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Unregistered persons can claim CENVAT credit upon registering under GST. Read to find out how much input tax credit you can avail.
Under the current excise tax, only manufacturers with a turnover above Rs. 1.5 crores are required to register and pay excise duty. Under GST, this threshold is reduced to 20 lakhs. So, many previously unregistered persons will now be required to register under GST. One of the most important questions business need an answer to is whether unregistered persons can claim CENVAT credit under GST on their stock in hand.
The short answer is yes.
A registered person, who was not registered under the existing law, will be allowed to avail input tax credit on goods held in stock on the appointed day.
How much ITC can you claim?
The concerned person can take entire 100% input credit on goods in stock and used in semi-finished or finished goods on the appointed day (1st July 2017). This provision will apply only if all the following conditions are satisfied:
Types of registered persons to whom the above applies:
A taxpayer, who was not registered under the existing law and does not possess proof of payment of excise, will still be allowed to take input tax credit.
The credit will be allowed at the rate of 40% of the GST applicable after the appointed date (1st July 2017). If the GST rate is 18% and above, then he can enjoy 60% of the GST applicable as ITC. This will be credited only after the output GST has been paid on the sale of goods. If IGST is paid on the sale of such goods then ITC of 30% is available if IGST rate is 18% and above and 20% ITC for others
This is available for six tax periods from the appointed date (i.e., till 31st December 2017 which is 6 months from 1st July 2017). This provision applies only if the following conditions are satisfied:
The amount of credit specified in the application in the FORM GST TRAN-1 will be credited to the electronic credit ledger of the applicant maintained in the FORM GST PMT-2 on the Common Portal.
NOTE: These schemes are available only if there is no proof of payment for inputs. If there is no proof at all regarding the goods (e.g., there are no challans, no goods received note) then this scheme of 40% will not be available. Those who were not registered under VAT can also claim input tax credit by registering under GST.