interpretation to Section 140 of the Act read with Sections 16 to 21 of the Telangana GST Act 2017. As he has failed to do the same, the matter requires reconsideration.”
“Section 140 of the Telangana Goods and Service TaxAct, 2017 is in pari materia with the same provision in the TNGST and the observations of the Telangana High Court would also support the view I have now taken,” the order said.
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