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A major concern for businesses registered under GST is to make sure they don’t lose out on the tax benefits and input credits of the old regime. These taxes may have been paid while purchasing, inputs, raw materials, semi-finished goods, finished goods, or on materials sent to job worker. For most businesses these taxes are available as input credit on 30th June 2017. And moving these to GST regime is important to take benefit of them.
The CBIC has released transition rules and formats and with the help of these, businesses can move credit of old regime to GST.
1st October 2022
The GST portal re-opened the facility to file or revise earlier filed TRAN 1/ 2 following the Supreme Court’s directive. The window to file these forms will be available from 1st October 2022 to 30th November 2022. Also, the GST portal released an advisory explaining the revised processes for claiming transitional ITC.
Any business having a closing stock -whether registered or not before GST, 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.
To help businesses transition smoothly and carry forward their input tax credit, the CBEC has released 2 transition forms called TRAN 1 and TRAN 2. Both these forms can be filed on ClearTax.
|Form type||Who can file||Who cannot file||When to file^|
|TRAN 1||Registered persons under GST, may be registered or unregistered under old regime||Those registering under GST as composition dealer||27th December 2017^|
|TRAN 2||Registered persons under GST but unregistered or under old regime A dealer or trader who does not have documents of duty paid||A manufacturer registered under excise A service provider registered under service tax||Monthly from July 2017 to December 2017^|
Note: TRAN 1 can be revised only once. After rectifying no further changes can be made.
^Following the Supreme Court’s directive, the GST portal re-opened the facility to file or revise earlier TRAN 1/ 2 from 1st October 2022 to 30th November 2022.
Transition aspects mainly relate to
Here is an item wise break up of information required in TRAN 1
a) Amount of cenvat credit carried forward to the electronic credit ledger as central tax ( Central Excise and Service Tax) Section 140(1) and Section 140(4)(a).
Applicable for a registered person other than a person paying tax under composition scheme, who was registered under the old regime and has furnished the returns under the old regime. (Section 140(1) of the CGST Act).
Input credit related to taxable supply where the registered person was providing/manufacturing both taxable as well as exempted service/goods under the old regime. (Section 140(4) (a) of the CGST Act).
Such a person can claim excise and service tax input credit balance reflected in the return. So this table is required to be filed if you are registered as a manufacturer or as a Service provider & if you have a closing balance of CENVAT credit in your return for the period ending 30th June 2017.
The following details have to be provided –
Table input 1: Serial No
Table input 2: Registration no. under existing law ( Central Excise and Service Tax) – provide your central excise and service tax registration number (both are unique 15 digit number)
Table input 3: Tax period to which the last return filed under the existing law pertains – give the period of the last return filed by you. Say for eg if you are an excise manufacturer you have to file monthly ER-1 and quarterly ER-3. Under this part, you provide details of both these returns filed for the past six months.
Table input 4: Date of filing of the return specified in Table input 3 – Provide the dates of the returns as mentioned above
Table input 5: Balance CENVAT carried forward in the said last return Provide amount of CENVAT credit you have carried forward for each return
Table input 6: CENVAT credit admissible as ITC of central tax in accordance with transitional provisions Provide amount of credit that you are eligible to carry forward out of the credit appearing in old return forms
b) Tax credit for C Forms, F Forms and H/I Forms which you want to carry forward [this information is to be provided for the period 1st April 2015 to 30th June 2017]
Here’s a simple recap of what these forms are –
‘C Forms’ – C Form is issued by a registered dealer (purchaser) to a registered seller when an interstate sale is made. When purchases are made under a C form Central Sales Tax (CST) is 2%.
‘F Forms’ – Are used for making branch transfers without paying tax. F Form is issued by the branch office/consignment agent receiving goods as branch/stock transfer to its head office/principal who is sending the goods. The Head office/Principal uses F forms to prove that goods sent are stock/branch transfer and not sale.
