Input Tax Credit On Closing Stock Under GST : Transitional Provision

In this article, we will learn the conditions and procedure for claiming the CENVAT credit of previous law (service tax, Excise Duty, VAT etc) under GST Law.

Under GST Law a taxable person shall be entitled to take in their ECL ( electronic credit ledger) the value of CENVAT Credit carried forward in the return relating to the period ending with the day immediately preceding 1st July 2017, furnished under the current tax regime.

The credit of the amount of Value Added Tax and Entry Tax carried forward in the return relating to the period ending with the day immediately preceding 1st July 2017, will be applicable for returns filed not more than 90 days before the said date, furnished under the current tax regime(Service tax/VAT etc).

CENVAT Credit can be related to inputs(goods), input services or capital goods. Balance shown in the return furnished under current tax regime will be opening balance in ECL (electronic tax ledger) under GST.

To learn the provision in a simplified manner, let us divide persons into two part:

1. A person registered under existing law ( like service tax, VAT etc) and paying taxes
2. A person registered under existing law but not paying any tax or unregistered

A person registered under existing law and paying taxes

The condition for claiming CENVAT credit [ 140(1) ]

1. Such person should be registered under GST
2. Not a composite dealer under GST [10]
3. Such input credit is also available under GST
4. Had filed the return for the period ending on 30th June 2017 (like service tax/VAT return)
5. Such CENVAT must be carried forward in the return specified above.
6. He has furnished all return pertaining to the period from 1st January 2017 to 30th June 2017.
7. The input credit should not be related to goods manufactured and cleared under any exemption notifications as are notified by the Government.

Exception:

For claiming Un-availed The expression “un-availed CENVAT credit” means the amount that remains after subtracting the amount of CENVAT credit already availed in respect of capital goods by the taxable person under the existing law from the aggregate amount of CENVAT credit to which the said person was entitled in respect of the said capital goods under the existing law. CENVAT credit of capital goods only condition no 1,2 and 3 is required to be satisfied.[140(2)]

A Person Registered under Existing law but Not Paying any Taxes or an Unregistered Person

Condition for claiming CENVAT credit of eligible duties does not include service tax duties[140(3)]

1. Such person should be registered under GST
2. Such inputs or goods are used or intended to be used for making taxable supplies under this Act;
3. The said registered person is eligible for input tax credit on such inputs under GST Act;
4. 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;
5. Such invoices or other prescribed documents were issued in a period not more than twelve months immediately preceding 1st July 2017; and
6. The supplier of services is not eligible for any abatement under this Act

However where a registered person, other than a manufacturer or a supplier of services, is not in possession of  tax invoice or any other documents showing payment of taxes in respect of inputs, then, such registered person shall, subject to such conditions, limitations and safeguards as may be prescribed, including that the said taxable person shall pass on the benefit of such input credit by way of discounted or reduced prices to the recipient, be allowed to take input credit at such rate and in such manner as may be prescribed.

PROCEDURE

After fulfilling the above mention conditions, a person shall submit a declaration electronically in FORM GST TRAN- 1 within ninety days of the appointed day