TRANSITION PROVISIONS UNDER CGST ACT 2017

The government on 04/06/2017 finalized the Transition Provisions for transfer of existing cenvat credit and for fresh claim of eligible cenvat credits under CGST and SGST act 2017. There are a lot of questions in the minds of dealers as well as practitioners as to how the credits for existing stock will be available, in order to make it clear  let us discuss the rules finalized by the government along with relevant provisions under the CGST Act 2017.

Rule-1: Tax or duty credit carried forward under any existing law or on goods held in stock on the appointed day

Sub Rule-1: Every registered person entitled to take credit of input tax under section 140 shall, within ninety days of the appointed day, submit a declaration electronically in FORM GST TRAN 1.

Before reading the rules it is important that we must be thorough with the provisions of section 140 to the CGST ACT 2017. So let us discuss the provision of section 140 along with relevant rules in summarized way:

Section 140(1) states that every regd. person other than the composition dealer shall be entitled to take in his electronic credit ledger amount of CENVAT credit carried forward in the return filled for the period immediately preceding the appoint day under the provisions of the existing law.

The aforesaid section uses the word CENVAT credit which means that credit of Input, Capital Goods and Input Services shall be eligible for carry forward under the current act subject to certain conditions specified below:

Provided that the registered person shall not be allowed to take credit in the following circumstances, namely:—

(i) where the said amount of credit is not admissible as input tax credit under this Act; or

(ii) where he has not furnished all the returns required under the existing law for the period of six months immediately preceding the appointed date; or

(iii) where the said amount of credit relates to goods manufactured and cleared under such exemption notifications as are notified by the Government

After reading the aforesaid provision it is clear that this provision is applicable for dealers who are currently registered under the central excise act or Finance act 1994 either as a manufacturer or FSD or SSD or as a service provider.

Provided further that in case of claim under section 140(1) the application shall separately specify:

  1. the value of claims under section 3, sub-section (3) of section 5, sections 6 and 6A and sub-section (8) of section 8 of the Central Sales Tax Act, 1956 made by the applicant and
  2. the serial number and value of declarations in Forms C and/or F and Certificates in Forms E and/or H or Form I specified in rule 12 of the Central Sales Tax (Registration and Turnover) Rules, 1957 submitted by the applicant in support of the claims referred to in sub-clause (i) above;

If as on the date of furnishing GST Tran 1 any C-Forms or F Form or E Form or H or I Form are pending to be received than the differential duty due to non-receipt of that form shall be paid by the dealer either in cash or through CENVAT at the time of filling GST Tran-1. This provision only applies in SGST rule.

The aforesaid provision is applicable for assessee’s who are engaged in interstate sale of goods against C-Form or against E-1/E-2, C-Form or transfer of goods between branches of the same company against F-Form.

Section 140(2): We all know that in the current regime CENVAT on Capital goods is allowed upto 50% in the year of acquisition and balance in the subsequent year.  Accordingly this section allows you to claim credit for CG which is not availed due the current law subject to certain condition that the registered person shall not be allowed to take credit unless the said credit was admissible as CENVAT credit under the existing law and is also admissible as input tax credit under this Act.

Section 140(3): allows a person who was not liable for registration under the existing law or who was engaged in the manufacture of exempted goods or provision of exempted services, or who was providing works contract service and was availing of the benefit of notification No. 26/2012—Service Tax, dated the 20th June, 2012 or a first stage dealer or a second stage dealer or a registered importer or a depot of a manufacturer to claim credit of eligible duties in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the appointed day subject to the following conditions, namely:–

(i) such inputs or goods are used or intended to be used for making taxable supplies under this Act;

(ii) the said registered person is eligible for input tax credit on such inputs under this Act;

(iii) the said registered person is in possession of invoice or other prescribed documents evidencing payment of duty under the existing law in respect of such inputs;

(iv) such invoices or other prescribed documents were issued not earlier than twelve months immediately preceding the appointed day; and

(v) the supplier of services is not eligible for any abatement under this Act:  

Provided that where a registered person, other than a manufacturer or a supplier of services, is not in possession of an invoice or any other documents evidencing payment of duty in respect of inputs, then, such registered person shall be allowed to take the credit as per the provisions of sub rule-4.

Sub Rule-4: Under sub rule-4 such credit shall be allowed @ 60% of the amount of central tax paid where the applicable central tax is 9% or more and @ 40% in other case. Such credit shall be allowed when the central tax has been paid.

If IGST is applicable then the credit shall be allowed @ 30% and 20% respectively.

