GST For Traders – Carry Forward of Input Tax Credit & Other Transitional Provisions

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GST For Traders – Carry Forward of Input Tax Credit & Other Transitional Provisions

As the Goods and Services Tax (GST) is to be implemented from 1st April 2017, it is very important for all of us to understand the fundamentals of GST. For smooth transition of GST in your business, you must be aware of the transitional provisions related to GST. In this article, we will explain the GST transitional issues related to traders. If you want to know the transitional provisions related to Services provider, you can read: GST Transition Provisions for Service Providers

GST Transitional Provisions and Carry Forward

GST Registration/Migration For Registered VAT Taxpayers

GST migration/registration process has been started for existing taxpayers registered under State VAT departments. All the VAT dealers are required to enroll on GST Common portal (gst.gov.in). You can register on GST Common Portal through provisional ID and Password, which will be provided by your State VAT department. If you have not received your provisional ID and password then you contact to your VAT department. To know the detailed process of GST Migration, you can check this post – GST Migration Process & Schedule For VAT Dealers

Input Tax Credit

Admissibility of Input Tax Credit to Trader/Dealer

Input Tax Credit Under VAT Law

Input Tax Credit Under GST Law

Input VAT credit is allowed but Cenvat Credit of Service tax (levied on Services) and Excise (levied on manufacture of goods) is not allowedEntitled to take credit of input tax charged on any supply of goods or services to him which are used or intended to be used in the course or furtherance of his business

1. Registered VAT Dealers

Carry Forward of Closing Balance of Input VAT Credit to GST

  • The closing balance of Input VAT Credit available on the last day, prior to the date on GST is implemented, can be carried forward to GST
  • Carried forward of VAT Input credit will be treated as SGST Input Credit under GST regime.
  • The closing balance of credit should be shown in the last return of VAT
  • The carry forward is allowed only if such types of credit is also admissible under GST Act

 

Transfer of Unavailed VAT Credit of Capital Goods (not carried forward/shown in last VAT return) To GST

  • The assessee can utilize (transfer) admissible Input VAT credit of Capital goods to the extent unavailed.
  • The taxpayer is entitled to credit only when Input VAT Credit on such capital goods were admissible under the earlier law (VAT Laws) and is also admissible in GST Law.
  • Such input credit will be treated as SGST Input Credit under GST regime.

First Stage Dealer/Second Stage Dealer/Importer Registered Under Excise: Transfer of Cenvat Credit (Excise) in respect of Inputs held in stock

  • Such inputs (closing stock) are used or intended to be used for making taxable supplies under GST Law
  • The taxable person passes on the benefit of such Cenvat credit by way of reduced prices to the recipient
  • The taxable person is also eligible for input tax credit on such types of inputs under GST Act
  • The Cenvat credit on such inputs were admissible under Central Excise Act
  • Invoices in respect such inputs (evidencing payment of tax) is available.
  • Such invoice was issued within 12 months from the date of implementation of GST

2. Traders not registered under VAT or engaged in sale of exempted goods but which are liable under GST

Input VAT Credit in respect Closing Stock

VAT Credit in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on last day, can be utilized/transferred to GST, if:

  • Such inputs and / or goods (closing stock) are used or intended to be used for making taxable supplies under GST Act
  • The taxable person passes on the benefit of such credit by way of reduced prices to the recipient
  • The  taxable person is eligible for input tax credit on such inputs under GST Act
  • The credit on such inputs were admissible under VAT laws
  • Invoice in respect such inputs (evidencing payment of tax) is available.
  • Such invoice was issued within 12 months from the date of implementation of GST
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By | 2016-12-05T11:19:21+00:00 November 30th, 2016|GST Implementation and Transition, Input Credit|2 Comments

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