GST ITC on Stock Transition Provision on eligible duties and taxes held in stock
Under GST, input tax credit of eligible duties and taxes held in stock and input w.r.t. semi-finished goods and finished goods will be available to eligible taxpayers on the fulfilment of certain conditions as discussed in this article.
Following are the categories of registered taxable person entitled to take credit of inputs subject to certain conditions:
- Being not liable to be registered under current law, dealing in exempted goods or services
- Providing works contract service or availing benefit of exemption notification for services
- First stage dealer or second stage dealer, registered importer.
Being not liable to be registered under current law
Under Central Excise Law every manufacturer whose first aggregate turnover does not exceed Rs 1.5 crores is not required to be registered or discharge the liability to pay taxes. Similarly, under VAT Act, a taxpayer is not required to be registered in case the turnover does not exceed the prescribed limit in a financial year which differs state to state.
Under GST a taxpayer is liable to register in case aggregate turnover in a financial year exceeds Rs 20 lakhs or Rs 10 lakhs for the Special Category States. Hence, here persons who were not required to be registered will not be liable for same on transition to GST which will lead to discharge of duties and taxes under GST
2. Providing works contract service or availing benefit of exemption notification for services or dealing in exempted goods or services
In case a person is engaged in providing services which are exempted due to an exemption notification or dealing supply of goods on which tax is not levied, is not liable to pay duties. However, under GST the person who was not required to pay taxes or duties earlier will be liable to discharge the same.
3. First stage dealer or second stage dealer, registered importer
Under Central Excise Law every First stage dealer or second stage dealer is required to be registered as a dealer and the not eligible to take credit of excise duty paid. The excise duty involved is allowed as a credit to the registered manufacturer of dutiable goods. Similarly, an importer of goods is required to be registered and discharge import duties.
The categories of registered taxable person mentioned above will be entitled to take credit of inputs.
Conditions to be fulfilled to take credit of eligible duties or taxes:
- The goods used for making taxable supplies
- Under the current tax regime, input tax credit is not allowed which leads to increased prices of goods or services. Under GST, the credit of such input taxes or duties will be allowed will lead to decreased prices of such goods or services. This benefit must be passed to the recipients of such goods or services through reduced prices
- The taxable person must be eligible for such input tax credit under GST
- Taxable person must be in possession of invoice and/ or other documents evidencing payment of duty under current law
- The date of invoice and/ or other documents must be issued is within 12 months from the date of transition to GST i.e. appointed date
- The supplier of services is not eligible for any abatement under GST. In the case where the registered taxable person is not in possession of invoice and/ or other documents evidencing payment of duty under the current law, the credit of input tax will be allowed subject to such limitations, conditions and safeguard as may be prescribed by the law
To know more about transition provisions on availing credit of Input Tax Credit of amount carried forward in return and CENVAT Credit on Capital Goods, not carried forward in return, you may visit our site.
Here’s a link for you to download the government of India prescribed GST TRAN 1 form.