‘H/I Forms’ – used in case of Exports for local purchases made without payment of tax. This Form is issued when the buyer is an exporter and is purchasing inter state for exports. If the exporter/buyer issues H form, the seller is not required to charge or pay any CST on the transaction.
For each of these forms provide the following information – TIN of Issuer Name of Issuer Serial Number of Form Amount Applicable VAT Rate
c) Tax credit for State/UT Tax for pending C Forms, F Forms and H/I Forms (For all registrations on the same PAN and in the same State) –
If you are registered under any State VAT & if you have any pending C-Form/F Form/H or I Form then you are required to pay the differential tax as you are not eligible to charge concessional CST rate.Such Differential tax payable will be deducted from the input tax credit balance available in the last return filed by you & the remaining credit will be carried forward under GST Regime.
The details to be provided are as under –
6. Details of capital goods for which unavailed credit has not been carried forward under existing law (Section 140(2)) –
This requires you to provide details of any unavailed input credit pertaining to capital goods. Credit of taxes paid on capital goods is usually spread over more than one financial year. In case you were not able to fully claim input credit of taxes in full by 30th June, the remaining portion can be claimed by reporting here.
Section 140(2) of the CGST Act basically refers to carry forward of CENVAT credit for capital used which was not carried forward in a return of the old regime. If a cenvat credit has been carried forward in an earlier return it will be included in 5a.mentioned above.
This information has to be provided under 6a.and 6b. below
a) Central Tax portion of unavailed input tax credit on capital goods Amount of unavailed cenvat credit for capital goods which you want to carry forward to electronic ledger as central tax, which is for CENVAT or Excise, or Countervailing Duty or Special Additional Duty (Central Taxes)
In this table you have to give the details of unavailed cenvat credit of Excise Duty or SAD or CVD of Capital goods –
b) State/UT Tax portion of unavailed input tax credit on capital goods Amount of unavailed input tax credit carried forward to electronic credit ledger as State/UT tax (for all registrations on the same PAN and in the same state) – In this table you have to provide details of unavailed cenvat credit of VAT Or Entry Tax (State/UT Tax) for capital goods-
7. Details of inputs held in stock in terms of section 140(3), 140(4)(b) and 140(6)
This section is for claiming input tax credit by a manufacturer or dealer who was previously unregistered and/or was dealing in exempted goods. This portion asks for details of inputs held as stocks. This portion of TRAN-1 basically applies to a business registered under GST but
[Any one of the above may be true. These are as per the Section 140(3) of the CGST Act]
It also applies to a person who was manufacturing both taxable and exempted goods or providing taxable as well as exempt services. And tax in the stock/inputs which was used for exempted supply under old regime but is taxable under the GST.
[As per section 140(4)(b) of the CGST Act] Also applied to a person registered as a composition dealer (paying tax at fixed rate or fixed amount) in old regime, but a normal registered taxpayer under GST. All these above-mentioned persons can claim credit of eligible taxes in respect of stocks held by them when they meet these conditions:
In short these are the persons who have stock as on 30th June 2017 but were unable to claim the credit of such stock through returns filed by them which are already mentioned in 5a.b. or c. of FORM GST TRAN -1 ( see above).
a) Input credit claims other than those claimed in 5a. above
Provide the following HSN ( at 6 digit level) Unit Quantity Value Eligible duties paid on such inputs
Part 7A is Where duty paid invoices or other documents are available to be filled for inputs or for inputs contained in semi-finished and finished goods by a manufacturer or service provider to claim input tax credit of excise duty or service tax as input tax credit of CGST.
