Can We Claim Input Tax Credit (ITC) On The Products Which Are Converted From Exempted To Taxable and are in stock as on 18.07.2022?

There is a lot of dissatisfaction with the sudden changes made in the GST rates (shifting many products from exempted to the taxable) as to whether we have to bear the GST from our pocket for the closing stock held in stock as on 18.07.2022.

In this article, I have tried to answer the 2 most important question, the 1st one being, “Do I have to pay complete tax from the pocket for the stock which were exempted and are now taxable, or is there any way out for the same?” and the 2nd one being “Can I change the MRP on before exempted product which has now been made taxable, thereby enabling me to include the GST cost in the MRP”.

Regarding the 1st query “Do I have to pay complete tax from the pocket for the stock which was exempted then and became taxable from 18.07.2022, or is there any way out for the same?”

The simple answer to the question is, Yes we can claim Input Tax Credit on the following

1. Inputs in stock relatable to such previously exempted supply

2. Inputs in semi-finished goods in stock relatable to such previously exempted supply

3. Inputs in finished goods in stock relatable to such previously exempted supply

4. Capital goods exclusively used for the such previously exempted supply

(As per Section 18(1)(d) of the CGST Act 2017 read with Rule 40 of the CGST Rules 2017).

If yes, what is the time-limit to claim the credit of the same ?

Rule 40 of the CGST Rules 2017, specifies a period of 30 days from date of eligibility to avail ITC on stock. Thus, such businesses would be required to file Form within 17th August 2022.

Can I change the MRP on before exempted product that has now been made taxable, thereby enabling me to include the GST cost in the MRP?

To answer this question I would like to refer to Circular No. I-10/14/2020-W&M Dated: 01.08.2022 issued by Ministry of Consumer Affairs, Food and Public Distribution wherein the manufacturers or packers or importers of pre-packaged commodities are allowed to declare the revised retail sale price (MRP) on the unsold stock manufactured /packed / imported prior to revision of GST, after inclusion of the applicable/ increased amount of tax or after reducing the reduced amount of tax due to GST, if any, in addition to the existing retail sale price (MRP) up to 31st January, 2023 or till such date the stock is exhausted, whichever is earlier.

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