As we are on the verge of implementation of GST, the biggest challenge that the professionals face these days is on the transition provisions of GST i.e. Chapter XX Transitional Provisions of CGST Act 2017 ranging from Section 139 to 142.
As per Section 140, every registered person (other than those opting for composition scheme) shall be allowed to carry forward the CENVAT amount in their electronic ledger. In simple words, whatever Credit supplier will be having as on 30th June 2017 (as per the return for the relevant period) will become his input tax credit under GST. CENVAT credit here includes Duties levied under Finance Act 1994, Customs Tariff Act 1975, Central Excise Tariff Act 1985 as well as State Vat Act.
For suppliers who will be obtaining fresh registration, Section 18 allows them to avail tax credit of the input tax paid on the stock, semi finished and finished goods they have as on June 30th 2016. However credit will be allowed subject to conditions as specified as section 140(3) which majorly includes that the inputs are used for making taxable supplies, inputs are eligible for credit, he is in possession of taxable invoice and that they were issued not before than twelve months from June 30,2017.
The major question here arises is whether suppliers (be them already registered or newly registered) having stock will get credit of Excise Duty borne by them but paid at some earlier level?
Same has been addressed in Transition Rules Rule 3(a).
The rule says that in respect of excise duty paid by the traders on the purchase of stock, credit shall be allowed at prescribed rate which is 40% of CGST applicable on the goods. However the credit is again allowed subject to certain conditions. a) Credit will be allowed only when the applicable CGST has been paid on them. b) Same shall be allowed only for Six Tax Periods i.e. for Six Months. c) Dealer is required to submit FORM GST TRAN- at the end of each six tax periods.
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