After the implementation of GST on 1st July,2017 one of the major concern is about claiming of Input Tax Credit (ITC) on a registered business closing stock as on 30th June. Any business which held closing stock on the appointed date i.e. 1st July must file the Forms TRAN-1 and TRAN-2 to claim ITC on this stock as per the tax paid in the pre-GST regime.
Businesses carrying over CENVAT credit and Input VAT credit are allowed to carry forward the eligible CENVAT/Input Credit (ITC) from earlier regime to GST. The CENVAT credit including Service Tax will be carried forward as CGST Input Tax credit and VAT including entry tax will be available as SGST Input tax credit.
Closing stock may be held by the businesses themselves, or may be part of a job work, sale on approval basis etc. We can also claim ITC on these stocks by filing the mandatory forms.
Forms required for transition of ITC
Forms Required for Transition of Input Tax Credit are Tran 1 and Tran 2. The Form TRAN-1 needs to be filed by every person having closing stock registered under GST, regardless of whether they were registered under the pre-GST regime or not. The criteria for filing here is the presence of closing stock held as on 1st July, and need to claim ITC on this stock.
What is FORM GST TRAN-1?
Form GST TRAN-1 is a form to be filed by the registered taxable person to claim transitional ITC. Considering the various business circumstances in which the ITC is allowed, the Form GST TRAN-1 is categorized into 12 tables. . The tax payers are required to fill the relevant tables of Form GST TRAN-1 as applicable to their business. Out of the 12 tables in Form GST TRAN-1, the details related to:
- Amount of tax credit carried forward in the return filed under previous law
- Unavailed credit on capital goods and
- Tax credit on closing stock would be relevant for most of the businesses.
Following are categories of closing stock held on which ITC can be claimed and shown in the transition forms
- Credit of tax paid under CST to be carried forward for closing stock along with details of Form-C, Form-H/I, Form- F
- Details of the inputs held in stock which were exempted under pre-GST regime but made taxable under GST
- Amount of tax to be carried forward w.r.t tax unavailed on capital goods.
- Details of transfer of CENVAT credit for registered person having centralized registration under pre-GST regime
- Details of goods send for job work by principal manufacturer and held by the job worker for job work.
- Details of goods held in stock as agent on behalf of the principal and goods held by agent as a principal.
- Details of goods sent on approval basis six months prior to the 1st July.
Due date to file GST TRAN-1
The Form GST TRAN-1 needs to be filed within 90 days from the date of implementation of GST. However, with GST committee’s decision to allow the transitional credit in discharging July’s tax liabilities, there are 2 sets of due date to file Form GST TRAN-1.
- The due date for businesses opting to avail transitional credit to discharge the tax liability of July 2017 is 28th August, 2017.
- The due date for businesses planning not to avail transitional credit to discharge the tax liability for the month of July 2017 is within 90 Days from the appointed date, that is, 28th September, 2017.
Who are required to file Form GST TRAN-1?
Broadly, there are 2 types of transitional credit. The first being the closing balance of CENVAT, and Input VAT credit from last return to GST. The second being tax credit allowed on closing stock held on 30th June, 2017, in certain business circumstances. Based on this, we are listing down the businesses who are required to file Form GST TRAN-1.
- Businesses that have registered under earlier regime (Excise, VAT or Service Tax) having closing balance of Input tax credit in the June month’s return.
- Businesses registered only under VAT but have closing stock as on 30th June, 2017, which has suffered Excise duty.
- Businesses who have not registered under any of the earlier tax regime but registered under GST, and have the closing stock on which the various tax have been paid.
- Businesses engaged in manufacture/sale of exempted goods or provisions of exempted service but the said goods or services are taxable under GST and have closing stock as on 30th June, 2017, on which the various tax has been paid.
- Businesses who had opted for composition scheme in earlier regime and opted to be regular dealers, are allowed to claim the tax credit on closing stock held on 30th June, 2017.
- Businesses having unavailed ITC on capital goods are allowed to claim the unavailed portion as Transitional Input Tax credit.
- A principal manufacturer who has removed the goods for job work process under the earlier regime but those goods are to be returned in GST. The details of such goods are required to be provided in Form GST TRAN-1. Similarly, a job worker is also required to file Form GST Tran-1.
Differences to clear which Form to choose
Who can file
Who cannot file
When to file
Registered person under GST, may be registered or unregistered under old regime
Those registering under GST as composition dealer
Within 90 days of 1st July i.e. 28th September 2017
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
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%.
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.
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.
Link for Details and Format of TRAN-1 is below
FORM GST TRAN-1