Sec 140 – Transitional arrangements for input tax credit

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Sec 140 – Transitional arrangements for input tax credit 2017-04-14T02:54:14+00:00

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  • Miloni ShahMiloni Shah
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    (1) A registered person, other than a person opting to pay tax under section 10, shall be entitled to take, in his electronic credit ledger, the amount of CENVAT credit carried forward in the return relating to the period ending with the day immediately preceding the appointed day, furnished by him under the existing law in such manner as may be prescribed:
    Provided that the registered person shall not be allowed to take credit in the following circumstances, namely:-
    (i) where the said amount of credit is not admissible as input tax credit under this Act; or
    (ii) where he has not furnished all the returns required under the existing law for the period of six months immediately preceding the appointed date; or
    (iii) where the said amount of credit relates to goods manufactured and cleared under such exemption notifications as are notified by the Government.
    (2) A registered person, other than a person opting to pay tax under section 10, shall be entitled to take, in his electronic credit ledger, credit of the unavailed CENVAT credit in respect of capital goods, not carried forward in a return, furnished under the existing law by him, for the period ending with the day immediately preceding the appointed day in such manner as may be prescribed:
    Provided that the registered person shall not be allowed to take credit unless the said credit was admissible as CENVAT credit under the existing law and is also admissible as input tax credit under this Act.
    Explanation.–For the purposes of this sub-section, the expression “unavailed CENVAT credit” means the amount that remains after subtracting the amount of CENVAT credit already availed in respect of capital goods by the taxable person under the existing law from the aggregate amount of CENVAT credit to which the said person was entitled in respect of the said capital goods under the existing law.
    (3) A registered person, who was not liable to be registered under the existing 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, shall be entitled to take, in his electronic credit ledger, credit of eligible duties in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the appointed day subject to the following conditions, namely:–
    (i) such inputs or goods are used or intended to be used for making taxable supplies under this Act;
    (ii) the said registered person is eligible for input tax credit on such inputs under this Act;
    (iii) the said registered person is in possession of invoice or other prescribed documents evidencing payment of duty under the existing law in respect of such inputs;
    (iv) such invoices or other prescribed documents were issued not earlier than twelve months immediately preceding the appointed day; and
    (v) the supplier of services is not eligible for any abatement under this Act:
    Provided that where a registered person, other than a manufacturer or a supplier of services, is not in possession of an invoice or any other documents evidencing payment of duty in respect of inputs, then, such registered person shall, subject to such conditions, limitations and safeguards as may be prescribed, including that the said taxable person shall pass on the benefit of such credit by way of reduced prices to the recipient, be allowed to take credit at such rate and in such manner as may be prescribed.
    (4) A registered person, who was engaged in the manufacture of taxable as well as exempted goods under the Central Excise Act, 1944 or provision of taxable as well as exempted services under Chapter V of the Finance Act, 1994, but which are liable to tax under this Act, shall be entitled to take, in his electronic credit ledger,-
    (a) the amount of CENVAT credit carried forward in a return furnished under the existing law by him in accordance with the provisions of sub-section (1); and
    (b) the amount of CENVAT credit of eligible duties in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the appointed day, relating to such exempted goods or services, in accordance with the provisions of sub-section (3).
    (5) A registered person shall be entitled to take, in his electronic credit ledger, credit of eligible duties and taxes in respect of inputs or input services received on or after the appointed day but the duty or tax in respect of which has been paid by the supplier under the existing law, subject to the condition that the invoice or any other duty or tax paying document of the same was recorded in the books of account of such person within a period of thirty days from the appointed day:
    Provided that the period of thirty days may, on sufficient cause being shown, be extended by the Commissioner for a further period not exceeding thirty days:
    Provided further that said registered person shall furnish a statement, in such manner as may be prescribed, in respect of credit that has been taken under this sub-section.
    (6) A registered person, who was either paying tax at a fixed rate or paying a fixed amount in lieu of the tax payable under the existing law shall be entitled to take, in his electronic credit ledger, credit of eligible duties in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the appointed day subject to the following conditions, namely:–
    (i) such inputs or goods are used or intended to be used for making taxable supplies under this Act;
    (ii) the said registered person is not paying tax under section 10;
    (iii) the said registered person is eligible for input tax credit on such inputs under this Act;
    (iv) the said registered person is in possession of invoice or other prescribed documents evidencing payment of duty under the existing law in respect of inputs; and
    (v) such invoices or other prescribed documents were issued not earlier than twelve months immediately preceding the appointed day.
    (7) Notwithstanding anything to the contrary contained in this Act, the input tax credit on account of any services received prior to the appointed day by an Input Service Distributor shall be eligible for distribution as credit under this Act even if the invoices relating to such services are received on or after the appointed day.
    (8) Where a registered person having centralised registration under the existing law has obtained a registration under this Act, such person shall be allowed to take, in his electronic credit ledger, credit of the amount of CENVAT credit carried forward in a return, furnished under the existing law by him, in respect of the period ending with the day immediately preceding the appointed day in such manner as may be prescribed:
    Provided that if the registered person furnishes his return for the period ending with the day immediately preceding the appointed day within three months of the appointed day, such credit shall be allowed subject to the condition that the said return is either an original return or a revised return where the credit has been reduced from that claimed earlier:
    Provided further that the registered person shall not be allowed to take credit unless the said amount is admissible as input tax credit under this Act:
    Provided also that such credit may be transferred to any of the registered persons having the same Permanent Account Number for which the centralised registration was obtained under the existing law.
    (9) Where any CENVAT credit availed for the input services provided under the existing law has been reversed due to non-payment of the consideration within a period of three months, such credit can be reclaimed subject to the condition that the registered person has made the payment of the consideration for that supply of services within a period of three months from the appointed day.
    (10) The amount of credit under sub-sections (3), (4) and (6) shall be calculated in such manner as may be prescribed.
    Explanation 1.-For the purposes of sub-sections (3), (4) and (6), the expression “eligible duties” means–
    (i) the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957;
    (ii) the additional duty leviable under sub-section (1) of section 3 of the Customs Tariff Act, 1975;
    (iii) the additional duty leviable under sub-section (5) of section 3 of the Customs Tariff Act, 1975;
    (iv) the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Textile and Textile Articles) Act, 1978;
    (v) the duty of excise specified in the First Schedule to the Central Excise Tariff Act, 1985;
    (vi) the duty of excise specified in the Second Schedule to the Central Excise Tariff Act, 1985; and
    (vii) the National Calamity Contingent Duty leviable under section 136 of the Finance Act, 2001,
    in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the appointed day.
    Explanation 2.-For the purposes of sub-section (5), the expression “eligible duties and taxes” means–
    (i) the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957;
    (ii) the additional duty leviable under sub-section (1) of section 3 of the Customs Tariff Act, 1975;
    (iii) the additional duty leviable under sub-section (5) of section 3 of the Customs Tariff Act, 1975;
    (iv) the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Textile and Textile Articles) Act, 1978;
    (v) the duty of excise specified in the First Schedule to the Central Excise Tariff Act, 1985;
    (vi) the duty of excise specified in the Second Schedule to the Central Excise Tariff Act, 1985;
    (vii) the National Calamity Contingent Duty leviable under section 136 of the Finance Act, 2001; and
    (viii) the service tax leviable under section 66B of the Finance Act, 1994, in respect of inputs and input services received on or after the appointed day.

