Section 18 of the CGST Act provides for credit of input tax in respect of transitional stock. Transitional stock for this purpose would mean inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the specified day. Transitional credit has been allowed in case of a new registrant under four different circumstances as follows:
i) New Registration: A person who has applied for registration under the Act within thirty days from the date on which he becomes liable to registration and has been granted such registration. Transitional stock in this case would refer to the stock as on the day immediately preceding the date from which he becomes liable to pay tax under the provisions of this Act.
ii) Voluntary Registration: A person, who takes a voluntary registration under sub-section (3) of section 25. Transitional stock in this case would refer to the stock as on the day immediately preceding the date of grant of registration.
iii) Person Exceeding the Turnover Limit for Composition Levy: Any registered taxable person who ceases to pay tax under composition levy as provided in section 10. Transitional stock in this case would refer to the stock as on the day immediately preceding the date from which he becomes liable to pay tax under section 9. In this case, even the capital goods are eligible for transitional credit as reduced by such percentage points as may be prescribed in this behalf.
iv) Withdrawal of Exemption: An exempt supply of goods or services by a registered taxable person becoming a taxable supply, may be due to withdrawal of the exemption. Transitional stock in this case would refer to the stock relatable to such exempt supply and capital goods exclusively used for such exempt supply, on the day immediately preceding the date from which such supply becomes taxable. The credit on capital goods shall be reduced by such percentage points as may be prescribed in this behalf.
The transitional credit as above would be allowed subject to such conditions and restrictions as may be prescribed. In any case, the input tax credit as above in respect of any supply forming part of the transitional stock shall be restricted to tax invoices issued not more than one year prior to the transitional stock date.
Change in Constitution
Where there is a change in the constitution of a registered taxable person on account of sale, merger, demerger, amalgamation, lease or transfer of the business with the specific provision for transfer of liabilities, the said registered taxable person shall be allowed to transfer the input tax credit that remains unutilized in its books of accounts.
The amount of credit under the above four circumstances shall be calculated in such manner as may be prescribed.
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