Taxpayers will not be able to avail transitional input credit available for Krishi Kalyan Cess (KKC) under the Goods and Services Tax (GST) regime. The ruling was given by the Maharashtra Advance Ruling Authority yesterday.
The Advance Ruling Authority observed that Krishi Kalyan Cess was utilised only towards payment of KKC and under GST there is no levy of KKC. It also argues that tax and cess are distinct levies and KKC cannot be treated as excise duty or service tax for availing the CENVAT credit.
Under the earlier indirect tax regime, manufacturers or the output service providers were allowed a set off of the taxes paid on the inputs or the input services used for manufacturing the final product or providing the output service. This was referred to as Cenvat Credit.
Therefore, the advanced ruling authority said in its order that accumulated credit by way of Krishi Kalyan Cess as appeared in the service tax return of Input Service Distributor (ISD) on June 30, 2017 which is carried forward in the electronic credit ledger maintained by the company under CGST Act 2017, will not be considered as admissible input tax-credit.
Abhishek Jain, Tax Partner, EY India said, "A long awaited advance ruling was delivered yesterday by the Maharashtra Advance Ruling Authority, upholding non-admissibility of the KKC credit as an eligible input tax credit under the GST regime. While the ruling is in the context of a particular fact pattern, it does concur with the revenue authorities view of ineligibility of transitioning of KKC credits." Jain though admits that the order may trigger a long drawn legal battle on this issue.