    Priya MadrechaPriya Madrecha
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    140.1.1  Introduction
    This transition provision enables a taxable person to carry forward unutilized input credit under the CENVAT Credit Rules, 2004.
    140.1.2  Analysis
    The amount of any input credit carried forward in a return, which is unutilized under the existing tax regime may be carried forward into the GST regime except in the case of a person who opts to pay tax under composition scheme in a GST regime.
    • The said credit will be allowed to be carried forward to the GST regime, if the following conditions are satisfied:
    (1)    The said credit is admissible as input tax credit under the provisions of the CGST Act;
    (2)    The registered person has furnished all the returns required under the existing law for the period of six months immediately preceding the appointed date.
    (3)    Input tax credit does not relate to goods manufactured and cleared under exemption notifications as are notified by the Government.
    (4)    Input tax credit carried forward will not be allowed if such credit relates to goods manufactured and cleared under exemption notifications as notified by the government.
    Particulars     CGST
    Credit to be carried forward      CENVAT credit
    Relevant law      CENVAT Credit Rules, 2004
    Laws to be subsumed and
    the relevant credit      Central Excise
    Service tax
    Input Tax Credit to be carried forward       Central Excise paid on ‘inputs’ /capital goods
     Countervailing duty paid on ‘inputs’/capital goods
     Special Additional Duty paid on ‘inputs’ /capital goods in case of manufacturers
     NCCD paid on ‘inputs’
     Service tax paid on ‘input services’ – both direct or reverse charge
     Krishi Kalyan Cess for Service Provider.
    Conditions       The said credit is admissible as input tax credit under the provisions of the CGST Act ;
     The registered person has furnished all the returns required under the existing law for the period of six months immediately preceding the appointed date;
     The said credit does not relate to goods
    Particulars     CGST
    manufactured and cleared under such exemption notifications as are notified by the Government;
     Must have been reflected as input credit carried forward in the return filed for the last month / period under the existing law, viz., last monthly return or quarterly return or the half yearly return, as the case may be.
    Form in which the credit would be availed under the
    GST Law     Would be available as a balance in the Electronic Credit Ledger of the tax payer.
    FORM GST TRAN-1 (To be submitted electronically within 60 days of the appointed day)
    Illustration 1: Assume that GST is applicable from 1stJuly, 2017 and the amount of credit as per the return for the period ending 30th June, 2017 is as follows:
    Particulars of Input tax Credit     Credit amount as per return
    Central Excise      200,000
    Service Tax     100,000
    Education Cess     10,000
    Secondary and Higher Education Cess     5,000
    Krishi Kalyan Cess     5,000
    Swachh Bharat Cess     5000
    Additional Duty u/s 3(1) of CTA – CVD     40,000
    Additional Duty u/s 3(5) of CTA – SAD     30,000
    Input Tax Credit under VAT     50,000
    Total      445,000
    What will be the amount of opening CGST to be brought forward as per the GST Law as on 1stJuly, 2017?
    Ans. The amount of CGST to be brought forward on 1stJuly, 2017 will be calculated as follows:
    A.    If the tax payer is a Manufacturer
    CGST Components     CGST Value
    Central Excise      200,000
    Service Tax     100,000
    Education Cess     10,000
    Secondary and Higher Education Cess     5,000
    Additional Duty u/s 3(1) of CTA     40,000
    Additional Duty u/s 3(5) of CTA     30,000
    Krishi Kalyan Cess     5000
    Total CGST     390,000
    Note:
    1.    Swachh Bharat Cess will not be allowed to be carried forward.
    2.    Input credit under VAT will not be allowed to be carried forward as CGST.
    3.    EC and SHEC – Provision relating to carry forward of the same would need to be seen subsequently. At present, the law lacks to provide clarity on the same.
    4.    KKC may not be allowed to be carried forward by manufacturer.
    B.    If the tax payer is a Service Provider
    CGST Components     CGST Value
    Central Excise      200,000
    Service Tax     100,000
    Education Cess     10,000
    Secondary and Higher Education Cess     5,000
    Krishi Kalyan Cess     5,000
    Additional Duty u/s 3(1) of CTA-CVD     40,000
    Total CGST     3,60,000
    Note:
    1.    Service Provider not entitled to avail credit of SAD & Swachh Bharat Cess.
    2.    Additional Duty u/s 3(1) of CTA – CVD will be available if it is paid on import purchase of specified goods.
    3.    EC and SHEC – Provision relating to carry forward of the same would need to be seen subsequently. At present, the law lacks to provide clarity on the same
    140.1.3 FAQ
    Q1. A person who is registered under service tax as well as under Central Excise and having unavailed cenvat credit in central excise return, has not filed his service tax returns. Whether he can carry forward the unavailed cenvat credit as per the last central excise return to GST regime?
    Ans: No. Credit cannot be taken unless he has furnished all the returns required under the existing law for the period of six months immediately preceding the appointed date.
    Q2. Whether returns under CST in relation to the six months immediately preceding the appointed date also to be furnished in order to carry forward the unavailed cenvat credit with respect to service tax and central excise into the GST regime?
    Ans: Yes, The registered person has to furnish all the returns required under the existing law for the period of six months immediately preceding the appointed day.
    140.1.4 Related provisions
    Section     Description
    Section 2(107)      Meaning of ‘taxable person’
    Section 2(46 )     Definition of ‘Electronic Credit Ledger’
    Section 16 to 21     Manner of taking input tax credit
    Section 2(48)     Meaning of Existing law
    Statutory Provision
    140(2). Credit of unavailed CENVAT credit in respect of capital goods, not carried forward in a return, shall be allowed.
    A registered person, other than a person opting to pay tax under section 10, shall be entitled to take, in his electronic credit ledger, credit of the unavailed CENVAT credit in respect of capital goods, not carried forward in a return, furnished under the existing law by him, for the period ending with the day immediately preceding the appointed day in such manner as may be prescribed:
    PROVIDED that the registered person shall not be allowed to take credit unless the said credit was admissible as CENVAT credit under the existing law and is also admissible as input tax credit under this Act:
    Explanation .- For the purposes of this section, the expression “unavailed cenvat credit” means the amount that remains after subtracting the amount of CENVAT credit already availed in respect of capital goods by the taxable person under the existing law from the aggregate amount of CENVAT credit to which the said person was entitled in respect of the said capital goods under the existing law.
    140.2.1 Introduction
    This transition provision enables a person to avail CENVAT credit of the balance amount (unavailed portion) in respect of capital goods, that has not been availed under the existing laws. The unavailed portion of credit relating to capital goods under the existing laws not carried forward through a return can be availed, Provided such credits are admissible under the GST laws.
    140.2.2 Analysis
    A registered person (except person opting for composition scheme) shall be allowed to take the amount of CENVAT Credit on capital goods not carried forward in the return. However, the said credit should be admissible under the existing law as well as under the provisions of the CGST Act.
    “Unavailed CENVAT credit” means the amount that remains after subtracting the amount of
    Cenvat credit already availed in respect of capital goods by the taxable person under the existing law from the aggregate amount of Cenvat credit to which the said person was entitled to, in respect of the said capital goods under the existing law.
    — Under the CENVAT Credit Rules, 2004, in respect of eligible capital goods, credit is required to be claimed in 2 parts of 50% each. Credit to the extent of 50% maximum of the central excise duty paid ought to be claimed in the same financial year in which the capital goods are received and the balance 50% can be claimed in any subsequent years.
    — Further, it needs to be noted that the capital goods referred above, means the goods as defined under Clause (a) of Rule 2 of CENVAT Credit Rules, 2004.
    Eg 1: A manufacturer purchased a capital asset worth Rs. 11,25,000 (including excise duty of Rs. 1,25,000) on 5th May, 2017. In the month of June, 2017, he could avail CENVAT Credit to the extent of 50% only i.e. Rs. 62,500. The unavailed CENVAT Credit on capital goods as on 1st July, 2017 (appointed day) will be Rs. 125,000 – 62,500 = Rs. 62,500.
    Eg 2: CENVAT Credit on Capital Goods used outside the factory of manufacturer is not allowable . So, it will not be admissible as input tax credit in the GST Law either.
    In terms of Sub Rule 2(a) of the Transition provision Rules particulars relating to every item of capital goods in respect of tax/duty awaited or utilised by way of credit under the existing law shall be indicated. Similar details in respect of unavailed portion under the existing laws shall also be stated. The details, conditions and documentation are as follows:
    Particulars     CGST
    Credit to be carried forward      CENVAT credit
    Relevant law      CENVAT Credit Rules, 2004
    Details of credit to be carried forward       Central Excise paid on ‘capital goods’
     Countervailing duty paid on ‘capital goods’
     Special Additional Duty paid on ‘capital goods’
    Conditions       Should qualify for eligible input credit under both, the existing law and the GST law
     Would be in respect of input credit which is not carried forward in the return filed for the last period under the existing law
    Form in which the credit would be availed under the GST law       FORM GST TRAN-1 (To be submitted electronically within 60 days of the appointed day)
     Would be available as a balance in the electronic credit ledger of the tax payer
    It must be clearly understood that CENVAT Credit can only be availed as CGST Credit in the Electronic Credit Ledger.
    Pictorially this provision can be depicted as follows:

