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How to claim ITC on old stock? Which Form to choose?

Any business whether registered or not under the pre-GST regime having a closing stock will be entitled to claim credit of tax paid under pre-GST regime. This claim of ITC also depends on few conditions which we will discuss further. FORM TRAN-1 AND FORM TRAN-2 are the forms required to be filed depending on being registered under pre-GST regime and possession of document evidencing payment of taxes.

ITC claim on Stock and Transition Forms, TRAN-1, TRAN-2

ITC claim on Stock and Transition Forms, TRAN-1, TRAN-2

How to fill Form Tran 1, How to fill Form Tran 2?

Categories of closing stock held and to be shown in the form to claim ITC in Tran 1:

    1. Credit of tax paid under CST on purchases
    2. Closing Stock w.r.t exempted earlier but now taxable under GST
    3. Unavailed credit on Capital Goods
    4. Registered person having centralized registration under pre-GST regime
    5. Goods send for job work
    6. goods held in stock as agent or send as principal
    7. goods sent on approval basis

Categories of closing stock held and to be shown in the form to claim ITC in Tran 2:

    1. Details of inputs held on stock on 1st July w.r.t any invoice/document evidencing payment of tax is not available with him
    2. Credit on State Tax on the stock mentioned in point no.1 above

How to file Tran 1 and Tran 2 on Cleartax GST?

In this article, we have explained when and why to file the Forms Tran 1 & Tran 2. It is critical to recognize the tables relevant for a taxpayer, and provide directions on how to fill all the fields in these forms.

Our Cleartax GST software makes this process simpler and error-free for our users by providing them a platform to file forms Tran 1 and Tran 2, by providing guided instructions and choosing the relevant tables on behalf of the user.

To claim the ITC on closing stock, it is important to file this form accurately. Precision and correctness plays a major role for, if a taxpayer makes a mistake in filing this form, he stands to lose his claimed ITC as well.

The ClearTax GST Software has these following features:

Choosing the relevant tables to be filled by the user

ITC claim on stock and transition forms, TRAN-1, TRAN-2

We understand that it is difficult to choose between the necessary tables on the transition forms. Hence, we have made this process simpler. The user only needs to answer a few simple questions before filling the forms, and our software will select only the relevant sections of GST TRAN 1 form based on the response to the questions.

Instructions for “How to fill” at each stage

At every stage of filling the form, the software will provide instructions along with short explainer videos to help our users understand the process.  We believe in empowering our users with self-understanding and the ability to accurately fill all the required fields, and claim their ITC easily.

ITC claim on stock and transition forms, TRAN-1, TRAN-2

Tool tip to explain every fields in the form

When you hover over each filed, our tool tip will provide you the meaning and directions for filling the field. With this the user will have a clear understanding of the information and the reason behind it.

What are the Rules and conditions for Tran 1?

Overview of FORM TRAN-1

Every registered person under GST who wishes to claim ITC for closing stock must file within 90 days of 1st July

The form is to be filed by every person registered under GST irrespective of being registered or not under pre- GST regime.

The form requires exhaustive details of the following:

  • Registration number under pre- GST regime (Central Excise, VAT Act, Service tax)
  • Tax period to which the last return filed under pre- GST regime pertains
  • Date of filing of the above
  • Details of description, unit quantity, value and type of goods (raw material, semi-finished/ finished goods)
  • GSTIN of the supplier of goods
  • HSN code of underlying goods

ITC to be carried forward of Commercial Tax (VAT/ CST) / Entry tax

  1. Details of last tax period of which returns have been filed and the amount of cenvat credit admissible
  2. Details of the following forms received from supplier for which credit is being claimed:
  • C- Form- Buyer dealer of different state issues C Form for compliance of CST Rules of the state of selling dealer
  • F- form- The F form is required for stock transfer to branches / consignment agents or vice-versa from one state to another without attracting charge of CST
  • H/I- Form- It is issued when the inter-state buyer is an exporter and buys the goods for exports.

3. In case any of the above forms are not available, details of such forms and differential tax also needs to be mentioned

Unavailed ITC w.r.t. capital goods

ITC for capital goods is not available to the taxpayers under pre-GST regime 100% during the purchase of such goods. In case a registered person has purchased the capital goods and was not able to claim the total amount of tax paid on purchase, the remaining ITC can be claimed under GST.

