Transitional Provisions
• Section 140 of the West Bengal Goods and
Services Tax (WBGST) Act 2017 read with Rule
117 of WBGST Rules 2017 enables the
taxpayers to carry forward the Input Tax Credit
(ITC) earned under the existing laws to the
GST regime.
Audit Objectives
– Whether the mechanism envisaged by the
Department for selection and verification of
transitional credit claims was adequate and
effective; and
– Whether the transitional credits carried over by
the assessees into GST regime were valid and
admissible.
Audit Scope
• The audit scope comprised review of
Transitional credit returns filed by the
taxpayers under Section 140 of the WBGST Act
2017 from the Appointed date to the end of
March 2020.
Audit Criteria
• Section 140 of the WBGST Act 2017 governs
the transition of VAT credit from legacy West
Bengal Value Added Tax Act & Central Sales
Tax Act provisions. The section read with Rule
117 of the WBGST Rules 2017 and relevant
Notifications/Circulars issued by State Tax,
Directorate of Commercial Taxes, West Bengal
constitute the criteria for audit.
Coverage
• The analysis of 2412 sample data across 69 Charge
offices in 17 Circles, as received from Headquarters
was carried out and identified 1973 cases across 55
Charge Offices in 14 Circles, based on the following
parameters:
– Cases involving claim of high money value.
– Jurisdictional offices falling under industrial hub/economic
centres.
• Proportional representation of each of the ITC category
such as Table 5c, 6b, 7b, 7c, 7d, 10a, 10b, T11.
Audit Findings
(Systemic)
Incorrect credit administered
• On verification of transitional credit claim of a taxpayer (M/s
Gontermann Pipers (India) Limited GSTIN: 19AABCG0946P1Z6)
coming under jurisdiction of Behala Charge Office, Audit
noticed that though the taxpayer did not submit Tran 1 for
carrying forward of Input Tax Credit which the taxpayer have in
his credit in WBVAT regime, the electronic credit ledger of the
taxpayer for the respective period has been credited with an
amount of Rs. 108.91 lakh. The reasons of erroneous credit to
the electronic credit ledger may be attributed to the system
deficiency or incorrect application of the system itself.
• On this being pointed out in Audit, the local authority admitted
the audit point.
Electronic Credit Ledger populated twice/in
excess
• Verification of the Tran 1 returns and Electronic
Credit Ledger (ECL) data of the taxpayer M/s
Fairfield Equipment Private Limited (GSTIN:
19AABCF1812F1Z1) within the jurisdiction of
Strand Road Charge Office transpired that the
ECL of the taxpayer was credited with excess
input tax credit amounting to Rs.13.36 lakh,
over and above the credit claimed by the
taxpayer as per Tran 1 return.
AUDIT FINDINGS
(COMPLIANCE)
Incorrect credit taken
M/s. NEO METALIKS LIMITED, (19AABCN8514G1ZE), that the RTP
submitted TRAN-01 to take credit of Rs. 6,01,81,681.20 as state
tax credit carried forward under 5c & 7b though last WBVAT
return submitted by the dealer/RTP revealed that the
taxpayer/dealer has nothing in his credit as Input Tax Credit
(ITC). However, scrutiny of records, it was noticed that the dealer
claimed refund of Rs. 6,38,64,149 which has duly been
sanctioned by the Hon’ble CCT dated 03.05.2019. As such, the
RTP wrongly availed Input Tax credit to the tune of Rs.
6,01,48,934.
On this being pointed out in Audit, the RTP paid the dues
without interest.
Excess credit taken
• M/s Rent Alpha Limited (GSTIN: 19AAGCR6775C1Z2)
coming within Strand Road Charge office under
Barabazar Circle had carried forward Rs.263.30 lakh
under table 5(c) of Tran 1 return as closing WBVAT credit
balance from the legacy returns. However verification of
the corresponding legacy return of the taxpayer
transpired that the taxpayer shown carried forward input
tax credit of Rs.199.51 lakh which was short claimed in
earlier years though there was no such credit available in
earlier years leading to an excess credit taken to the
tune of Rs.199.51 lakh.
Excess Credit Carried Forward
• M/s. Srei Equipment Finance Pvt. Ltd. (GSTN:
19AAKCS3431L1ZZ), within the jurisdiction of Large Taxpayers
Unit Charge Office under Large Taxpayers Unit Circle had
claimed Rs.251.20 lakh under table 5(c) of Tran 1 as closing
WBVAT credit balance in legacy return. However, verification
of the corresponding legacy return for the taxpayer transpired
that though the taxpayer brought forwarded Rs.251.21 lakh as
input tax credit in the legacy return for the period April 2017
to June 2017 in WBVAT regime from the corresponding legacy
return for the period 2016-17, there was no such credit
available to be carried forward in the legacy return for the
period for 2016-17.
Irregular Credit Taken
• M/s. Golden Tread (GSTN: 19BPVPB5603M1ZE),
within the jurisdiction of Bally Charge Office under
Bally Circle had claimed Rs.55.18 lakh under table
5(c) of Tran 1 as closing WBVAT credit balance in
legacy return. However, verification of the
corresponding legacy return for the taxpayer
transpired that though the taxpayer claimed input
tax credit of Rs.55.18 lakh, the corresponding sale on
which purchaser claimed Input Tax Credit, had not
admitted by the selling dealer for the year 2017-18.
