FCA Dinesh Kumar

fca-dinesh-kumar

This article will provide you information with respect to following questions for transitional CENVAT credit under GST

1) Who may transfer CENVAT credit under GST?

2) How CENVAT Credit shall be transferred under GST?

3) What are the eligible Duties and Taxes for transferring under GST?

4) Whether unavailed cenvat credit on capital goods may be carried forward under GST?

5) Whether Input Service Distributor is allowed to transfer CENVAT credit under GST for invoice prior to GST?

6) What be about that portion of CENVAT that could not be shown Return?

1) Who may transfer CENVAT credit under GST?

As per section 143(1)

A registered taxable person shall be entitled to take credit of the amount of cenvat credit

It means the registered person, who are already registered under earlier law like Service Tax, Excise, VAT etc are entitled to transfer CENVAT Credit under GST

2) How CENVAT Credit shall be transferred under GST?

As per section 143(1) credit of the amount of cenvat credit carried forward in a return, furnished under the earlier law by him, in respect of the period ending with the day immediately preceding the appointed day in such manner as may be prescribed

As per this provision of GST, only that amount of CENVAT may be transferred which is shown in return furnished under earlier law, immediately preceding the appointed day in such manner as may be prescribed.

a) Here it is important to note that Govt. will specified manner in which such eligible CENVAT Credit amount shall be ultimately transferred under GST

b) Now it is very difficult to digest that as per existing law that service tax return is furnished half yearly, let suppose appointed date of GST is 1st April 2017, it means whether CENVAT which is shown in Service Tax Return (Apr-Sep-16) shall only be allowed. Because a it would be return immediately preceding the appointed date for a Service Provider

c) Similarly Excise Return immediately preceding of appointed date is of Feb-2017 by 10th March 17

d) Based on existing provision it is not clear which amount of CENVAT Credit and how much shall be transferred

e) Hope Govt. would specify a format and time under which It may ask information of amount CENVAT credit unutilized before appointed date which may be taken under GST.

3) What are the eligible Duties and Taxes for transferring under GST?

As per section 143(1)

taxable person shall not be allowed to take credit unless the said amount was admissible as cenvat credit under the earlier law and is also admissible as input tax credit under this Act

Only that CENVAT credit is allowed to be transferred under GST, which are admissible under existing laws (CCR-2004 and VAT).

a) This transitional provision does not specify the duties and Taxes , credit of which may be transferred under GST but section 145 specify name of all eligible duties and Taxes (CGST), which may be considered for transferred under GST

i) the duty of excise specified in the First Schedule to the Central Excise Tariff Act, 1985(5 of 1986

ii) the duty of excise specified in the Second Schedule to the Central Excise Tariff Act, 1985(5 of 1986);

iii) the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Textile and Textile Articles) Act, 1978 (40 of 1978);

iv) the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957(58 of 1957);

v) the National Calamity Contingent Duty leviable under section 136 of the Finance Act, 2001(14 of 2001);

vi) the additional duty leviable under sub-section (1) of section 3 of the Customs Tariff Act, 1975 (51 of 1975);

vii) the additional duty leviable under sub-section (5) of section 3 of the Custom Tariff Act, 1975 (51 of 1975); and

viii) the service tax leviable under section 66B of the Finance Act, 1994 (32 of 1994);

The above list is not exhaustive as these are defined under section 145 and 146.

For the purpose of section 142, it may have some more eligible duties and taxes , as and when specified by Govt.

But based on wording of section 143 it may be said that all cenvat credit which are available under existing law shall be equally entitled under GST.

4) Whether unavailed cenvat credit on capital goods may be carried forward under GST?

As per Section 144:- Registered taxable person shall be entitled to take, in his electronic credit ledger, credit of the unavailed cenvat credit in respect of capital goods, not carried forward in a return, furnished under the earlier law by him, for the period ending with the day immediately preceding the appointed day in such manner as may be prescribed:

Provided that the taxable person shall not be allowed to take credit unless the said credit was admissible as cenvat credit under the earlier law and is also admissible as input tax credit under this Act:

5) Whether Input Service Distributor are allowed to transfer CENVAT credit under GST for invoice prior to GST?

As per section 162, Notwithstanding anything to the contrary contained in this Act, the input tax credit on account of any services received prior to the appointed day by an Input Service Distributor shall be eligible for distribution as credit under this Act even if the invoice(s) relating to such services is received on or after the appointed day.

It means CENVAT Credit in respect of services rendered prior to appointed date and invoice received after appointed date may be transferred as ISD.

6) What be about that portion of CENVAT which could not be shown Return due to reason like non receipt of invoice etc ?

Till date there is no clarity over such non-reported CENVAT Credit but apply liberty same as provided to ISD in section 162 that ISD may transfer on account of any services received prior to the appointed day by an Input Service Distributor shall be eligible for distribution. It means even the CENVAT Credit, non shown in return by ISD, may be transferred post GST.

Also when per Rule 11 of CCR-2004 Transitional Provision- any amount of credit earned by a manufacturer under the CENVAT Credit Rules 2002, as they existed prior to the 10th day of Sep 2004 or by a provider of output services under the STR-2002 as they existed prior to the 10th day of Sep-2004 and remaining unutilized on that day shall be allowed as CENVAT Credit to such manufacturer or provider of output services under these rules.

Therefore it may be hoped that Govt. may allow transfer of CENVAT Credit unutilized prior to appointed day even it would not be shown in Return due to reasons like CENVAT Credit invoices received after appointed day etc.

(Author can be reached at cadineshkumar33@gmail.com or on +91-9891876936)

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2 responses to “CENVAT Credit -Transitional Provision under GST”

  1. Leena says:

    With regard to point no. 2, section 143(1) states that a taxable person is entitled to take credit of the amount of cenvat credit carried forward in a return furnished under the earlier laws “for the period” immediately preceding the appointed date . So if the appointed day is let us say 01.04.2017 in that case taxpayer is entitled for credit of cenvat credit filed in the returns upto 31.03.2017.

  2. Satya says:

    Dear Sir,
    till now no clarity of ED Cess and SH Cess which are lying at present in our Registers.
    pl advice on this

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