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Transitional credit of WIP, Goods and Services Tax - GST

Issue Id: - 117712
Dated: 18-12-2021
By:- Rajesh Kumar
Transitional credit of WIP

  • Contents

Audit of the builder was conducted, they made a para that they have transferred more itc then available in their stock as on 01.07.2017. On 01.07.2017 builder shown some inputs as WIP . So audit is being rejected the itc proportional to the input were WIP

is ITC of WIP was not available for trans1?

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Showing Replies 1 to 5 of 5 Records

1 Dated: 19-12-2021
By:- Rajagopalan Ranganathan


According to Section 140 (6) of the Central Goods and Services Act, 2017-

"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 11[goods held in stock on the appointed day, within such time and in such manner as may be prescribed, 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."

Therefore you are eligible to take credit of inputs and input services utilised in WIP. You may bring this provision to the notice of audit. However, I think the audit objection should be based on some other stronger grounds because I presume the Departmental Officers are aware of this provision.

2 Dated: 19-12-2021

How can the builder transfer more ITC than available in the stock as on 30.6.17/1.7.17 ? Inputs contained in WIP is part of stock. Pl. read the para again and understand what is the factual object raised by the Audit wing of the department post the query again.

3 Dated: 20-12-2021
By:- Shilpi Jain

Audit party is raising objection stating that building is immovable property and thereby transitional credit is not available which as per section 140 is available only w.r.t. goods.

However, this can be contested.

4 Dated: 28-1-2022
By:- CAHemanth Kumar

Yes for department when it comes to ITC they will say it as immovable property and ITC is not eligible.

When it comes to sale of same under constructed property they will say it as not completed, works contract service and u have to pay tax.

5 Dated: 30-1-2022
By:- Shilpi Jain

So, on the grounds mentioned by Hemanth, one can argue that in case transition credit is being denied, then the stand of taxing incomplete building under GST and ST is not correct. This can get them in a fix!


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