    140.2.3  Related provisions
    Section of CGST     Description
    Section 2( 46)     Definition of ‘Electronic Credit Ledger’
    Section 16 – 21     Manner of taking input tax credit
    Section 79     Recovery of tax
    Section 2(48)     Existing law
    Statutory Provision
    140(3). Credit of eligible duties in respect of inputs held in stock allowed in certain situations
    A registered person, who was not liable to be registered under the existing 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 20.06.2012 or a first stage dealer or a second stage dealer or a registered importer, or a depot of a manufacturer, shall be entitled to take, in his electronic credit ledger, credit of eligible duties in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the appointed day subject to the following conditions:
    (i)    such inputs and / or goods are used or intended to be used for making taxable supplies under this Act;
    (ii)    the said registered person is eligible for input tax credit on such inputs under this Act;
    (iii)    the said registered person is in possession of invoice and/or other prescribed documents evidencing payment of duty under the existing law in respect of such inputs;
    (iv)    such invoices and /or other prescribed documents were issued not earlier than twelve months immediately preceding the appointed day; and
    (v)    the supplier of services is not eligible for any abatement under the Act:
    PROVIDED that where a registered person, other than a manufacturer or a supplier of services, is not in possession of an invoice or any other documents evidencing payment of duty in respect of inputs, then such registered person shall, subject to such conditions, limitations and safeguards as may be prescribed, including that the said taxable person shall pass on the benefit of such credit by way of reduced prices to the recipient, be allowed to take credit in such rate and in such manner as may be prescribed.
    The amount of credit under sub-section (3) shall be calculated in such manner as may be prescribed.
    Explanation.— For the purpose of this sub section, the expression “eligible duties” means-
    (i)    the duty of excise specified in the First Schedule to the Central Excise Tariff Act, 1985(5 of 1986);
    (ii)    the duty of excise specified in the Second Schedule to the Central Excise Tariff Act, 1985(5 of 1986);
    (iii)    the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Textile and Textile Articles) Act, 1978 (40 of 1978);
    (iv)    the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957(58 of 1957);
    (v)    the National Calamity Contingent Duty leviable under section 136 of the Finance Act, 2001(14 of 2001);
    (vi)    the additional duty leviable under sub-section (1) of section 3 of the Customs Tariff Act, 1975 (51 of 1975);
    (vii)    the additional duty leviable under sub-section (5) of section 3 of the Customs
    Tariff Act, 1975 (51 of 1975); and
    in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the appointed day.
    140.3.1  Introduction
    This transition provision sets out the conditions and procedure for availing input credit in respect of stock held on appointed day by certain registered taxable persons under the GST Law. Inputs which are held in stock and inputs contained in semi-finished / finished goods held in stock which were for manufacture of exempted goods under the earlier law have also been dealt with.
    Registration under the GST law is mandatory to claim such credits.

