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GST consolidates multiple taxes into one. It is important to have rules in place to ensure that a registered business smoothly transitions to GST.
Let’s discuss each of these cases in detail :
Provisions have been made for the smooth transition of Input Tax Credit available under VAT, Excise Duty or Service Tax to GST. A registered dealer opting for composition scheme will not be eligible to carry forward ITC available in the previous regime.
Here are some of the cases where ITC transition provisions will be applicable:
The closing balance of ITC as per the last return filed before GST can be taken as credit in the GST regime.
The credit will be available only if the returns for the last 6-months i.e. from January 2017 to June 2017 were filed in the previous regime (i.e. VAT, Excise and Service Tax returns had been filed).
Form TRAN 1 has to be filed by 27th December 2017 to carry forward the Input Tax Credit. Also, TRAN 1 can be rectified only once.
Before GST, only a part of input tax paid on Capital Goods could be taken as credit.
For example, if ITC on a Capital Good purchased in the year 2016-17 is Rs 10,000,
50% i.e. Rs 5,000 can be claimed as ITC in the same year and balance Rs 5000 can be claimed in the next year.
In such cases, there could be some amount of un-utilized credit available on the capital goods. This credit can be carried forwarded to GST by entering the details in Form TRAN 1.
A manufacturer or a service provider who has goods lying in the closing stock on which duty has been paid can also take the credit for the same. The dealer has to declare the stock of such goods on the GST Portal.
The dealer should have the invoices for claiming this credit. Also, the invoices should be less than 1 year old.
Manufacturers or service providers who do not have an invoice evidencing payment of duty, cannot claim the credit under the GST regime. Only traders can claim credit in case invoice is unavailable, subject to the following conditions:
|Rate of GST on Goods||Intra-state Credit to CGST||Inter-state Credit to IGST|
|18 % or more||60%||30%|
|Less than 18%||40%||20%|
Every person who is
can also enjoy ITC of inputs in stock held on 1st July. The following conditions must be fulfilled –
Input tax credit can be claimed by the manufacturer/dealer for those goods received after the appointed day, the tax on which has already been paid under previous law. Above credits would only be allowed if the invoice/tax paying document is recorded in the accounts of such person within 1st August 2017. A thirty-day extension may be granted by the competent authority on grounds of sufficient cause for delay.
Any claims/appeals pending for the refund on the due amount of CENVAT credit, tax or interest paid before 1st July shall be disposed of according to the previous laws.
Any amount found to be payable under previous law will be treated as arrears of GST and be recovered according to GST provisions.
No tax shall be payable on Inputs, semi-finished goods removed for job work for carrying certain processes and returned on or after 1st July Conditions when there is no tax payable:
Taxes are not applicable if finished goods were removed before 1st July for carrying certain processes and are returned within 6 months from 1st July
Input tax credit will be recovered if the goods are not returned within 6 months
Transition provisions will apply in cases where the service was received prior to 1st July and the invoices received on or after 1st July.ISD will be eligible to distribute input tax credit under GST.
When a registered dealer who was paying tax under composition scheme previously but is a normal taxpayer under GST can claim credit of inputs available as on 1st July by satisfying certain conditions –
To know more about TRAN 1 and TRAN 2 forms, go to – Transition of old input credits to GST regime