Imput tax credit to registered person

[CA Akash Phophalia]

The provision contained in section 140(1) of CGST Act 2017 states about the admissibility of input tax credit to the registered person migrating to the GST regime. The section 140(1) is as under :-

“Section 140 (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.”

Persons covered here

This provision is applicable on the persons registered under the present tax regime under the indirect taxes to be subsumed as-

a) A person registered under Central Excise Act,1944 other than a person registered as first stage dealer or second stage dealer or as a registered importer or as a depot of a manufacturer under the said act.

(b) A person registered under Finance Act 1994 (Service tax).

(c) A person registered under respective Sales Tax Act.

(d) A person registered under any of the relevant act as applicable to it.

Thus the persons registered under the present indirect taxes which are going to be subsumed in the new GST regime and are eligible to avail of input tax credit under the present taxation regime shall be eligible to carry forward input tax credit under this provision.

However, if the person is registered under the present law and migrates to the GST regime and opts for composition scheme under section 10 of the CGST Act 2017, then he shall be ineligible to carry forward credit under GST regime.

Stipulations

In order to carry forward input tax credit by the registered eligible person following stipulations needs to be fulfilled-

a) The registered person has to file return for the period ending the day immediately preceding the appointed day under the existing law.

Illustration :- Bhim Ltd is registered under the present excise law. If the appointed date for implementation of GST law is 1^st July 2017, then Bhim Ltd has to file excise return for the period ending with 30^th June 2017 under the present Central excise Act 1944.

(b) The input tax credit should be admissible under the new GST regime.

Illustration :- Bhim Ltd is carrying on the non-taxable and taxable business after the appointed date, then it will not be eligible to take credit of that portion of input tax credit which is used for carrying on the non-taxable business after the appointed date.

(c) The registered person has to furnish all the returns required to be furnished under the existing law for the period of six months immediately preceding the appointed date.

Illustration :- If the appointed date is 1^st July 2017, then Bhim Ltd has to file all the return from the period January 2017 to June 2017. Then only it will be allowed to carry forward the admissible input tax credit as shown in the return.

(d) The credit should not pertain to goods manufactured and cleared under the exemption notification as notified by the government under the present taxation regime.

Illustration :- The goods which are chargeable to 1%/2% excise duty, if available as inputs, then input tax credit on such goods shall not be admissible to be carried forward under the GST regime.

(e) The registered person under the present law should not opt for composition scheme as per Section 10 of the CGST Act 2017 under the GST regime.

Amount of input tax credit to be carried forward

The input tax credit admissible to be carried forward is the amount of Input tax credit as shown in the return filed for the period ending on the date immediately preceding the appointed date.

Illustration :- Bhim Ltd has Cenvat credit balance of ₹ 10 lacs which it claims in the return filed for the month of June 2017, presuming 1^st July 2017 as the appointed date, then by filing of return for the month of June 2017, Pinto Ltd can carry forward the Cenvat credit balance of ₹ 10 lacs as CGST. Similarly by filing return for the period ending with June 2017, it can carry forward input tax credit of state vat as SGST.

Process to carry forward credit

The registered person has to carry out the following process:-

(a) Migrate as a taxable registered person (other than Composition dealer as per Section 10 of the CGST Act 2017) under the GST regime.

(b) Submit an application electronically in Form GST TRAN-1,specifying the eligible amount of tax or duty to the credit.

(d) If the person had transferred goods on “F” or on "C" form or other forms as specified in the relevant state law and CST Act, then in order to claim credit, the registered person has to submit the detail of the said forms as serial number and value of declarations in the said forms.

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CA Akash Phophalia

9799569294

ca.akashphophalia@gmail.com