Part 7B is to be filled only by those who are not manufacturer or service provider who was unregistered in the old regime – basically to be filled by dealers or traders to provide information of Inputs where duty paid invoices or documents are not available. Such a person also has to fill TRAN-2 which we will also discuss.
b) VAT and entry tax paid on inputs or input services where documents of payment of tax are available and which will be carried forward as SGST/UTGST:
Where input or input services are received on or after the 1st july 2017 but the duty or tax on the same was paid by the supplier under the old regime. Registered person can take credit of eligible duties and taxes paid by them when the invoice has been recorded in the books within 30 days from 1st July. (The period can be extended by the Commissioner GST by another 30 days). This situation is covered under section 140(5) of the CGST Act & the following details must be submitted.
c) Amount of VAT and entry tax paid on inputs supported by invoices/documents evidencing payment of tax carried forward to electronic credit ledger as SGST/UTGST under section 140(3), 140(4)(b) and 140(6)
d) Stock of goods not supported by invoices/documents evidencing payment of tax (for only those states having VAT at single point)
This portion must be filled if you are trader or dealer who is unregistered under the old regime and where you do not have the invoice or other prescribed documents evidencing payment of VAT/Entry Tax which will be claimed as ITC of SGST after filing FORM GST TRAN – 2. Please note that a manufacturer or a service provider cannot fill this table. Also this applies to states where the VAT need to paid at the single point. (i.e tax is paid by the manufacturer or the importer only ) like in Punjab. Provide the following details: Description Unit Quantity Value Tax paid
8. Details of transfer of cenvat credit for registered person having centralized registration under existing law (Section 140(8))
This is applicable for transfer of input tax credit related to service tax. The following details are required
9. Details of goods sent to job worker and held in his stock on behalf of principal under section141
a) Sent as principal A principal who has sent goods to the job worker must fill-
b) Held as job-worker If you are a job worker then you must give details of goods held by you for the Principal in 9 (b) –
10. Details of goods held in stock as agent of behalf of the principal under section 142(14) of the SGST Act. Section 142(14) says that if any goods or capital goods belonging to the principal are lying at the premises of the agent on the appointed day, the agent can take credit of the tax paid on such goods or capital goods when he meets the following conditions:
(i) the agent is registered under GST
(ii) both the principal and the agent must declare the details of stock of goods or capital goods lying with such agent on 30th June 2017
(iii) the invoices for such goods or capital goods had been issued not earlier than 12 months prior to 1st July 2017.
(iv) the principal has either reversed(if anu input tax credit claimed by him) or not availed the input tax credit for such goods or capital goods.
a) Details of goods held as agent If you are an agent then you must give details of Stock held by you on behalf of the Principal which is unsold as on 30th June 2017 in Serial No 10 (a) –
b) Goods sent as principal held by the agent If you are a principal then you must give the details of the stock sent by you to the agent & unsold as on 30th June 2017 in Serial No 10 (b) –
11. Details of credit as per Section 142(11)
(c) — This is for works contractor where both VAT & Service Tax is paid by him on any supply, then GST shall be leviable & he shall be entitled to take credit of VAT & Service Tax paid by him to the extent of supplies made after 1st of July 2017. Here you are required to give details :
12. Details of goods sent on approval basis six months prior to 1st July 2017 (Section 142(12))
This is for goods that are sent on approval basis not earlier than 6 months prior to July 1st 2017. Following details are required –
Form TRAN – 2 can be filed by a dealer/trader who has registered for GST, but was unregistered under the old regime. Such a dealer who does not have a VAT or excise invoice for stocks held by them on 30th June 2017, can use TRAN -2 to claim tax credit on the stock with them. A manufacturer or service provider cannot file Form GST TRAN – 2. TRAN-2 has to be filed by a dealer or trader at the end of every month, when stock is sold reporting the details to claim input tax credit. He must meet the following conditions –
Stock held with no supporting document showing payment of Excise Duty(Central Tax) If you do not have a document showing the payment of Excise Duty , then you are supposed to fill the following details – Here you must give details of the Stock in the following manner:-
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. Specify the following in respect of every capital goods, invoice-wise details of:
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
Following are the basic details to be mentioned in the form:
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
Following are the basic details to be mentioned in the form:
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.
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/-
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.