TDS Credit from VAT Regime Can Be Carried Forward to GST: High Court

The writ was filed by the businessman under Article 226 of the Indian Constitution, which permits individuals or businesses to raise objections against the illegal and unfair actions taken by the government authorities in the high court.

Here in this writ, the petitioner is asking the court to quash the order dated February 01, 2021, passed by the State Tax Officer (ST), Suramangalam Circle, Salem, which was marked as Reference No. ZD 330221000135F.

What was the issue?

The main issue is regarding the Tax Deducted at Source (TDS) that was earlier collected under the old VAT regime, when GST was not introduced. When GST was introduced in July 2017, several businesses tried transferring their tax credits and balances, including TDS, from the VAT system to the GST system.

But the tax department ordered that only ITC is allowed to be transferred, not TDS. Meaning the TDS amount collected during the period of the old VAT regime was not allowed to be transferred to the new GST system. Which was considered unfair and illegal by the petitioner, i.e., Star Electrical Works.

The judge referred to a previous ruling in a similar case, W.P. No. 9991 of 2020, and other connected petitions, decided on 26.02.2021. In that case, titled M/s. DMR Constructions vs. The Assistant Commissioner (CT), the High Court had clearly stated that TDS from the VAT period should also be allowed to be carried forward into GST.

What did the court decide in this case?

Since the issue was exactly the same, and a clear legal decision already existed, the judge applied the same legal principle here. As a result:

• The impugned order dated 01.02.2021, which disallowed the transfer of TDS, was quashed (cancelled).
• The court allowed the writ petition, meaning the petitioner’s request was accepted.
• The judge did not award any costs, so neither side has to pay legal expenses to the other.
• The connected Miscellaneous Petition (W.M.P.No.12192 of 2021) was also closed, as it became unnecessary after the main petition was allowed.