GST India Forum – Goods and Services Tax (GST) in India › Forums › Article › Did you file GST TRAN-1 correctly?
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- Avalara IndiaParticipantSeptember 22, 2017 at 12:13 PMPost count: 11Topics: 11
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A few days ago, India’s finance minister spoke to the media, announcing that the government collected Goods and Services Tax (GST) of more than Rs 92,000 crore during July, which was well beyond expectations. This was a stupendous achievement for the Indian GST regime, and that too in the very first month of the new taxation system.
In fact, the cheer may not end there, as a good part of indirect tax revenues for the central and state governments (roughly 25 percent) comes from petroleum products, and such products are still outside the ambit of GST. These will provide a healthy financial cushion to these governments if GST revenue should waver a bit.
While everything was set for a good harvest, government noticed that more than Rs 65,000 crore was claimed as Central GST (CGST) transitional credit by businesses across the country. This, of course, can impact the government’s kitty in the coming months, as such credit can be used for payment of taxes. Adding to these claims for transitional credit, refund claims by exporters and state VAT refunds will eat into government’s revenues once pending C forms are collected.
Considering the financial impact of these claims, the CBEC ordered an immediate review of all transitional credits above Rs 1 crore to ensure that if any wrong credits taken, with or without an intent, do not flow into the GST system and deplete revenue.
The first reality check of the GST process may be how the tax officer and the taxpayer will work out misunderstandings in the filing of returns when they come face to face. Understanding the GST council’s intention regarding claims for transitionary credit may help make this interaction smoother.
What is transitionary credit?
The previous indirect tax regime of central excise, service tax, VAT, CST, entry taxes, etc. allowed credits of certain taxes subject to conditions in the respective laws. While some laws, such as state VAT laws, generally allowed cash refunds of outstanding balances at the end of the year, central laws allowed taxpayers to carry forward such credits without any refunds. Refunds of credit were allowed only in cases of exports. Thus, there was a need to transfer accumulated credits into the GST system so that the transition would happen in a seamless manner.
The CGST Act made provisions for such transitions (Sections 139-142), and supplemented the provisions with rules outlining detailed procedures (Rules 117-121). Similar provisions were included in the State GST (SGST) laws as well. Three formats — viz. forms TRAN-1, TRAN-2, and TRAN-3 — were made available to taxpayers for claiming credit under different transition situations. Of these, TRAN-1 …..
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