This circular provides directions to ensure uniform implementation of the CGST Act in cases involving non-transition or non-utilisation of certain categories of CENVAT credit under the GST regime.

It clarifies that where a show cause notice was issued under the CENVAT Credit Rules and, as on 1 July 2017, the last adjudication or appellate order had held the credit to be inadmissible, such disputed credit, even if carried forward into the electronic credit ledger under section 140 of the CGST Act, cannot be utilised to discharge GST or IGST liability. If such credit is utilised while the adverse order remains in force, it shall be recovered along with applicable interest and penalty.

The circular further clarifies that blocked credits, which are not eligible under section 17(5) of the CGST Act, such as credit relating to telecommunication towers and pipelines laid outside factory premises, are not permitted to be transitioned under section 140. If such blocked credit is wrongly carried forward and credited to the electronic credit ledger, it cannot be utilised and is liable to recovery with interest and penalty.

It also prescribes that where the amount of disputed or blocked transitional credit exceeds ₹10 lakh, the taxpayer is required to submit an undertaking to the jurisdictional officer confirming non-utilisation or non-availment of such credit. These directions are intended to prevent misuse of inadmissible transitional credits under GST.