    140.3.2 Analysis
    The following persons shall be entitled to take credit of eligible duties and taxes on inputs held in stock and inputs contained in semi–finished or finished goods held in stock on the date on which this provision is made effective:
    •    not liable to be registered under the earlier law, or
    •    was engaged in the manufacture of exempted goods or provision of exempted services,
    or
    •    was providing works contract service and was availing the benefit of notification No. 26/2012-Service Tax, dated 20.06.2012, or
    •    a first stage dealer or a second stage dealer or a registered importer or a depot of a manufacturer
    The credit shall be allowed to the aforesaid taxable persons subject to the following conditions:
    •    Such inputs and/or goods are used or intended to be used for making taxable supplies under CGST Act.
    •    He is eligible for input tax credit on such inputs under CGST Act.
    •    He is in possession of invoice and/or other prescribed documents evidencing payment of duty under the earlier law in respect of such inputs, which
    •    were issued not earlier than twelve months immediately preceding the date on which these provisions come into effect.
    •    That the supplier of services is not eligible for any abatement under the CGST Act.
    •    In terms of Sub Rule 2(b) of the Transition Provision Rules the application in Form GST TRAN -01 shall specify separately the details of stock held on the appointed day upto 6 tax periods indicating the details of supplies effected during each tax period.
    Availability of Credit to Trader who is not in possession of invoice evidencing payment of Central Excise Duty –Refer Rule 3 of the Transition Provision Rules
    •    As per proviso to sub section(1), credit may be allowed to a trader even if he is not in a possession of such invoice/document disclosing payment of duty/tax .
    •    However, in such cases the person will have to follow the conditions specified below:-
    •    Credit shall be allowed at the rate of 40%, of the central tax applicable on supply of such goods after the appointed date and shall be credited after the central tax payable on such supply has been paid. This situation arises when invoice is raised under the current tax regime & supply happens in a GST regime.
    •    Such goods were not wholly exempt from duty of excise specified in the First Schedule to the Central Excise Tariff Act, 1985 or were not nil rated.
    •    The registered person is in possession of documents relating to procurement of goods.
    •    The stock of goods on which the credit is availed must be stored in a way that it can be easily identified.
    •    The scheme shall be available for six tax periods from the appointed date
    •    Registered person availing this scheme must furnish the details of stock held by him and submit a statement in FORM GST TRAN— at the end of each of the six tax periods during which the scheme is in operation indicating the details of supplies of such goods effected during the tax period.
    •    The amount of credit allowed shall be credited to the electronic credit ledger.
    •    Eligible Duties in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the day on which the CGST Act comes into force shall include the laws cited in the Section supra
    •    Explanation
    The expressions “Central Value Added Tax (CENVAT) credit” “first stage dealer”, “second stage dealer”, or “manufacture” shall have the same meaning assigned to them in the Central Excise Act, 1944 or the rules made there under.
    Particulars     CGST
    Credit to be carried forward      CENVAT credit
    Relevant law      CENVAT Credit Rules, 2004
    Specified duties which would be allowed as transitional credit           Central Excise paid on ‘inputs’ specified in schedules I and II of CETA, 1985
         Countervailing duty paid on ‘inputs’ under Customs Tariff Act
         Special Additional Duty paid on ‘inputs’
         National Calamity Contingent Duty paid on ‘inputs’
         AED paid under AED (Textile &Textile Articles) Act,
    1978 on ‘inputs’
         AED     paid     under     AED     (Goods     of     Special
    Importance) Act, 1957 on ‘inputs’
    It must be clearly understood that CENVAT Credit can only be availed as CGST Credit in the Electronic Credit Ledger.
    Credit of eligible duties and taxes on input held in stock
    140.3.3
    Person eligible for input tax credit
    •    Person not liable to be registered under the earlier law
    •    Person engaged in manufacture/ sale of exempted goods, provision of exempted
    services
    •    Person providing works contract service and
    availing abatement under notification no. 26/2012
    •    First/     Second
    stage dealer,
    •    importer or
    •    a     depot     of     a         •    Inputs held in stock and inputs contained in semi-finished goods or finished goods held in stock as
    on appointed day

