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GST Council Extends Input Tax Credit Claim Period for Transition Stock to 90 Days

The GST Council has extended the period for claiming input tax credit (ITC) on transitional stock from 60 to 90 days, addressing concerns from traders and retailers. This decision, made effective from July 1st, also introduced provisions for deemed credit on subsequent sales. Businesses will receive 30 percent deemed credit if the IGST rate exceeds 18 percent, and 20 percent otherwise. This measure aims to facilitate a smoother transition into the new GST regime for businesses holding pre-GST inventory.

📖 2 min read read🏷️ Input Tax Credit

Extension of Input Tax Credit Claim Period for Transition Stock

Many traders and retailers across India expressed concerns regarding the process of claiming input tax credit (ITC) for existing stock once the Goods and Services Tax (GST) system was implemented on July 1st. In response to these concerns, the GST Council has extended the deadline for claiming this input credit. Initially, the draft rules stipulated a 60-day window, but this has now been increased to 90 days.

Furthermore, specific provisions have been introduced for 'deemed credit' when these goods are subsequently sold and Integrated Goods and Services Tax (IGST) is paid on the transaction. If the IGST rate for the transaction is above 18 percent, a deemed credit of 30 percent will be available. For all other scenarios, where the IGST rate is not above 18 percent, a deemed credit of 20 percent will be applicable. This decision aims to ease the transition process for businesses as reported in the Economic Times.

Further Reading

Frequently Asked Questions

What is Input Tax Credit (ITC) under GST?
Input Tax Credit (ITC) allows businesses to reduce the tax they pay on their output by the tax they have already paid on inputs. It prevents the cascading effect of taxes, ensuring tax is levied only on the value added at each stage of the supply chain.
Who is eligible to claim ITC?
Any registered person under GST can claim ITC on goods and services used or intended to be used in the course or furtherance of their business, provided they meet certain conditions specified in the GST law.
What is the significance of transition stock in GST?
Transition stock refers to goods held by businesses at the time of GST implementation, which were purchased under the previous tax regime. Allowing ITC on this stock ensures that businesses do not incur losses due to the shift in tax systems and helps maintain price continuity.
How does the GST Council make decisions?
The GST Council is a joint forum of the Centre and States. It makes recommendations to the Union and State Governments on issues related to GST, including rates, exemptions, thresholds, and administrative procedures. Decisions are typically made by a three-fourths majority of the weighted votes of the members present and voting.
What is 'deemed credit' in the context of GST?
Deemed credit refers to a notional input tax credit allowed under specific circumstances where actual input tax payment cannot be precisely determined or verified. In the context of transition stock, it provides a simplified way to grant partial relief for taxes paid on existing inventory.

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