Credit taken twice
• Verification of the Tran 1 return of the
taxpayer M/s Amit Enterprise (GSTIN:
19AUXPG1032F1ZM) within the jurisdiction of
Salt Lake Charge Office under 24 Parganas
Circle transpired that the taxpayer claimed Rs.
2.22 lakh for inputs held in stock both for
Table 7a and Table 7c of Tran 1 return for the
same item of stock with same invoice having
same value.
Credit Taken Without Filing Legacy Returns
• M/s. India Green Reality Limited (GSTN:
19AACCI1495A2ZR) within the jurisdiction of
Ballygunge Charge Office under Kolkata (South)
Circle had claimed Rs.51.54 lakh under Table 5(c) of
Tran 1 as closing WBVAT credit balance in legacy
return. However, verification of the corresponding
legacy return for the taxpayer transpired that the
taxpayers did not file VAT returns for the period of
six months immediately preceding the appointed
date in contravention of provision of the Act.
Ineligible Credit Taken
• M/s. Shree Om Engineering (GST IN
19ABDFS5963N1ZD) within the jurisdiction of Bally
Charge Office under Bally Circle claimed to take
credit of Rs.2.57 lakh as Input Tax Credit (ITC),
under Table 5(c) of Tran 1, as closing WBVAT credit
balance in legacy return. However, verification of
Tran 1 transpired that the taxpayer had not
deducted any tax amount from the carried forward
of input tax credit for pending of C forms for
turnover of Rs.106.64 lakh.
Un-availed credit on capital goods
• M/s. IFB Industries Ltd. (GST IN 19ABDFS5963N1ZD)
within the jurisdiction of Large Taxpayers Unit
Charge Office under Large Taxpayers Unit Circle
claimed Rs.1.51 lakh as unavailed credit on capital
goods under Table 6(b) of Tran 1, as closing WBVAT
credit balance in legacy return. However,
verification of Tran 1 transpired that the taxpayer
had already availed the said WBVAT credit in the
legacy return. On this being pointed out in Audit,
the taxpayer paid the dues with interest.
Credit taken without filing supporting documents
• M/s. HCL Infosystems Ltd. (GSTN
19AAACH2420C1Z8) within the jurisdiction of
Salt Lake Charge Office under 24 Parganas
Circle claimed to take credit of Rs.153.30 lakh
as eligible taxes held in respect of inputs
under Table 7.b of Tran 1, as inputs held in
stock. However, verification of Tran 1
transpired that the taxpayer had not
submitted any statement sustaining his claim.
Non-verification of eligibility of inputs for
want of privileges
• M/s. Mohta Brothers Private Limited (19AABCM7991G1Z0),
claimed to take credit of Rs. 3,28,925 as Input Tax in Tran 1 for
goods hold as an agent on behalf of principal having GSTIN
24AAACF7820L1ZM. As per provisions of the Act itself, the
principal taxable person, in respect of whom the taxable person
act as an agent, either not to claim the input tax or reverse the
same for the goods hold by the agent.
• Due to not having the privilege, the details of the taxable
person having GSTN outside the State of West Bengal, could not
be verified and audited. No documents regarding non-
availment of input credit by the principal dealer were made
available to Audit.
Non-levy of Interest
• M/s. NEO METALIKS LIMITED, (19AABCN8514G1ZE), submitted
TRAN-01 to take credit of Rs. 6,01,81,681.20 (Rs. 6,01,48,934
in 5c & Rs. 32,747.20 in 7b) as state tax credit carried forward
under 5c & 7b though last WBVAT return (April to June 2017)
submitted by the dealer/RTP revealed that the taxpayer/dealer
has nothing in his credit as Input Tax Credit (ITC). On this being
pointed out in Audit, the RTP paid Rs. 6,01,48,634 in DRC 03
on 18 March 2021. Though the RTP paid the wrongly availed
Input Tax Credit in Tran 1, no interest has been computed.
On this being pointed out in Audit, the proper officer did not
furnish any reply.
Constraints
• Though the sample of transitional credit cases,
provided by Headquarters, has data under
table 7(d) and table 10(b) of Tran 1 to be
checked, no such data were found in the Tran
1.
• The fact of un-accessibility was intimated to
the competent authority.
Conclusion
• Audit identified a sample of 1973 out the 2412
cases of transitional credit claims from the cases
identified by the Headquarter for verification with a
view to assess the adequacy of the verification
mechanism adopted by the Department as well as
the general compliance by the taxpayers in the GST
regime. Out of the sample of 2412 cases Audit have
covered 1973 cases (82% approx) and had
representation of claims from all the tables
prescribed for transitional credit claims.
• From a compliance perspective Audit observed 227
compliance deviations in the 1973 cases audited
constituting an error rate of 11.51%. Deficiencies
and irregularities in transitioning of closing balance
of credit in the last legacy returns, inputs/input
services held in stock without sustaining statement
constituted majority of the compliance deviations.
• As no documents furnished regarding verification
of these claims by the Department, the Audit could
not carried out any inadequacies on verification
process.