    •    Above benefit not available for input
    services

    •    Such credit can be taken in the electronic credit ledger         •    Goods must be used for taxable supply

    •    Eligible     to     take     the
    credit under GST law

    •    Such person should be in possession of invoice or other prescribed
    document

    •    Invoice or other document should be within 12 months from
    the appointed day

    •    Excess claims will be recovered as arrears of tax under GST law

    Related provisions
    Section     Description     Remarks
    Section     2(46) CGST Law     Definition     of
    ‘Electronic     Credit
    Ledger’     Input tax credit will be taken in this document.
    Section     2(108) CGST Law     Definition of Taxable supply     Only inputs intended to be used for taxable supplies are allowed as credit.
    Section 16 to 21
    CGST Law     Manner of taking input tax credit     This is for determining the admissibility of Input tax credit under the GST law
    Section     79
    CGST Law     Recovery of tax     For recovery of arrears of tax under GST for demand arising from proceedings under earlier law
    Rule     9(1)     Documents     and     Contains the list of documents on the basis of
    CENVAT Credit
    Rules 2004     Accounts     which CENVAT Credit can be availed
    Rule     2(d)
    CENVAT Credit
    Rules 2004      Definition of exempted goods     One of the possible pre-conditions in respect of category of person is engaged in
    manufacture/sale of exempted goods
    Proviso to Rule
    4(7) CENVAT Credit Rules
    2004     Time limit for admissibility of
    CENVAT Credit     Similar time limit prescribed as one of the conditions for availment of credit under GST law
    Rule 9 Central Excise Rules
    2002     Registration     under
    Central Excise     One of the possible preconditions in respect of category of persons is non registration in earlier law.
    Section 69(1) and Rule 4 Finance Act
    1994 & Service
    Tax Rules     Registration     under
    Service Tax     One of the possible preconditions in respect of category of persons is non registration in earlier law.
    Statutory Provision
    140(4)  Credit of eligible duties and taxes in respect of inputs held in stock allowed in certain situations
    (1)

