Dear Readers,
Transitioning into GST from the earlier tax regime is an activity necessary for all existing business. This transitioning is very important considering stakes involved in the same. Credit of most of taxes paid in old regime is available as GST-ITC in the new regime. Careful assessment of stocks is necessary in order to ascertain the available ITC for stock lying with the businesses as raw material/ finished/ semi-finished goods. Though, this reclaim of credit is certainly not a benefit as at the time of making outward supplies, GST shall be applicable. Compliance required for availing the benefit is furnishing of TRAN-1 & TRAN-2, as applicable. A simplified process for claiming of the credit is described below for ready reference:
Step 1: Identify unclaimed credit.
Step 2: Categorize as per relevant provisions of GST.
Step 3: Identify relevant column under GST TRAN-1 to fill in information.
Step 4: Fill in the relevant details in TRAN – 1 form on GST Portal and avail the ITC. The same shall be reflected in you Tax Credit Ledger.
See table below for type of credit, relevant provision under GST Acts and column in TRAN-1 for claiming the credit.
| Sr. No. | Relevant column in GST TRAN-1 | Type of Credit | Relevant Section of CGST Act | Relevant Section of SGST Act | Specific Conditions/ Comments |
| 1. | 5(a) | Carry forward of CENVAT in C. Ex. and Service Tax return for the period ending 30 June 2017 | S. 140 (1) & 140(4)(a) | Common credit carried forward in the returns for inputs as prescribed in S. 140(4)(a) | |
| 2. | 5(c) | Carry forward of VAT‑ITC and Entry Tax Credit (as available) for the period ending 30 June 2017 | S. 140 (1) | 5(b) – details of concessional forms received – shall be required in case any credit is carried forward under this sub-section. Details only upto the value for which credit is being carried forward is to be provided.
5(c) – details of pending concessional forms shall be required to be provided. Reduction of credit in case of non-provision of details related to said forms. Credit shall be reduced to the extent of benefit allowed due to concessional forms. The same shall be refunded under VAT laws once claims are substantiated as per CST Rules. |
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| 3. | 6(a) | Unavailed CENVAT Credit of Capital Goods not carried forward in the return. | S. 140 (2) | Carry forward of CENVAT w.r.t. capital goods, where partial credit has been utilized. | |
| 4. | 6(b) | Unavailed Input Tax Credit of Capital Goods, not carried forward in the return | S. 140 (2) | Carry forward of VAT-ITC w.r.t. capital goods, where partial credit has been utilized. | |
| 5. | 7(a) | Unaviled CENVAT credit claimed on inputs held in stock/semi-finished or finished goods for the period ending 30 June 2017.
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140(3), 140(4)(b);
140(6); 140(7) |
Any registered person who was not liable to be registered under the existing law or was engaged in providing exempted goods or services or providing works contract services is entitled to take credit in electronic credit ledger.
Registered person engaged in manufacturing of taxable as well exempted goods under previous law is entitled to take CENVAT credit. A registered person who was either paying tax at a fixed rate or paying a fixed amount under existing law shall be entitled to take CENVAT credit. Input Service Distributor will be eligible for distribution input tax credit on account of services received before 30th June, 2017. |
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| 6. | 7(b) | Unaviled CENVAT credit and VAT credit in respect of tax already paid by supplier and goods received after 1st July 2017.
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140(5); 140(7) | 140(5); 140(7) | Central credit and VAT credit available w.r.t. taxes or duty already paid on input or input services and recorded within 30 days in the books of account post 1stJuly, 2017
Invoices for services might have been received post 1st July, 2017. |
| 7 | 7(c) | Unaviled VAT and Entry taxcredit claimed on inputs held in stock/semi-finished or finished goods for the period ending 30 June 2017.
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140(3);
140(4)(b); 140(6) |
Any registered person who was not liable to be registered under the existing law or was engaged in the sale of exempted goods or tax free was entitled to the credit of input tax at the time of sale of goods shall be entitled to take, in his electronic credit ledger, credit of the value added tax held in stock on 1st July, 2017.
Registered person engaged in sale of taxable goods as well as exempted goods or tax free goods under previous law is entitled to credit of the value added tax of held on 1st July, 2017. A registered person who was either paying tax at a fixed rate or paying a fixed amount under existing law shall be entitled to take credit of value added tax in respect of inputs on 1st July, 2017. |
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| 8. | 7(d) | Unaviled CENVAT credit on inputs not supported by invoices/documents | 140(3) proviso
r/w Rule 117(4) of CGST Rules, 2017 |
140(3) proviso r/w R. 117 (4) of SGST Rules, 2017. | Registered person who is not in possession of invoice/ document evidencing payment of duty can claim the tax paid during supply under GST @40% (in case goods are taxed at 5% or 12%) OR @60% (in case goods are taxed at 18% or 28%), as applicable.
The benefit of such credit must be passed on to the recipient by way of reduced prices. |
| 9 | 8 | Unaviled CENVAT credit already carried forward in last return under existing law.
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140(8) | Person having centralized registration under old law shall be allowed to take CENVAT credit, carried forward under previous return filed for period ending 30.06.2017. | |
| 10. | 9(a) | Details of goods held with job worker and non‑taxable return of goods within 06 months | 141 | Both job-worker and manufacturer must declare the goods. Else the transaction shall not be treated as non-taxable. Also, credit availed on the goods shall be recovered. | |
| 11. | 9(b) | Details of goods of manufacturer held with job worker and non‑taxable return of goods within 06 months | 141 | ||
| 12. | 10(a) | Details of goods held with agent and credit available on such goods | 142(14) | Both agent and principal must declare the goods. Else credit shall not be available to the agent. | |
| 13 | 10(b) | Details of goods held in stock as an agent | |||
| 14. | 11 | Details of credit available on tax already paid under service tax / VAT under existing law– activities where both VAT & ST were applicable. | 142(11)(c) | 142(11)(c) | Credit shall be available if tax has already being paid under both service tax as well as Vat under existing law. |
| 15 | 12 | Details of goods sent on approval basis but rejected or not approved by the buyer – non-taxable transaction upto 06 months | 142(12) | If goods are returned after 06 months, the same shall be treated as supply under GST for both the transactions, i.e., when goods were sent and when goods were returned. In case not returned within 06 months GST shall be payable by the person who had sent the goods. |
Note #1: It is compulsory that returns for the past 06 months have been duly filled. In case of non-compliance, submission of TRAN-1 shall not be allowed.
Note #2: In case of wrong availment of credit the same shall be extracted in terms of R. 121 of CGST Rules:
“R. 121: The amount credited under sub-rule (3) of rule 117 may be verified and proceedings under section 73 or, as the case may be, section 74 shall be initiated in respect of any credit wrongly availed, whether wholly or partly.’
General Conditions & Precautions:
- That the registered person is not opting composition scheme under GST.
- That the relevant returns for previous 06 months have been submitted.
- That the credit being transitioned is eligible under GST regime.
- That the TRAN 01 is submitted by 29th Sept 2017, subject to any extensions as may be prescribed.
Disclaimer:
- The above is only general information. It is advisable that expert advice depending on factual situations be sought before taking any action.
- There might be some variance in SGST law from state to state. Refer state specific provisions for further accuracy.
- As per GST Council meeting held on 09.09.2017, revision of the TRAN-01 shall be allowed. However, relevant notification to that effect is awaited.
GST Law India is a blog on GST and allied commercial laws managed by members of the law firm ALA Legal.