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Transitional Provision and Input Tax Credit

GST is going to be rolled out in our country from the midnight of 01.07.2017. In this crucial juncture, analysis of the critical provisions of GST may enable the registered person to step forward towards the goals of GST implementations. It is imperative to mention that, before the actual commencement of GST from the appointed date, the first and foremost task that requires the urgent action from each GST registered dealers is to formally transfer the Input credit amount to “electronic credit ledger” of the GSTN portal by taking the physical stock and prepare a list of all the inputs and inputs held in stock in semi-finished and finished goods. 

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 To facilitate the seamless transfer of Input Tax credit under GST for the existing physical stocks which already suffered the incidence of taxes under different existing laws and are still lying with the registered dealers as on appointed date, Transitional Provisions are incorporated in GST Act, 2017.  Section 140 to 142 of GST Act,2017 and Rules made there under  specifically deals with the provisions of input tax credit to be carry forward from the existing law which are going to be subsumed under GST and  thereby reducing the cascading effect of GST.  To avail the transition credit, all the GST registered dealers are required to upload Form GST TRAN 1 & 2 within 90 days from the appointed date.

Filling of GST TRAN 1 & 2 requires extensive knowledge of existing laws as well as GST ACT and Rules made there under.  In our Endeavour to enlighten the readers on the provisions of GST for all the registered dealers falling under the SME Sectors, we took the initiative to present before you “How to fill up GST TRAN 1 & 2 Forms” in a very lucid manner,  which is the first assignment under GST ACT after migration from existing law.

 

GST TRAN – 1

                                                                          

Para: 1 to 4 : General Information.

Para: 5 :- Amount of Cenvat Credit Carried forward in the return filed under existing laws.

Para: 5(a) : Amount of Cenvat credit carried forward to electronic credit ledger

 

Relevant Section: 140(1), 140(4)(a) of CGST ACT

 

I

Eligibility

Central Excise and Service Tax assessee

II

Information to be Filed in GST TRAN 1:

Balance Cenvat Credit Available as appeared in the last returns of Central Excise and service Tax assessee

 

III

In which Ledger amount will be credited

Central Tax Ledger (CGST)

Conditions

The registered person shall not be allowed to take credit in the following circumstances, namely:—

(i) where the said amount of credit is not admissible as input tax credit under this Act; or

(ii) where he has not furnished all the returns required under the existing law for the period of six months immediately preceding the appointed date; or

(iii) where the said amount of credit relates to goods manufactured and cleared under such exemption notifications as are notified by the Government.

 

 

Para: 5(b) :  Details of Statutory forms received for which credit is being carried forward

 

Period: 1st April,2015 to 30th June,2017

 

I

Eligibility

VAT Dealers

II

Information to be Filed in GST TRAN 1:

Details of statutory forms viz. C/F/H & I   received for which credit is being carried forward

III

In which Ledger amount will be credited

State/ UT Tax Ledger ( SGST/UTGST)

 

Para: 5(c) : Amount of Tax credit carried forward to electronic credit ledger as State/UT Tax (Under same PAN in the same State)

 

I

Eligibility

VAT Dealers

II

Informa tion to be Filed in GST TRAN 1:

Balance of ITC of VAT and Entry Tax in Last Return and Details of C/F/H & I Forms.

 

III

In which Ledger amount will be credited

State/ UT Tax Ledger (SGST/UTGST)

Conditions

As detailed in Para 5(a)

 

Para: 6 :- Details of Capital Goods for which unavailed credit has not been carried forward under Existing Law

Para: 6(a) : Amount of unavailed cenvat credit in respect of capital goods

 

Relevant section: 140(2) of CGST ACT.

I

Eligibility

Central Excise and Service Tax assessee who are eligible to avail cenvat Credit on Capital Goods

II

Information to be Filed in GST TRAN 1:

Unavailed Cenvat Credit in respect of Capital Goods not carried forward in a return furnished under the existing Law.

 

III

In which Ledger amount will be credited

Central Tax Ledger (CGST)

Conditions

Provided the said credit was admissible as CENVAT credit under the existing law and is also admissible as input tax credit under this act.

 

Para: 6(b) :  Amount of unavailed input tax credit ( For all registration on the same PAN and in the same State)

I

Eligibility

VAT Dealers

II

Information to be Filed in GST TRAN 1:

Details regarding total eligible VAT and Entry Tax credit on Capital Goods

 

III

In which Ledger amount will be credited

State/UT Tax Ledger (SGST/UTGST)

 

Para: 7 :- Details of Inputs held in Stock

Para: 7(a) :  Amount of duties and taxes on inputs claimed as credit excluding the credit claimed under Para 5(a) and 6(a)

 

Relevant Section: 140(3),140(4)(b) and 140(6) of CGST ACT

 