    A registered person, who was engaged in the manufacture of taxable as well as exempted goods under the Central Excise Act, 1944 or provision of taxable as well as exempted services under Chapter V of Finance Act, 1994, but which are liable to tax under this Act shall be entitled to take, in his electronic credit ledger,
    (a)    the amount of Cenvat credit carried forward in a return furnished under the existing law by him in accordance with the provisions of sub-section (1); and
    (b)    the amount of Cenvat credit of eligible duties in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the appointed day, relating to such exempted goods or services, in accordance with the provisions of sub-section (3).
    Explanation.— For the purpose of this sub section, the expression “eligible duties” means-
    (i)    the duty of excise specified in the First Schedule to the Central Excise Tariff Act, 1985(5 of 1986);
    (ii)    the duty of excise specified in the Second Schedule to the Central Excise Tariff Act, 1985(5 of 1986);
    (iii)    the additional duty of excise leviable under section 3 of t(Textile and Textile Articles)
    (iv)    the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957(58 of 1957);
    (v)    the National Calamity Contingent Duty leviable under section 136 of the Finance Act, 2001(14 of 2001);
    (vi)    the additional duty leviable under sub-section (1) of section 3 of the Customs Tariff Act, 1975 (51 of 1975);
    (vii)    the additional duty leviable under sub-section (5) of section 3 of the Customs
    Tariff Act, 1975 (51 of 1975); and
    in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the appointed day.
    140.4.1 Introduction
    This transition provision sets out the provisions for availing input credit by a taxable person who was engaged in the manufacture of taxable as well as exempted goods under the Central Excise Act, 1944 or engaged in provision of taxable as well as exempted services under Chapter V of Finance Act, 1994.
    140.4.2 Analysis
    This provision is applicable only for inputs (not capital goods) held in stock or in respect of inputs contained in semi-finished goods or finished goods held in stock on the appointed day on ‘ELIGIBLE DUTIES and the amount of cenvat credit carried forward in a return furnished under the existing law by him.
    The definition of ‘Eligible Duties ’ as stated in explanation 1 to Section 143(10) cited supra is applicable here.
    The claim of transitional credit under this Section is subject to the following conditions:
    (i)    The person must be a registered person under the GST Laws.
    (ii)    The taxable person must have been engaged in the manufacture of taxable as well as exempted goods under the Central Excise Act, 1944 or provision of taxable as well as exempted services under Chapter V of Finance Act, 1994.
    (iii)    In terms of Sub Rule 2(b) of the Transition Provision Rules the application in Form GST TRANS -01 shall specify separately the details of stock held on the appointed day upto 6 tax periods indicating the details of supplies effected during each tax period.
    The details of credit availment is as follows:
    Particulars     CGST
    Credit to be carried forward      Amount of CENVAT credit carried forward in a return furnished under earlier law in terms of section 140(1)
    Particulars     CGST
    Amount of Cenvat credit of eligible duties in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the appointed day, relating to exempted goods or services, in terms of section 140(3). Reference may be in Section 140(3) for better understanding.
    Relevant law      CENVAT Credit Rules, 2004
    Form in which the credit would be available under the
    GST law      –    FORM GST TRAN-1 (To be submitted electronically within 60 days of the appointed day)
    –    Would be available as a balance in the electronic credit ledger of the tax payer
    140.4.3 Related provisions
    Section of CGST     Description
    Section 2(46)     Definition of ‘Electronic Credit Ledger’
    Section 16 to 21     Manner of taking input tax credit
    Section 79     Recovery of tax
    Statutory Provision
    140(5). Credit of eligible duties and taxes in respect of inputs or input services during transit
    (1)

    A registered person shall be entitled to take, in his electronic credit ledger, credit of eligible duties and taxes in respect of inputs or input services received on or after the appointed day but the duty or tax in respect of which has been paid by the supplier under the existing law, subject to the condition that the invoice or any other duty or taxpaying document of the same was recorded in the books of accounts of such person within a period of thirty days from the appointed day:
    PROVIDED that the period of thirty 30 days may, on sufficient cause being shown, be extended by the commissioner for a further period not exceeding thirty days.
    PROVIDED FURTHER that said registered person shall furnish a statement, in such manner as may be prescribed, in respect of credit that has been taken under this subsection
    140.5.1 Introduction
    This transition provision sets out the conditions and procedure for availing input credit in case of transactions that are spread over the transition period.

    140.5.2  Analysis
    (i) In any given business scenario it is possible that invoices are raised in the current tax regime and applicable taxes are also remitted under the existing laws. However, inputs or input services in respect of such transactions are received in a GST regime. This provision allows the difficulty in clearing credits in such instances. In order to avail such credits in the Electronic Credit Ledger the following conditions need to be satisfied:
    (a)    Invoices/duty paid documents must be recorded in the books within 30 days for the appointed date which may be extended by the commissioner for another 30 days on showing sufficient cause.
    (b)    The recipient of inputs or input services must furnish a statement as follows:
    In terms of Rule 2(c) of Transition provisions the said taxable person shall furnish the following details:
    (i)    A statement indicating the name & address of the supplier together with invoice details.
    (ii)    Description, quantity and value of goods or services.
    (iii)    The amount of taxes, duties, VAT, Entry tax charged by the supplier.
    (iv)    The date at which receipt of goods or services are entered in the books of the recipient. Explanation
    For the purpose of this sub section, the expression “eligible duties and taxes” means
    (1)    the duty of excise specified in the First Schedule to the Central Excise Tariff Act, 1985(5 of 1986);
    (2)    the duty of excise specified in the Second Schedule to the Central Excise Tariff Act, 1985(5 of 1986);
    (3)    the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Textile and Textile Articles) Act, 1978 (40 of 1978);
    (4)    the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957(58 of 1957);
    (5)    the National Calamity Contingent Duty leviable under section 136 of the Finance Act, 2001(14 of 2001);
    (6)    the additional duty leviable under sub-section (1) of section 3 of the Customs Tariff Act, 1975 (51 of 1975);
    (7)    the additional duty leviable under sub-section (5) of section 3 of the Customs Tariff Act, 1975 (51 of 1975);
    (8)    the service tax leviable under section 66B of the Finance Act, 1994
    140.5.3 Related provisions
    Section of CGST     Description
    Section 2( 46)     Definition of ‘Electronic Credit Ledger’
    Section 16 to 21     Manner of taking input tax credit
    Section 79     Recovery of tax
    Statutory Provision
    140(6). Credit of eligible duties and taxes on inputs held in stock to be allowed to a taxable person switching over from composition scheme
    (1)

