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The answer is, Yes! As is the case with excise duty, unregistered persons can claim available VAT credit by registering under GST. The credit of both VAT and entry tax will be available.
How much ITC can you claim?
The taxpayer can take entire input VAT credit on goods held in stock and used in semi-finished or finished goods (held in stock) on the appointed day (1st July 2017). The following conditions will have to be satisfied for this:
A registered person (earlier not registered under VAT), holding goods which were taxed only at first point in the state and subsequent sales of which were not taxed, will be allowed to avail input tax credit on stock-in-hand on the appointed day (1st July 2017).
The credit will be allowed at the rate of40% of the SGST
applicable after the appointed date (1st July 2017). ITC of 60% will be applicable if the total GST rate is 18% and above. If IGST is paid on the sale of such goods, then 30% ITC is available if the IGST rate is 18% and above and 20% for other cases.
This amount will be credited to the taxpayer’s electronic ledger only after payment of output SGST on the sale of those goods. 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). The following conditions will have to be satisfied for this:
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: This scheme is 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 available.