I

Eligibility

A registered person, who was not liable to be registered under the existing law, or who was engaged in the manufacture of exempted goods or provision of exempted services, or who was providing works contract service and was availing of the benefit of notification No. 26/2012—Service Tax, dated the 20th June, 2012 or a first stage dealer or a second stage dealer or a registered importer or a depot of a manufacturer, or who was either paying tax at fixed rate or paying a fixed amount in lieu of the tax payable under the existing law

II

Information to be Filed in GST TRAN 1:

Details of Inputs held in stock or Inputs contained in Semi-fished or Finished goods held in stock excluding the credit claimed under Para 5(a) & 6(a)

III

In which Ledger amount will be credited

Central Tax Ledger (CGST)

Conditions

(i) such inputs or goods are used or intended to be used for making taxable supplies under this Act;

(ii) the said registered person is eligible for input tax credit on such inputs under this Act;

(iii) the said registered person is in possession of invoice or other prescribed documents evidencing payment of duty under the existing law in respect of such inputs;

(iv) such invoices or other prescribed documents were issued not earlier than twelve months immediately preceding the appointed day; and

(v) the supplier of services is not eligible for any abatement under this Act:

Sub Para:  7A

Where duty paid Invoices or any other documents is available.

 

Sub Para: 7B

Where duty paid invoices are not available ( other than Manufacturer or Service provider) Credit in this section will be available to the extent of 40% & 60% or 20% & 30% in CGST or IGST account respectively depending on the   total GST Tax rate slab of less than 18 % or 18% & above  respectively in CGST .

 

Para: 7(b) : Amount of VAT and Entry Tax Paid on Inputs supported by Invoice/documents evidencing payment of Tax.

 

I

Eligibility

 A registered person, who was engaged in Exempt sale and not claimed the input tax credit under earlier law.

II

Information to be Filed in GST TRAN 1:

Amount of VAT and Entry Tax paid on inputs Supported by Invoice/ Documents evidencing payment of Tax.

III

In which Ledger amount will be credited

State/UT Tax Ledger (SGST/UTGST)

 

Para: 7(C) : Stock of goods not supported by invoice/ documents evidencing payment of tax

 

Relevant Rule: 1(4) of SGST ACT

 

I

Eligibility

A registered person, holding stock of goods which have suffered tax at the first point of their sale in the State and the subsequent sales of which are not subject to tax in the State

II

Information to be Filed in GST TRAN 1:

Amount of VAT & Entry Tax Paid on goods but  not supported by invoice/documents evidencing payment of tax( Only in state having VAT at Single point)

III

In which Ledger amount will be credited

State/UT Tax Ledger (SGST/UTGST)

Conditions

 Such credit shall be allowed at the rate of sixty per cent. on such goods which attract State tax at the rate of nine per cent. or more and forty per cent for other goods of the State tax applicable on supply of such goods after the appointed date and shall be credited after the State tax payable on such supply has been paid:

Provided that where integrated tax is paid on such goods, the amount of credit shall be allowed at the rate of thirty per cent. and twenty per cent. respectively of the said tax.

(iii) The scheme shall be available for six tax periods from the appointed date.

(b) Such credit of State tax shall be availed subject to satisfying the following conditions, namely,-

(i) such goods were not wholly exempt from tax under the <Name of the State> Value Added Tax Act,…..

(ii) the document for procurement of such goods is available with the registered person.

(iii) the registered person availing of this scheme and having furnished the details of stock held by him in accordance with the provisions of clause (b) of sub-rule (2) of rule 1, submits a statement in FORM GST TRAN 2 at the end of each of the six tax periods during which the scheme is in operation indicating therein the details of supplies of such goods effected during the tax period.

(iv) the amount of credit allowed shall be credited to the electronic credit ledger of the applicant maintained in FORM GST PMT-2 on the Common Portal.

(v) the stock of goods on which the credit is availed is so stored that it can be easily identified by the registered person.

 

Para: 8 :- Details of transfer of Cenvat Credit for registered person having centralized registration under existing law

Para: 8 :-  Centralized registration under existing law

 

Relevant Sections: 140(8) of CGST ACT

I

Eligibility

Transfer of Cenvat Credit for Registered person having Centralised registration under Existing Law

II

Information to be Filed in GST TRAN 1:

Balance eligible Cenvat Credit forward in the last return

III

In which Ledger amount will be credited

Central Tax Ledger (CGST)

Conditions

  1. Provided that if the registered person furnishes his return for the period ending with

the day immediately preceding the appointed day within three months of the appointed day,

such credit shall be allowed subject to the condition that the said return is either an original

return or a revised return where the credit has been reduced from that claimed earlier:

  1. Provided further that the registered person shall not be allowed to take credit unless

the said amount is admissible as input tax credit under this Act:

  1. Provided also that such credit may be transferred to any of the registered persons

having the same Permanent Account Number for which the centralised registration was

obtained under the existing law.