ITC claim on stock and transition forms, TRAN-1, TRAN-2

Specify the following in respect of every capital goods, invoice-wise details of:

    1. Total Cenvat Credit involved in such capital goods
    2. the amount of ITC availed or utilized till July 1st
    3. the amount of ITC remaining unavailed or unutilized till July 1st

Stock held being send or received for job work

When a principal manufacturer has sent his goods for job work to the job worker and such goods are lying with the job worker as on 1st July, it is also a stock held by principal manufacturer on which credit of tax will be allowed.

The details must be filed by both principal manufacturer and job worker for goods

    1. Held as a job worker on behalf of the principal
    2. Send to job worker for job work as principal

Following are the basic details to be mentioned in the form:

    1. Challan number and date
    2. Type of goods (raw material, semi-finished/ finished goods)
    3. Description of goods- HSN, unit, quantity, value
    4. GSTIN of manufacturer or job worker

Goods sent to agent or consignment dealer for sale

When a principal dealer or manufacturer has sent his goods to his agent or consignment dealer for sale and the stock still lies with the agent or consignment dealer as on 1st July, it is also a stock held by principal dealer or manufacturer on which credit of tax will be allowed.

The details must be filed by both principal dealer or manufacturer and agent or consignment dealer for goods

    1. Held as an agent or consignment dealer on behalf of the principal
    2. Send to agent or consignment dealer by principal dealer or manufacturer

Following are the basic details to be mentioned in the form:

    1. GSTIN of principal dealer or manufacturer
    2. Description of goods- unit, quantity, value and ITC to be taken

Conditions to claim ITC

ITC claim on stock and transition forms, TRAN-1, TRAN-2

What are the Rules and conditions for Tran 2?

Requirement to file FORM TRAN-2

    1. The person aiming to claim ITC is registered under GST
    2. The registered person under GST is not registered under any pre-GST regime (VAT Act or Central Excise, Service Tax)
    3. Not in possession of an invoice or other documents evidencing payment of taxes
    4. Not a manufacturer under Central Excise or a supplier of services under Service Tax
    5. Closing stock lying on 3oth June

The registered person who satisfies all the above conditions must file FORM TRAN-2  

% of ITC claim available

The registered person under GST will be allowed the credit of tax paid on purchase of goods and held in closing stock as on the appointed date. Since, it is not in in possession of an invoice or other documents evidencing payment of taxes under VAT Act, Central Excise, credit will be allowed based on rate of IGST, CGST and SGST of the closing stock under GST according to the HSN code.

When the taxpayer sells the goods held as closing stock as on 30th June, he will have to first pay the appropriate taxes on such outward supply and then he will be allowed the ITC based on the rate of tax paid for that outward supply.

 

ITC claim on stock and transition forms, TRAN-1, TRAN-2

For Example:

Mr. Avinash holds the following goods as closing stock as on 30th June

1000 units of Umbrellas

Now on 15th July he sells 100 umbrellas for Rs.100 each on which IGST is applicable at 12%

Taxable value- Rs. 10,000/-

Tax amount- Rs. 1,200/-

Now, since the rate of IGST is less than 18%, ITC will be allowed at 20%

Hence, ITC allowed will be 20% of Rs 1,200/- = Rs 240/-

ITC claim on Stock and Transition Forms, TRAN-1, TRAN-2

A registered person can claim credit of ITC in the above manner for six tax periods from the appointed date i.e. July 2017 till December 2017

For each such period a statement indicating the details of supply in FORM TRAN-2 has to be filed by the end of the tax period

Conditions to be fulfilled to claim credit of Central Tax and State tax- Applicable in case of States offering Tax on MRP Scheme.

  • The central tax or state tax payable on such supply has been paid.
  • such goods were not wholly exempt from Excise Duty or Nil rated or under the relevant State VAT Act.
  • the document for procurement of such goods is available with the registered person.
  • furnish the details of stock held at the end of each of the 6 tax periods indicating therein the details of supplies of such goods effected during the tax period in FORM TRAN-2
  • amount of credit allowed shall be credited to the Electronic Credit Ledger.
  • the stock of goods on which the credit is availed is so stored that it can be easily identified by the registered person.

Refer our PPT for a summary on Transition Provisions, Rules and Formats

Download Form Tran 1 and Tran 2

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