The government on 04/06/2017 finalized the Transition
Provisions for transfer of existing cenvat credit and for fresh claim of
eligible cenvat credits under CGST and SGST act 2017. There are a lot of
questions in the minds of dealers as well as practitioners as to how the
credits for existing stock will be available, in order to make it clear
let us discuss the rules under transitional provisions in detail:
Transitional arrangements for ITC:-
Elaborate provisions have been made to carry
forward the ITC earned under the existing law. Such credit should be
permissible under the GST law. However, the taxable person opting for
composition scheme would not be eligible for carry forward of the existing ITC.
ITC of various taxes under the existing laws (CENVAT credit, VAT etc.) would be
carried forward as under:
Closing balance of the credit in the last
The closing balance of the CENVAT
credit/VAT in the last returns filed under the existing law can be taken as
credit in electronic credit ledger. Such credit would be available only when
returns for the previous last six months have been filed under the existing
law. In order to claim this credit, declaration in form GST TRAN 1 is required
to be furnished on the common portal within ninety days from the appointed day
i.e. the day on which the GST law would come into force.
Un-availed credit on capital goods:
The balance instalment of un-availed credit
on capital goods credit can also be taken by filing the requisite declaration
in the GST TRAN 1.
duty paid stock:
registered taxable person, other than the manufacturer or service provider, may
have duty paid goods in his stock on the appointed day. GST would be payable on
all supplies of goods or services made after the appointed day. It is not the
intention of the Government to collect tax twice on the same goods. Hence, in
such cases, it has been provided that the credit of the duty/tax paid earlier
would be admissible as credit. Such credit can be taken as under:
Credit shall be taken on the basis of invoice
evidencing payment of duty of excise or VAT
invoices should be less than one-year old
Declare the stock of duty paid goods within the
prescribed time on the common portal.
Credit on duty paid stock when Registered Person
does not possess the document evidencing payment of excise duty/VAT: For
traders who do not have excise or VAT invoice, there is a scheme to allow
credit to them on the duty paid stock. The features of this scheme are as
The scheme is operative only for six months from
the appointed day. It is not available to manufacturer or supplier of service.
It is available to traders only.
60% on such goods which attract central tax @ 9% or more and @ 40% for other
goods of GST paid on the stock cleared after the appointed day would be
allowed. However, such goods should not be unconditionally exempted goods or
taxed at nil rate under the existing law. It has also been provided that where
integrated tax is paid on such goods, the amount of credit shall be allowed at
@ 30% and 20% respectively of the said tax.
would be allowed after the GST is paid on such goods subject to the condition
that the benefit of such credit is passed on to the customer by way of reduced
statement of supply of such goods in each of the six tax periods has to be
stored should be easily identifiable.
Credit relating to exempted goods under the
existing law which are now taxable:
Input Tax Credit of CENVAT/VAT in respect of
input, semi-finished and finished goods in stock attributable to exempted goods
or services which are now taxable can also be taken in the same manner
Input/input services in transit:
There might be a scenario where input or
input services are received on or after the appointed day but the duty or tax
on the same was paid by the supplier under the existing law. Registered person
(RP) may take credit of eligible duties and taxes, provided the in-voice has
been recorded in the books within 30 days from the appointed day. The period
can be extended by the Commissioner GST by another 30 days. A statement of such
in-voices has to be furnished. ISD can also distribute such credit.