    A registered person, who was either paying tax at a fixed rate or paying a fixed amount in lieu of the tax payable under the existing law, shall be entitled to take, in his electronic credit ledger, credit of eligible duties in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the appointed day subject to the following conditions, namely:
    (i)    such inputs or goods are used or intended to be used for making taxable supplies under this Act;
    (ii)    the said registered person is not paying tax under section 10;
    (iii)    the said registered person is eligible for input tax credit on such inputs under this Act;
    (iv)    the said registered person is in possession of invoice or other prescribed documents evidencing payment of duty under the existing law in respect of inputs; and
    (v)    such invoices or other prescribed documents were issued not earlier than twelve months immediately preceding the appointed day.
    140.6.1 Introduction
    This transition provision sets out the conditions and procedure for availing input credit by a registered person who is switching over from composition scheme (paying tax at fixed rate or fixed amount) under the existing laws to a regular scheme under the GST law.
    140.6.2 Analysis
    This provision is applicable only for inputs (not capital goods) held in stock or in respect of inputs contained in semi-finished goods or finished goods held in stock on the appointed day on ‘ELIGIBLE DUTIES’ The claim of transitional credit under this Section is subject to the following conditions:
    (i)    The person must be a registered person under the existing law as well as GST Laws.
    (ii)    He should have opted for payment of tax at a fixed rate or fixed amount in lieu of tax payable under the existing law. Eg. Compounded Levy Scheme under central excise in case of aluminium/steel pattas/pattis, special service tax rates in case of insurers carrying on life insurance business, persons providing services in relation to purchase/ sale of foreign currency including money changers
    (iii)    Specified duties paid on ‘inputs’ would be allowed as input tax credit, in his Electronic Credit Ledger.
    (iv)    The person should opt for payment of tax under the regular scheme under the GST law (cannot be a composition taxpayer u/s 10 of CGST Law).
    (v)    The relevant inputs should be held in stock on the date of introduction of GST.
    (vi)    Inputs may take any of the following forms –
    (i)    inputs as such (in the same form as it was procured / received – may be raw materials, consumables, packing materials, traded goods etc.),
    (ii)    may be contained in WIP or semi- finished goods or (iii)     may be contained in the finished goods.
    (vii)    Such inputs must be used or intended to be used for making taxable supplies under the GST Laws.
    (viii)    Such goods should qualify as eligible inputs under the GST law.
    (ix)    The registered person should be in possession of the invoice and such other documents (as may be prescribed) that shall satisfy the following conditions:
    (a)    The invoice / other document should evidence the payment of duty / tax on such goods.
    (b)    The invoice should not be more than 12 months prior to the date of introduction of GST.
    (x)    In terms of Sub Rule 2(b) of the Transition Provision Rules the application in FORM TRAN-1 shall specify separately the details of stock held on the appointed day upto 6 tax periods indicating the details of supplies effected during each tax period. 140.6.3 Related provisions
    Section of CGST     Description
    Section 2( 46)     Definition of ‘Electronic Credit Ledger’
    Section 10     Composition Dealer
    Section 16 to 21     Manner of taking input tax credits
    Rule 2(b)     Transition Provision Rules under GST Laws

