No ITC on Closing Stock Without Resale Under VAT | HC

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  • Last Updated on 29 May, 2025

ITC on closing stock

Case Details: Commissioner Commercial Tax vs. S/S Ravi Prakash Rahul Prakash - [2025] 174 taxmann.com 771 (Allahabad)

Judiciary and Counsel Details

  • Piyush Agrawal, J.
  • Bipin Kumar Pandey for the Appellant.
  • Vishnu Kesarwani for the Respondent.

Facts of the Case

The dealer was registered under the UP VAT Act and engaged in trading food grains including rice. As of 30-06-2017, just before the introduction of GST on 01-07-2017, the dealer held closing stock on which input tax had been paid under the VAT regime. The dealer initially filed Form GST TRAN-1 to claim input tax credit (ITC) on this closing stock but subsequently filed Form GST TRAN-2 reversing the ITC claim upon realising that such credit was not admissible.

The Commercial Tax Tribunal (CTT), Allahabad had passed an order allowing the dealer to claim ITC benefit on the closing stock. The revisionist (department) challenged this CTT order before the Allahabad High Court. The revisionist argued that under Section 13 of the UP VAT Act, ITC can only be claimed if purchased goods are resold as taxable sales. Since the dealer had not sold the closing stock on the date GST was introduced and the goods were not exempt under GST, the input tax paid under VAT did not mature into ITC under GST.

High Court Held

The Hon’ble High Court of Allahabad allowed the revision, setting aside the CTT order in favour of the revisionist. The Court held that input tax credit under the UP VAT Act is available only when purchased goods are resold as taxable sales under Section 13, and mere holding of closing stock on the GST introduction date does not qualify for ITC. Since the dealer had not sold the goods as of 01-07-2017 and the closing stock was not exempt under the GST Act, the input tax credit on such stock was inadmissible. Consequently, the High Court of Allahabad upheld the department’s position on disallowing ITC on closing stock.

List of Cases Reviewed

  • Commissioner, Commercial Tax v. S/S Janki Industries Nai [Sales/Trade Tax Revision No. 10 of 2025, dated 9-5-2025] (para 17), followed

List of Cases Referred to

  • Commissioner, Commercial Tax v. S/S Janki Industries Nai [Sales/Trade Tax Revision No. 10 of 2025, dated 9-5-2025] (para 3)
  • Farooq Agencies v. CCT [2013] 37 taxmann.com 473 (Allahabad) (para 4)
  • CIT v. R. Hanumathappa and son (1971) 3 SCC 592 (para 5)
  • State of Jharkhand v. Govind Singh (2005) 10 SCC 437 (para 5)
  • Sangeeta Singh v. Union of India (2005) 7 SCC 484 (para 5).

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Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.

The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:

  • The statutory material is obtained only from the authorized and reliable sources
  • All the latest developments in the judicial and legislative fields are covered
  • Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
  • Every content published by Taxmann is complete, accurate and lucid
  • All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
  • The golden rules of grammar, style and consistency are thoroughly followed
  • Font and size that's easy to read and remain consistent across all imprint and digital publications are applied