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

15 thoughts on “GST For Traders – Carry Forward of Input Tax Credit & Other Transitional Provisions

  • Consider a situation in which there is a trading unit which is registered under VAT but not with excise authorities,but pays the full excise duty on the invoices drawn by its manufacturer suppliers.Whether the unit can claim the excise duty paid on his purchase invoices as input tax credit during transition to GST?

  • Mr Deals in Footwears with MRP Below Rs 500 which is exempt in DVAT but shall be taxable under GST.
    Mr has Rs 1 Cr Stock lying on the first date of GST implementation

    How Mr A will take credit on such stock.Please clarify

  • I am a textile dealer and te textile under the VAT in Assam is exempted under VAT but we have to entry tax on the said purchase. Will i be elegible for ITC IN GST and what will be the treatment for the said items under GST

  • If your state allows credit of entry tax paid at any stage, then you would be allowed credit of the entry tax.
    in case your state would not have allowed credit of the entry tax paid under earlier laws, then you would not have been eligible for credit of the tax paid under entry tax on the opening stock in GST.
    When we view transitional provisions, they maintain a balance between situation under the previous law and situation under GST. However, in any situation, transitional provisional does not put the taxpayer in a situation which is detrimental as compared to the present situation. The transitional provisions are drafted in such a manner to maintain status quo in terms of present situation while striking a balance with the provisions under GST.

  • I am a dealer/importer registered with excise. We pass on cenvat paid by us on as is basis to our buyers. Can we claim credit for CENVAT under GST? Or do we have to ask for refund of same? If we can claim credit, How do we claim credit for same, under which head of gst?

  • I am an importer and trader in steel. The steel in question in specialised and all do not sell even within a year. I have many stocks and excise lying for more than a year to 10 years. How do I take benefit of the input in transition for the more than one year olds. Matter is urgent

    • As of now the department is insisting on a Invocie ( bill of entry) which is max 365 days prior to 1st july 2017 as the cutoff date to claim the cenvat credit- we are also in a similar situation with special purpose vibrators in stock which are even 5 years old.

      Hope that the department comes up with a special provision- that if you have your documents BOE in order and can prove the existence of the item in your stock then the credit should be allowed. Till now they were allowing us to pass on the Cenvat even if it was old stock as long as properly accounted for – Now why this sudden change of stand??

  • WHAT INPUT WILL BE GIVEN FOR CLOSING STOCK ON 30.06.17 SAY RS.10.00 LAC IF I DO NOT HAVE INPUT CREDIT???PLS REPLY

  • We are traders of timber which is a non exciseable item. All our purchases are inter state (2% CST) purchase and sale is intra state (5% VAT). We do not get any input credit as such now. Now timber is categorised at 18% GST item (which is a huge increase in tax rates).
    1. Would any tax input be available at the time of sale of goods lying in closing stock as on 01/07/2017 ??
    2. Is the 60% input credit on CGST available only on exiseable items ??
    3. Will we get any credit for entry tax paid in 2016-2017 for payment of GST ??

  • under “Traders engaged in sale of exempted goods but which are liable under GST”,
    You have stated that “Invoice in respect such inputs (evidencing payment of tax) is available.”

    If the goods were exempt from tax (VAT etc) then how will be there any payment of tax ?

    You need to clarify that how will be GST paid on nil tax paid goods (i.e., goods exempted under earlier tax regime now taxable under GST), if the dealer opts for composition scheme under GST?

  • We have VAT Taxpaid (Ist Stage) stock. Now what is the status of Taxpaid Stock Under GST Act. Can we sale it as Taxfree Goods under GST Act.

  • SIR,
    WE ARE HAVING R & D TYPE JOB WORK BUSINESS OF ENGINEERING RELATED
    WE DEVELOPING ITEM FOR MACHINE WHICH WAS PURCHASE BY OUR CLIENT FORM USA OR ANY OTHER COUNTRY SO THAT DEVELOP SOME PART CONSUMABLE FORM US AFTER ALL TRIAL AND ERROR WE GET SUCCESS TO DEVELOP SUCH ITEM THEN WE SALE IS FOR 10 PEACE AND REMAINING AFTER FULLY SUCCESS OF 4 MONTH 6 MONTH OR 1 YEAR DEPENDING ON INDUSTRIES PRODUCTION NOW STOCK WHICH LYING WITH US OR WITH OUR JOB WORK COMPANY OR SOME TIME ROW MATERIAL ALSO PENDING WITH OTHER COMPANY WAITING FOR PERFORMANCE OF THAT PART ( ITEM)
    WE DO NOT WANT ANY CREDIT OF INPUT WT EVER BUT WE LIKE TO SALE IT AND WHATEVER TAX WE COLLECT FROM PARTY WHICH WE SUBMIT TO GOVT.
    SOME MATERIAL HAVE BEEN SO OLD MORE THEN TWO OR THREE YEARS EVEN SOME TIME WE DO NOT WHO HAS DEVLOP IT TWO THERE JOB WORK DONE TO GET PERFECT SOLUTION TO GET SUCCESS
    ONCE WE START OUR WORK ON ANY WE HAVE NO TIME TO DO PAPER WORK

  • SIR,
    Under The VAT Act Trader Adopt Lumsum Scheme And Now Trader Want Go Reguler Dealer Under GST Act.Question Is That Can Teader Is Eligible To Take SGST Credit Under GST Act Which is Paid Under VAT Act????

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