 

 

Para: -9 : Details of Goods sent to Job Worker and held in his stock on behalf of principal

Para: -9(a) :  Details of Goods sent as principal to the job worker.

 

Relevant Section:  141 of CGST ACT

 

I

Eligibility

No Tax is payable if such inputs, after completion of Job work or otherwise, are returned to the principal within six months from the appointed date.

II

Information to be Filed in GST TRAN 1:

Challan No, Challan date, details of Goods with Job worker

Conditions

Provided that the period of six months may, on sufficient cause being shown, be extended by the Commissioner for a further period not exceeding two months,

Provided further that if such inputs are not returned within the period specified in this sub-section, the input tax credit shall be liable to be recovered in accordance with the provisions of clause (a) of sub-section (8) of section 142.

 

 

Para: -9(b) :  Details of Goods held in stock as job worker on behalf of the Principal to the job worker

 

Relevant Section; 141 of CGST ACT

 

I

Eligibility

No Tax is payable if such inputs, after completion of Job work or otherwise, are returned to the principal within six months from the appointed date.

II

Information to be Filed in GST TRAN 1:

Challan No, Challan date, details of Goods with Job worker

Conditions

Same as para 9(a).

 

 

 

Para: -10 : Details of Goods held in stock as agent on behalf of the principal.

Para: -10(a) :  Details of Goods held  as agent on behalf of the principal.

 

Relevant Section : 142(14) of the SGST ACT

I

Information to be Filed in GST TRAN 1:

Description, Quantity, Value & Input Tax to be taken

II

In which Ledger amount will be credited

State/UT Tax Ledger (SGST/UTGST)

 

Para: -10(b) :  Details of Goods held  by the agent

 

Relevant Section : 142(14) of the SGST ACT

I

Information to be Filed in GST TRAN 1:

Description, Quantity, Value & Input Tax to be taken

II

In which Ledger amount will be credited

State/UT Tax Ledger (SGST/UTGST)           

 

Para: -11:  Details of credit availed in respect of VAT and Service Tax paid under the Existing law to the extent of supplies made after the appointed day on proportional basis.,

 

Relevant section 142(11)( c)

I

Eligibility

VAT Dealers  and Service Tax Assessee

Ii

Information to be Filed in GST TRAN 1:

Details of VAT paid taken as SGST credit and Service Tax Paid as Central Tax Credit

 

Para: -12 :  Details of Goods  sent on approval basis 6 month prior to the appointed date

 

Relevant Section: 142(12)

I

Eligibility

No Tax is payable if returned within 6 month to the supplier even after the appointed date.

Ii

Information to be Filed in GST TRAN 1:

HSN, Description, Unit, Quantity, Value

 

GST TRAN - 2

Para: 1 to 3 : General Information.

Para: 4 :-  Details of Inputs held on stock on appointed date in respect of which the registered person is not in possession of any Invoice/documents evidencing payment of tax carried forward to Electronic Credit Ledger

 

Relevant Section: Rule 1(4)(a)(i)

 

I

Eligibility

A registered person, who was not liable to be registered under the existing law, or who was engaged in the manufacture of exempted goods or provision of exempted services, or who was providing works contract service and was availing of the benefit of notification

No. 26/2012—Service Tax, dated the 20th June, 2012 or a first stage dealer or a second stage dealer or a registered importer or a depot of a manufacturer

II

Information to be Filed in GST TRAN 2:

Opening Stock for the Tax period, Outward supply made and closing balance.

III

In which Ledger amount will be credited

Central Tax Ledger (CGST)

Conditions

(i) such goods were not unconditionally exempt from the whole of the duty of excise specified in the First Schedule to the Central Excise Tariff Act, 1985 or were not nil rated in the said Schedule.

(ii) the document for procurement of such goods is available with the registered person.

(iii) the registered person availing of this scheme and having furnished the details of stock held by him in accordance with the provisions of clause (b) of sub-rule (2) of rule 1, submits a statement in FORM GST TRAN 2 at the end of each of the six tax periods during which the scheme is in operation indicating therein the details of supplies of such goods effected during the tax period.

(iv) the amount of credit allowed shall be credited to the electronic credit ledger of the applicant maintained in FORM GST PMT-2 on the Common Portal.

(v) the stock of goods on which the credit is availed is so stored that it can be easily identified by the registered person.

 

Para: 5 :-  Credit on State Tax on the stock mentioned in 4 above

 

I

Eligibility

To be there only in state having VAT at single point or MRP Schme

II

Information to be Filed in GST TRAN 2:

Opening Stock for the Tax period, Outward supply made and closing balance.

III

In which Ledger amount will be credited

State/UT Tax Ledger (SGST/UTGST)

Conditions

Same as Para 4 above.

Credits: Mr Anjan Chanda, GST Expert

Disclaimer:  Every efforts are being taken to present the article in its true prospective on the basis of the understanding of law by the writer. However for any misrepresentation of the fact the writer is not responsible to anyone.

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