Petitioners are entitled to transit accumulated TDS under the VAT Act for set off against output GST liabilities in terms of Section 140 of the state GST Act.
Section 140 of the CGST Act, 2017- Transitional Credit –-TDS - The petitioners challenged notices issued by the Commercial Tax Authorities proposing the denial of transition of credit in respect of TDS in terms of Section 13 of the TNVAT 2006. The petitioner counsel submitted that being a value added tax for the purposes of Section 140(1) of the Act, it is entitled to be carried forward for set off; deduction of tax at source is only a mechanism to ensure advance payment and collection of tax without leakage. Thus, TDS is a tax. The respondent counsel submitted that the amount deducted and remitted by a payer is only an approximation of the actual tax payable and not an exact amount. Thus, even if one were to assume that the amount deducted at source constitutes a tax at the time of deduction, whatever remains after adjustment would not retain the character of a tax, since it is, admittedly, in excess of the tax liability. ITC is defined in terms of Section 2(63) of the CGST Act to mean ‘credit of Input Tax Act’. This cannot be extended to TDS or any other deduction as what can be transitioned must be ITC only. The court observed that any deduction made towards anticipated tax liability would assume the character of tax and will not change or fluctuate depending on whether it is held as credit or whether it is an adjustment against tax liability. The amount collected/deducted has been captured in the returns of turnover filed under the erstwhile TNVAT regime.
Held that:- The Hon’ble High Court set aside the impugned orders and held that the petitioners are entitled to transition TDS under the TNVAT Act in terms of Section 140 of the Act.