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Every business is waiting to make the transition to the new law under GST. Taxpayers already registered under VAT/Service tax also need to register under GST. Each entity registered under the previous indirect tax laws shall get a certificate of registration on the provisional basis.

This certificate issued would be valid for a period of 6 months. Businesses having a turnover of more than Rs 20 Lakhs have to get registered mandatorily under GST. Small businesses can either opt for composition scheme or they can get voluntarily registered under GST.

All compliances have to be done online. The process of deduction, payment, and refund of indirect taxes under GST would be carried out electronically.

Every business should have a fully computerized office for ease of compliance under GST. We have various articles explaining the need/process of registration for all different kind of businesses.

Transition of Input Tax Credit

transition to gst

Input tax credit claimed in the return filed under previous laws for the period prior to the appointed day (1 July 2017) would be transferred to the electronic credit ledger.

Registered persons who were registered under previous law and under GST

Existing manufacturers/dealers can claim the CENVAT credit in respect of input held in stock, semi-finished or finished goods held in stock if the following conditions are satisfied-:

(i) ITC is allowed under GST Act as well as previous acts
(ii) All the returns required under the previous law for six months immediately preceding 1st July have been filed
(iii) The credit does not relate to goods manufactured and cleared
under such exemption notifications as are notified by the Government.

Registered persons who were not registered under previous law

A registered dealer (unregistered under previous law) or who was engaged in the manufacture of exempted goods or provision of exempted services, or who was providing works contract service and was availing of the benefit of notification No. 26/2012—Service Tax, dated the 20th June, 2012 or a first stage dealer or a second stage dealer or a registered importer or a depot of a manufacturer can also enjoy ITC of inputs in stock held on 1st July if the following conditions are satisfied:

  • Such inputs and/or goods are used or intended to be used for making taxable supplies under GST;
  • The said taxable person passes on the benefit of such credit by way of reduced prices to the recipient;
  • The said taxable person is eligible for input tax credit on such inputs under GST;
  • The said taxable person is in possession of invoices and/or other prescribed documents evidencing payment of duty under the earlier the law in respect of such inputs;
  • Such invoices and/or other prescribed documents were issued not earlier than twelve months immediately preceding the appointed day;
  • The supplier of services is not eligible for any abatement under GST.

ITC on Goods Sent Before Appointed Date

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 thirty days of the appointed day. A thirty-day extension may be granted by the competent authority on grounds of sufficient cause for delay.

Refunds and Arrears

Any claims/appeals pending for the refund on the due amount of CENVAT credit, tax or interest paid before the appointed day 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. 

Other Scenarios

Job Work

Inputs, semi-finished goods removed for job work for carrying certain processes and returned on or after the appointed date

In case any inputs or semi-finished goods had been removed before the appointed date from the factory of the manufacturer and sent to a job worker for carrying further processing, testing, repair or for a similar purpose, and the same is received on or after the appointed date, no tax shall be payable if the following conditions are satisfied:

  • Underlying goods are returned to the factory within 6 months from the appointed date (extendable for a maximum period of 2 months).
  • Declaration of the goods held by job worker is done in Form TRANS-1
  • Supply of semi-finished goods is done only on payment of tax in India or the goods are exported out of India within 6 months from the appointed date (extendable by not more than 2 months).

Finished goods removed before appointed date for carrying certain processes and returned on or after the appointed date

In case any excisable goods had been removed without payment of duty for carrying out tests or other processes not amounting to manufacture, no tax shall be payable if the goods, after undergoing manufacturing
processes or otherwise, are returned to the said place within six months from the appointed day.

If the underlying inputs, semi-finished goods or finished goods are not returned within 6 months or extended period, input tax credit shall be recovered respectively.

Credit Distribution by ISD

In the case of services received prior to the appointed date AND invoices received on or after appointed date, transition provisions will apply. ISD will be eligible to distribute input tax credit under GST.

Composition Scheme

Credit of eligible duties and taxes on inputs held in stocks switching over from composition scheme to a taxable person

Taxpayers registered under composition scheme in the current tax regime will be allowed to take credit of input held in stock, or in semi-finished goods or in finished goods on the day immediately preceding the date from which he opts to be taxed as a regular taxpayer, subject to certain conditions.

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All Articles

  1. Filing VAT and Service Tax returns for June 2017 is very important. It is required to carry forward ITC in VAT or Service Tax to GST.
  2. What happens to the CENVAT Credit when a dealer who was not registered under Excise Act receives goods cleared before 1st July 2017? Learn more...
  3. ITC claim on stock and transition forms, TRAN-1, TRAN-2 to be filed depending on registered under pre-GST regime, possession of document evidencing tax pay
  4. This is a short list of things, provisions and laws to remember while transitioning to GST. Read to find out more.
  5. Goods leaving a seller when VAT is applicable might reach buyers after GST is live. Read more on the transition provisions of goods in transit under GST.
  6. The GST Law has an entire chapter on transition provisions. Learn more about the provisions related to works contract, ISDs, and goods lying with agents.
  7. In an ongoing business dealing with contracts, contract price revision is very common. What happens when contract price is revised after GST?
  8. Businesses are worried about the taxability of goods sent on approval basis before GST and returned after GST implementation.
  9. Revision of VAT returns and other returns of old tax regime will be allowed after GST is implemented, with certain restrictions.
  10. Unregistered persons can claim CENVAT credit upon registering under GST. Read to find out how much input tax credit you can avail.
  11. Unregistered persons now can claim VAT credit under GST on registration. Read to find out how much input tax credit you can avail.
  12. More than 140 countries have implemented GST. Now let us take a look at what the other countries faced post implementation of gst.
  13. Forms Required for Transition of Input Tax Credit are Tran 1, Tran 2. criteria is holding closing stock , registration, having document showing tax payment
  14. Tax on Goods Return after GST provisions for refunds and tax payable on the type of goods returned by a registered taxpayer or unregistered taxpayer
  15. Under GST ITC on stock transition provision provides credit of duties held in inputs, semi-finished goods, finished goods available to eligible taxpayers
  16. Major concerns is the availability and eligibility for claim of ITC available for utilization, when the current indirect tax regime changes to GST.
  17. Many countries have adopted the GST model before India. Read more for a comparison of Indian GST with GST of other countries
  18. More than 140 countries have implemented GST. Now let us take a look at what the other countries faced post implementation of gst.
  19. A detailed guide on how SMEs can migrate from the current tax regimes to GST.