The aforesaid scheme is available for six months from the appointed day.

For each of the six month the dealer shall file GST Tran-2 stating the details of supplies made after which the credit shall be transferred to GST PMT-2 (electronic credit ledger).’

Section 140(4) allows a registered person who was engaged in the manufacture of taxable as well as exempted goods under the Central Excise Act, 1944 or provision of taxable as well as exempted services under Chapter V of the Finance Act, 1994, but which are liable to tax under this Act, shall be entitled to take, in his electronic credit ledger:

  1. CENVAT credit carried forward in a return furnished under the existing law by him in accordance with the provisions of sub-section (1); and
  2. the amount of CENVAT credit of eligible duties in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the appointed day, relating to such exempted goods or services, in accordance with the provisions of sub-section (3) as stated above.

Section 140(5) allows a registered person to claim credit of eligible duties and taxes in respect or inputs or input services received after the appointed day whereas taxes in respect of the same has been paid under the existing law subject to the condition that the invoice or any other duty or taxpaying document in respect of such supplies shall be recorded in the books of accounts within 30 days from the appointed day.

In case of claim under the section 140(5) following details shall be furnished under Rule-2:

a) the name of the supplier, serial number and date of issue of the invoice by the supplier or any document on the basis of which credit of input tax was admissible under the existing law (CREDIT TRANSFER DOCUMENT “CDT”),

b)the description and value of the goods or services,

c) the quantity in case of goods and the unit or unit quantity code thereof,

d)the amount of eligible taxes and duties or, as the case may be, the value added tax [or entry tax] charged by the supplier in respect of the goods or services, and

e) the date on which the receipt of goods or services is entered in the books of account of the recipient.

Section 140(6) allows a registered person, who was either paying tax at a fixed rate or paying a fixed amount in lieu of the tax payable under the existing law shall be entitled to take, in his electronic credit ledger, credit of eligible duties in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the appointed day subject to the conditions as specified in section 140(1).

RULE-3: DECLARATION OF STOCK HELD BY A PRINCIPAL AND AGENT

Every person to whom the provisions of section 141 (Transitional Provisions relating to Job Work apply shall, within ninety days of the appointed day, submit a declaration electronically in FORM GST TRAN-1, specifying therein, the stock of the inputs, semi-finished goods or finished goods, as applicable, held by him on the appointed day.

RULE-4: Details of goods sent on approval basis

Every person having sent goods on approval under the existing law and to whom sub-section (12) of section 142 applies shall, within ninety days of the appointed day, submit details of such goods sent on approval in FORM GST TRAN-1.

This rule is applicable for goods sent on approval basis not earlier than 6 months before the appointed day and returned within 6 months from the appointed day then no tax shall be payable on such goods.

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6 responses to “Transitional Provisions under CGST Act 2017 related to stock”

  1. Jordan says:

    Whether it is required to giv details of stock in GST TRANS-1 ,if I M registered under VAT & filed all return upto appointed date

  2. ASHOK KUMAR KANUNGA says:

    Q.1. Supplier of assessee has not paid excise duty due to turnover is below threshold limit can asssessee ask ITC U/S 140(3) of CGST act on input held in stock appointed date – S.140(3)(2) use words PAID in all central act.

    Q.2. from which month assessee can take credit (Sec 140(3) (2) of CGST.? – Sec speaks such supply has been paid and invoice raised under the GST regime – sale was made in July 2017 tax was paid on 20th august 2017Means credit allow in the GSTR-3 of August.

    Ph – 080-22255531/42154492

  3. CA Ankit Sharma says:

    Credit of capital goods can be claimed under section 140(2), but as per the provisions of that section credit on capital goods can be claimed only if the credit is eligible under the current tax regime. Therefore credit of capital goods can-not be claimed in your case as the same is not eligible in current tax regime. Unlike credit on input as allowed under section 140(3) there is no such provision for capital goods.

  4. Ramandeep Singh says:

    Query : Whether input tax credit is available on capital goods if, company is only producing goods (exempt under current tax regime ) but become taxable in gst regime

    • KASHYAP GANDHI says:

      Ramandeep Singh ji, in my opinion, credit on capital goods not availed in current regime due to exempted goods, will be available in GST regime fully under S 140(2) as it specifically says that capital goods on which credit not availed due to exemption will now be available in GST.

      • CA AnKit sharma says:

        No, there is a specific condition for claiming credit of capital goods under section 140(2) I.e. Credit of capital goods should be eligible under current tax regime. Since credit of cg not eligible now it will not be available under gst.

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