Tax paid under the existing law under
Those taxpayers who paid tax at fixed rate or
fixed amount in lieu of the tax payable un-der the existing law but are working
under normal scheme under GST can claim credit on their input stock,
semi-finished and finished stock on the appointed date, subject to the following
Such input stock used for taxable supply under this Act
Registered Person is not covered under section 10 (composition scheme) of this
(iii) Registered Person is eligible for ITC
under this Act
Registered Person is in possession of the invoice or other duty payment
Such invoices are not more than twelve months old on the appointed day
ITC in case of Centralised Registration under
service tax :
Such Registered Person can take credit of
the amount of CENVAT carry forwarded in return furnished under the existing
law, if the original/revised return under the existing law has been filed
within three months. Such credit may be transferred to any of the Registered
Persons having the same PAN for which the centralised registration was obtained.
the reversed Input Service credit :
CENVAT credit reversed on account of
non-payment of consideration within three months can be reclaimed if the
payment is made to the supplier of service within 3 months from the appointed
Where any goods or capital goods belonging to
the principal are lying at the premises of the agent on the appointed day:
provision is specific to SGST law. In such cases, agent shall be entitled to
take credit, subject to the following conditions:
The agent is a registered taxable person
Both the principal and the agent declare the
details of stock
The invoices are not older than twelve months
principal has either reversed or not been availed on the input tax credit
B. Transition provisions relating to job work, goods
returned/sent on approval etc:-
(a) Job work:
goods or finished goods were sent to the job worker or any other premises
without payment of duty/VAT under the existing law. No GST is payable by the
job worker when such goods are returned by him within six months after the
appointed day. The period can be extended by the Commissioner, GST by another
If not returned within the prescribed period, then ITC shall
be liable to be recovered from the principal as per second provision to section
141(1) of the Act. In addition, the job worker will have to pay the GST on such
supplies. In case of semi-finished goods, the manufacturer may transfer the
goods to premises of a Registered Person without payment of tax within the
prescribed period. In case of finished goods, the manufacturer may transfer the
goods on payment of tax or clear for export within the prescribed period.
(b) Goods removed
before 6 months of the appointed day but returned within 6 months from the
If such goods are
returned by an unregistered person, then refund of the duty/VAT paid under the
existing law can be claimed. If returned by a Registered Person, then the
return of goods shall be treated as supply of goods (ITC can be claimed).
(c) Goods sent on
approval basis before 6 months of the appointed day but re-turned within 6
months from the appointed day:
No tax is payable by
the person returning the goods. Commissioner may extend the period by 2 months.
If returned after that, tax is payable if the supply is taxable under GST (by
the recipient). If not returned, tax is payable by the person who sent the
goods on approval basis.
(d) TDS deducted in
Where a supplier has made any sale of goods, and tax was
required to be deducted under VAT Act, and invoice was issued before the
appointed day. however, the payment was made on or after the appointed day. In
such cases, no TDS under GST is to be deducted.
(e) Price revision in respect of existing contracts:
In case of upward
price revision, a registered person will issue a supplementary invoice or debit
notes within 30 days from the date of revision and such revision shall be
treated as supply under GST, and tax is payable under this Act.
In case of downward
revision, Registered Person may issue credit note within 30 days from such
revision and credit note shall be deemed to have been issued in respect of
outward supply made under this Act. A Registered Person will reduce his tax
liability for such credit note, subject to reversal of credit by the recipient.
C. Proceedings under the existing laws:-
GST law would become
operational w.e.f. the appointed day and existing laws would be repealed.
Elaborate provisions have been made to save the pending as well future claims
relating to existing law made before, on or after the appointed day. Such
proceedings may pertain to refund claims of CENVAT credit/VAT or export related
rebate or service tax, and the proceedings may either result in recovery of tax
All such cases would
be disposed of under the existing law. If any claim for refund of CENVAT credit
is fully or partially rejected, the amount so rejected shall lapse. Refund of
CENVAT credit shall be paid in cash. There will be no refund of CENVAT if
already carry forwarded. If any amount becomes recoverable, the same shall be
recovered as arrear of tax under GST Act.
relating to transition are contained in chapter XX (section 139 to 142) of the
Final Transition Rules along with Transition Formats and
proposed CTD (Credit Transfer Document) documents has been put on public domain
(as per GST council meeting held on June 03, 2017).
To access the rules & formats, please click on
the link below:
1. Transitional rules
2. Transitional formats