CA Umesh Sharma
Krishna (Fictional Character): Arjuna, up to 30 June there are VAT, Excise, Service Tax laws but from 1st July GST will be implemented so what about the stock as on 30th June is the biggest question which everybody facing and it has created confusion among many. The goods on which VAT is levied as per existing law, in GST VAT will be transformed to SGST. Similarly, now excise duty is levied on manufacture, in GST excise duty will be transformed to CGST. Whether taxpayer will get credit of stock lying on 30th June 2017 in GST or not let’s discuss in detail!
Arjuna: Krishna, if the taxpayer is registered under VAT Act, then how he will get set-off of the stock in GST?
Krishna: Arjuna, the following two thing should be considered to avail the credit of stock.
1. If VAT is payable in the VAT return of 30th June 2017 i.e. taxpayer have taken the credit of inputs, then there is no question of taking credit.
2. If VAT is carry forward in the VAT return of 30th June 2017 i.e. excess tax credit is available, then taxpayer will get credit of that carry forwarded amount in SGST. Ex. If the taxpayer has credit of Rs. 10,500 then it can be adjusted against SGST liability.
Arjuna: Krishna, if any taxable person is registered under excise law, then how can he take set-off of stock in GST?
Krishna: Arjuna, It is also similar like VAT. If the taxpayer is registered under Excise Law then if in the Excise return of 30th June 2017, excise duty is payable then no question of set-off. But if excise duty is carry forward then taxpayer will get set-off against CGST. The taxpayer can also take the credit of not availed excise duty on capital goods in GST.
Arjuna: Krishna, if any taxable person is not registered under excise law, then can he get set-off of stock in GST?
Krishna: Arjuna, if taxpayer is not registered under Excise law but he is registered in VAT law, then credit of VAT can be taken against SGST but what about CGST. In this case, if the taxpayer have the excise invoice which are in stock, then in GST 100% credit is available. But if no excise duty charged on that bill, then credit will be given as per GST rates in following manner:
1. If that stock covered in 18% or 28% in GST, then 60% of CGST can be availed as credit of stock. Ex. If there is 18% rate of GST on Spare parts, then 5.4% credit (60% of 9% of CGST) is available against the stock held on 30th
2. If that stock covered in 5% or 12% in GST, then 40% of CGST can be availed as credit of stock. Ex. If there is 12% rate of GST on any commodity, then 2.4% credit (40% of 6% of CGST) is available against the stock held on 30th
In GST taxpayer can use the above credit at the time of sale of goods. Further the taxpayer will have to use this credit within six months.
Arjuna: Krishna, What the taxpayer should do if he have to take credit of stock in GST?
Krishna: Arjuna, taxpayer will have to file TRAN 1 & TRAN 2 form for claiming credit of stock. In this form HSN wise details, its quantity, its rate, total value will have to be given. This information should be given to the government within 90 days. Credit of previous stock i.e. more than one year old stock is not available. It means if goods are purchased after 30th June 2016 then only credit can be taken.
Arjuna: Krishna, What lesson a taxpayer should take from this?
Krishna: Arjuna, Every trader should carefully understand these provisions of stock. Everyone should file revised return of VAT for financial year 2016-17 if necessary after checking all books of accounts and then return of April to June to be filed. Taxpayer should reconcile the VAT, Excise returns with books of accounts and then only file the above form to the government.
Do you think CBDT should extend Tax Audit Report and relevant ITR Due Date? Please Comment, Vote, Retweet and Like.— Tax Guru (@taxguru_in) September 18, 2018