Dabur, other FMCGs approach court over GST input tax credit

FMCG big guns such as Dabur moved court against the denial of input tax credit relating to capital goods lying in stocks before the introduction of the goods and services tax (GST) in July last year.

The matter was being heard in the Uttarakhand high court.

But, now Dabur and other big FMCG players have filed their petitions in the matter, sources said.

Under the erstwhile tax regime, capital goods that went into the production of goods in states that used to give area-based exemptions were not given input tax credit. However, now these goods have moved to the taxable category under the GST. Capital goods bought before July 1 last year but used for goods sold after the GST rollout are not given input tax credit.

A petitioner engaged in manufacturing of plastics has moved court against these provisions under the GST.

Lacunae related to removal of area-based exemptions under the goods and services tax (GST) have become a bone of contention between companies and the government.

Earlier, the high court had issued notices to the Centre, the GST Council, the state government and tax officials over the absence of transitional credit for capital goods after area-based exemptions were stopped under the GST.

Abhishek Rastogi, partner with Khaitan & Co. and counsel for main petitioner, said there was legitimate expectancy of these units that proportionate credit on capital goods should be given.

He said the entire controversy revolved over the use of specific language of Sections 140 (2) and 140 (3) of the Central GST (CGST) Act which denies input tax credit to these transitional stocks. Basically, he said the constitutional validity of these provisions was being challenged.

The court heard the arguments of the main petitioner and posted the hearing to August 2. The big FMCG players are yet to argue in the case.