    Statutory provisions
    140(7). Credit distribution of service tax by Input Service Distributor.
    Notwithstanding anything to the contrary contained in this Act, the input tax credit on account of any services received prior to the appointed day by an Input Service Distributor shall be eligible for distribution as credit under this Act even if the invoices relating to such services are received on or after the appointed day.
    140.7.1  Introduction
    (i)    This provision has an overriding effect over all other provisions under the GST law.
    (ii)    This provision is applicable when:
    (a)    The services are received by the Input Service Distributor before the date of applicability of GST and
    (b)    Tax on such services have not yet been distributed by the Input Service Distributor on the date of applicability of GST.
    (c)    Invoices relating to such services are received on or after appointed date.
    (iii)    Such services will be eligible for distribution as credit under the GST law.
    (iv)    Such provision will be applicable irrespective of the date of receipt of invoice by the Input Service Distributor.
    140.7.2 Analysis
    Input Service Distributor: This term has been defined under Section 2(61) of the CGST Law to mean “an office of the supplier of goods or services or both which receives tax invoices issued under section 31 towards the receipt of input services and issues a prescribed document for the purposes of distributing the credit of central tax, State tax, integrated tax or Union territory tax paid on the said services to a supplier of taxable goods or services or both having the same Permanent Account Number as that of the said office.”
    Explanation.- For the purpose of distributing the credit of CGST (SGST in State Acts) and / or IGST or UTGST, Input Service Distributor shall be deemed to be a supplier of services.
    Services: This term has been defined under Section 2(102) of the CGST law to mean “anything other than goods, money and securities but includes activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged.”
    Date of receipt of invoice is immaterial: In respect of the services received by the Input Service Distributor before the date of applicability of GST, the invoice can be received by the Input service distributor:
    (a)    either before the date of applicability of GST; or
    (b)    on the the date of applicability of GST
    (c )     after the date of applicability of GST
    This section seeks to cover all the cases.
    Date of receipt of services crucial: For the purposes of this section, it is important that the underlying services must have been received prior to the appointed date.
    Distribution of credit under GST Law: If any input service distributor:
         receives services before the date of applicability of GST; and
     such services are yet to be distributed on the date of applicability of GST, for want of invoice
         then irrespective of the date of the receipt of invoices by the Input Service Distributor       the distribution of credit will be as per the GST law.
    Manner of distribution of credit by Input Service Distributor: Section 20 of the CGST law provides the manner in which the credit will be distributed. Following are the key points for consideration:
         If the invoice is received by the Input Service Distributor before the date of applicability of GST, he can distribute the CENVAT Credit under the old law and carry forward this credit as CGST on the date of applicability of GST under section 140(1) of the CGST law. If he distributes the credit on or after the applicability of GST, he can take it as CGST or IGST depending on the nature of supply being intra State or inter-state respectively.
         If the invoice is received by the Input Service Distributor on or after the date of applicability of GST, he can distribute the credit in the form of CGST or IGST depending on the nature of supply being intra State or inter-state .
         If the Input Service Distributor and the recipient of credit are located in two different States, then the input tax credit of both CGST and IGST will be distributed as IGST.
         If the Input Service Distributor and the recipient of credit are located in the same State, then the input tax credit of both CGST and IGST will be distributed as CGST.
    140.7.3 Comparative Review
    This is a transitional provision for converging the provisions of the earlier law with the GST law. As this provision is temporary and only for the transition period, there are no comparative provisions in the earlier law which can be relatable to this section.
    140.7.4 Related provisions
    Section     Description     Remarks
    2(61)     Definition     of     Input
    Service Distributor     To know the meaning of Input Service Distributor under the GST law
    2(102)     Definition of Service     It is imperative to know the meaning of service to determine as to what will be distributed under the GST law
    20     Manner of distribution of Input Tax Credit by ISD     Section 20 acts as an extension of section 140(7). The eligibility of the credit is discussed as per Section 140(7) whereas the manner of distribution is under section 20.
    Analysis of this transitional provision can be presented in the following flowchart:

    Statutory provisions
    140(8).  Provision for transfer of unutilized Cenvat Credit by taxable person having centralized registration under the earlier law
    Where a registered person having centralized registration under the existing law has obtained a registration under this Act, such person shall be allowed to take, in his electronic credit ledger, credit of the amount of cenvat credit carried forward in a return, furnished under the existing law by him, in respect of the period ending with the day immediately preceding the appointed day in such manner as may be prescribed:
    Provided that if the registered person furnishes his return for the period ending with the day immediately preceding the appointed day within three months of the appointed day, such credit shall be allowed subject to the condition that the said return is either an original return or a revised return where the credit has been reduced from that claimed earlier:
    Provided further that the registered person shall not be allowed to take credit unless the said amount is admissible as input tax credit under this Act:
    Provision also that such credit may be transferred to any of the registered persons having the same Permanent Account Number for which the centralized registration was obtained under the existing law.
    140.8.1 Analysis
    Under the current law where centralized registration is obtained and credit is lying in balance, it is Provided that:
    •    Credit balance may be taken and carried forward in GST
    •    Such credit transfer will require filing of a return within 3 months
    •    Credit is required to be eligible under the GST law
    •    Credit is permitted to be transferred to other locations of the person which qualify as taxable persons in GST having the same PAN.
    It is interesting that the provision does not lay down any criteria for such transfer of credit between various locations of the person and this is a welcome measure as part of the transition steps.
    Transfer of unutilised Cenvat credit by a person having centralised registration

    Note:
    1.    Only those credits which are admissible under GST laws will be allowed
    2.    Credit may be transferred to any registered taxable person having the same PAN for which centralised registration was obtained under existing law
    3.    This section does not prevent upward revision of credits. However, in respect of downward revision of credits such lower credits alone shall be permitted.
    In terms of Sub Rule 2(b) of the Transition Provision Rules the application in FORM TRAN-1 shall specify separately the details of stock held on the appointed day upto 6 tax periods indicating the details of supplies effected during each tax period.
    Statutory Provisions
    140(9) Reclaiming CENVAT credit reversed due to non-payment of consideration
    Where any CENVAT credit availed for the input services Provided under the existing law has been reversed due to non-payment of the consideration within a period of three months, such credit can be reclaimed subject to the condition that the registered person has made the payment of the consideration for that supply of services within a period of THREE months from the appointed day.
    140.9.1 Introduction
    This transition provision has been introduced with a view to enable the availment of credit in cases where CENVAT credit has been reversed in terms of second proviso to rule 4(7) of the CENVAT Credit Rules, 2004. In terms of the said proviso, CENVAT credit is reversed in case of input services, the payment of consideration for which is not made within a period of 3 months from the date of invoice/challan etc. Subsequently, such credit is allowed as and when the payment is made.
    140.9.2 Analysis
    This Section would apply in the following circumstances:
    (i)    The CENVAT credit had been reversed by the manufacturer or the service provider in terms of second proviso to Rule 4(7) of the CENVAT Credit Rules, 2004.
    (ii)    Such payment is then made after the appointed day.
    (iii)    The payment is made within 3 months from the appointed day.
    It provides that where the above conditions are fulfilled, the credit shall be allowed as CGST credit.
    For the period ending with the day immediately preceding the appointed day, if the registered person files an original/revised return within 3 months of the appointed day.

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