Credit Transfer Document (CTD)

[CASANJAY AITHAN]

GST Council has recently issued draft rule for issue of Credit Transfer Document (CTD) to be inserted in the CENVAT Credit Rules, 2004 for transfer of Cenvat credit paid on specified goods available with a trader as on appointed date.

• A manufacturer who was registered under Central Excise Act, 1944 may issue a Credit Transfer Document to evidence payment of excise duty paid on goods manufactured and cleared by him before the date on which CGST Act, 2017 comes into force, under the cover of an invoice issued to a person who was not registered under the Central Excise Act, 1944 but is registered under the provisions of CGST Act, 2017.

Accordingly, a manufacturer may issue a document called as CTD for transfer of credit of excise duty to the person who is not registered person under Central Excise Act, 1944 but registered under GST Act, 2017.

• Transfer of credit of Excise Duty by issuing CTD is subject to the following conditions and procedures to be followed:

• The value of such goods is higher than ₹ 25,000 per piece, bears the brand name of the manufacturer or the principal manufacturer and is identifiable as a distinct number such as chassis / engine no. of a car.

• Verifiable records of clearance and duty payment relatable to each piece of such goods is maintained by the manufacturer and is made available for verification on demand by a Central Excise officer.

• The Credit Transfer Document shall be serially numbered and shall contain the Central Excise registration number, address of the concerned Central Excise Division, name, address and GSTIN number of the person to whom it is issued, description, classification, invoice number with date of removal, mode of transport and vehicle registration number, rate of duty, quantity, value and duty of excise specified in the First Schedule to the Central Excise Tariff Act, 1985 paid thereon.

The manufacturer is satisfied that the dealer to whom Credit Transfer Document is issued is in possession of such manufactured goods in the form in which it was cleared by him.

• Credit Transfer Document shall be issued within 30 days of the appointed date on which CGST Act, 2017 comes into force and copy of the corresponding invoices shall be enclosed with the Credit Transfer Document.

• Copies of all invoices relating to buying and selling from manufacturer to the dealer, through intermediate dealers, is maintained by the dealer availing credit using CTDs.

Accordingly, dealer has to maintain all the invoices relating to buying and selling from manufacturer through intermediate dealers, i.e., Invoice issued by the manufacture specifying the item details Invoices issued by the main dealer specifying the item details

• CTD shall not be issued in favour of a dealer to whom invoice was issued for the same goods before the appointed date.

CTD to be issued only to the third person (or second buyer) instead of the second party (or first party). This can be understood by given below example: BMW Manufacturing Private Limited, i.e., manufacturer, has sold a BMW Model to its dealer, i.e., ABC Limited, by issuing a tax invoice wherein Excise Duty as well as VAT has been charged in the bill. After that, ABC dealer has sold such car to the other dealer, i.e., XYZ Limited by issuing a tax invoice wherein VAT has been charged. In this case, there may be two scenarios, are as follows: Car is lying in the stock of ABC (second party) as on appointed date: Manufacturer cannot issue CTD to ABC (second party) as manufacturer has already been issued a tax invoice specifying the excise duty. ABC Limited can claim the credit of Excise Duty on the basis of such invoice. Therefore, there is no need to issue a CTD to second party, i.e., ABC Limited. Car is lying in the stock of XYZ (third party) as on appointed date Manufacturer may issue CTD to XYZ limited (third party) as invoice is available with the XYZ Limited is only for VAT purposes. It cannot claim the credit of the excise duty. Therefore, on the basis of CTD, it can claim the credit of Excise Duty and that to the extent of 100%.

• A dealer availing credit using Credit Transfer Document on manufactured goods shall not be eligible to avail credit under provision of rule 1(4) of Transition Rules made under CGST Act, 2017 on identical goods manufactured by the same manufacturer available in the stock of the dealer.                           

Rule 1(4) of Transition Rules made under CGST Act, 2017 provides availment of credit on notional basis @60%( goods rate is more than 9%) / 40% of CGST paid where a registered person is not having tax paying document of Excise Duty. Once a person has availed the credit of excise duty by using CTD then such person cannot claim the credit on notional basis again.

• The dealer availing credit on the basis of Credit Transfer Document shall , at the time of making supply of such goods, mention the corresponding Credit Transfer Document number in the invoice issued by him under section 31 of the CGST Act, 2017.

• Where a manufacturer issues a Credit Transfer Document such that credit of central tax is availed twice on the same goods under the provisions of CGST Act, 2017 and the rules made thereunder, he shall be jointly and severally responsible for excess credit availed by the dealer and provisions for recovery of credit, interest and penalty under the CENVAT Credit Rules, 2004 shall apply mutatis-mutandis on such manufacturer.

• A manufacturer issuing a Credit Transfer Document shall submit details thereof in table 1 of TRANS 3 on common portal within sixty days of the appointed date.

• A dealer availing credit on Credit Transfer Document shall submit details thereof in table 2 of TRANS 3 on common portal within sixty days of the appointed date.

• Manufacturer issuing CTD shall maintain record in the form TRANS 3A and such record shall be made available to the Central Excise officer for verification on demand.

• Dealers availing credit on CTDs shall maintain record in the form TRANS 3B and such record shall be made available to the Central Excise officer for verification on demand.

• It may be noted that Rule 9 of the CENVAT Credit Rules, 2004 shall be also amended to include Credit Transfer Document in the list of documents using which credit can be availed subject to the condition that such Credit Transfer Document is issued after the appointed date and within thirty days of the appointed date.

About the Author:

Author is practicing chartered accountant and can be reached at sanjay230291@gmail.com.