A significant concern for businesses registered under the Goods and Services Tax (GST) was ensuring they could retain tax benefits and input credits from the previous tax regime. These taxes might have been paid on inputs, raw materials, semi-finished goods, finished goods, or items sent to job workers. For many businesses, these credits were available as of June 30, 2017, and transferring them to the GST framework was crucial for their utilization. The Central Board of Indirect Taxes and Customs (CBIC) released specific transition rules and forms to enable businesses to move these old regime credits into GST. As a recent update, the GST portal re-opened the facility for filing or revising TRAN-1 and TRAN-2 forms from October 1, 2022, to November 30, 2022, following a directive from the Supreme Court. An advisory explaining the updated processes for claiming transitional Input Tax Credit (ITC) was also issued by the GST portal.

How to Claim Input Tax Credit on Old Stock?

Any business holding closing stock, regardless of its registration status before GST, is entitled to claim credit for tax paid under the pre-GST regime. This ITC claim is contingent upon meeting certain conditions. To facilitate a seamless transition for businesses and the carry-forward of their input tax credit, the CBEC introduced two transition forms: TRAN-1 and TRAN-2.

The table below outlines who can file these forms and the general timeline:

Note: Form TRAN-1 can be revised only once, with no further changes permitted after rectification. ^Following the Supreme Court's directive, the GST portal re-opened the facility to file or revise TRAN-1/TRAN-2 from October 1, 2022, to November 30, 2022.

Key Aspects of Transitioning to GST

The primary aspects of the transition to GST involve:

• Input Tax Credit from the old regime that businesses wish to claim in the new regime (to be reported in TRAN-1).
• Preventing disruption to material sent to job workers (to be reported in TRAN-1).
• Reporting agent-principal dealings and goods dispatch, including works contracts (to be reported in TRAN-1).
• Tax refunds and claims under the old regime (not reportable in TRAN-1 or TRAN-2).

Essential Considerations for GST Transition

Several points are crucial to remember when transitioning to GST:

• Transition forms must be filed separately for each GSTIN.
• Any credit intended to be carried forward from the old regime must also qualify as eligible credit under GST.
• Accumulated credits from the old regime can be transferred to GST, provided that returns for the past six months under the old regime (VAT/Excise/Service Tax) have been properly filed.
• Central taxes and duties, such as Excise and Service Tax, will be carried forward as Central GST (CGST).
• State taxes, such as VAT, will be carried forward as State GST (SGST).

Information Required in Form TRAN-1

Form TRAN-1 necessitates the following information:

• GSTIN: Your GSTIN number.
• Legal Name of Registered Person: Your full legal name.
• Trade Name: If applicable, your trade name.
• Confirmation of Past 6 Months' Returns: A 'Yes/No' answer confirming submission of all required returns under the existing law for the past six months. The closing balance of CENVAT/VAT credit can only be transferred to your GST electronic ledger if these returns were filed.

Tax Credit Carried Forward Under Existing Laws

Here, details of all CENVAT credit you intend to transfer to GST must be provided.

Tax Credit for CENVAT (Central Excise and Service Tax)

This section applies to registered persons (excluding those under the composition scheme) who were registered and filed returns under the old regime. It also covers input credit for taxable supplies where the registered person provided/manufactured both taxable and exempted services/goods under the old regime. Such individuals can claim the excise and service tax input credit balance reflected in their old returns.

This table is relevant if you were registered as a manufacturer or service provider and had a closing balance of CENVAT credit in your return for the period ending June 30, 2017. The following details are required:

• Serial No.
• Registration no. under existing law (Central Excise and Service Tax): Your 15-digit central excise and service tax registration number.
• Tax period to which the last return filed under the existing law pertains: The period of your last filed return (e.g., monthly ER-1 and quarterly ER-3 for excise manufacturers for the past six months).
• Date of filing of the return specified: The filing dates for the returns mentioned above.
• Balance CENVAT carried forward in the said last return: The amount of CENVAT credit carried forward for each return.
• CENVAT credit admissible as ITC of central tax in accordance with transitional provisions: The eligible credit amount for carry-forward from old return forms.

Tax Credit for C Forms, F Forms, and H/I Forms

This information is required for the period from April 1, 2015, to June 30, 2017.

• ‘C Forms’: Issued by a registered purchasing dealer to a registered seller for interstate sales, allowing a 2% Central Sales Tax (CST) rate.
• ‘F Forms’: Used for tax-free branch transfers. Issued by the receiving branch/consignment agent to the head office/principal sending goods.
• ‘H/I Forms’: Used for local purchases for exports without tax payment. Issued by the exporter/buyer to exempt the seller from charging/paying CST.

For each form, provide: TIN of Issuer, Name of Issuer, Serial Number of Form, Amount, Applicable VAT Rate.

State/UT Tax Credit for Pending C, F, H/I Forms

If registered under State VAT with pending C-Form/F Form/H or I Form, you must pay the differential tax due to ineligibility for the concessional CST rate. This differential tax is deducted from the input tax credit balance in your last filed return, and the remaining credit is carried forward under GST. The details required are:

• Column 1: Your State VAT registration number (TIN).
• Column 2: Closing balance of input tax credit in the return filed for the period ending June 30, 2017.
• Columns 3, 5, & 8: Turnover for which C-Form, F Form, & H/I Form, respectively, are pending.
• Columns 4, 6, & 9: Differential tax on the respective turnover (e.g., if concessional CST is 2% and VAT is 14.5%, differential tax is 12.5%). This amount is deducted from Column 2.
• Column 7: ITC reversed by you related to Columns 3 & 5. This amount is eligible to be carried forward as ITC under GST and added to Column 2.
• Column 10: Calculated as Column 2 – (4+6-7+9). This represents the balance ITC of VAT/Entry Tax transferred to GST.

Details of Capital Goods for Unavailed Credit (Section 140(2))

This section requires details of any unavailed input credit related to capital goods. Credit for taxes paid on capital goods is often spread across multiple financial years. If you could not fully claim input credit by June 30, 2017, the remaining portion can be claimed here. Section 140(2) of the CGST Act specifically addresses carrying forward CENVAT credit for capital goods that was not carried forward in an old regime return. If CENVAT credit was carried forward in an earlier return, it would be included in section 5a.

Central Tax Portion of Unavailed Input Tax Credit on Capital Goods

This table requires details of unavailed CENVAT credit (Excise Duty, SAD, or CVD) on capital goods:

• Columns 2 & 3: Invoice number and date of the capital good.
• Column 4: Supplier’s old regime registration number (ECC number for excise).
• Column 5: Your (recipient’s) registration number (service tax registration or ECC number).
• Column 6: Value of the capital good.
• Column 7: Excise Duty or CVD paid.
• Column 8: SAD paid.
• Column 9: CENVAT Credit eligible under the old regime (cannot exceed total of Column 7 & 8).
• Column 10: CENVAT Credit already availed under the old regime (cannot exceed Column 9).
• Column 11: Balance unavailed CENVAT Credit (Column 9 minus Column 10), representing remaining eligible ITC of Central Tax.

State/UT Tax Portion of Unavailed Input Tax Credit on Capital Goods

This table requires details of unavailed CENVAT credit (VAT or Entry Tax – State/UT Tax) for capital goods:

• Columns 2 & 3: Invoice number and date of the capital good.
• Column 4: Supplier’s registration number under relevant State VAT (TIN).
• Column 5: Your (recipient’s) registration number (your VAT registration/TIN).
• Column 6: Value of the Capital Good.
• Column 7: VAT or Entry Tax paid on the capital good.
• Column 8: Total VAT and entry tax credit eligible under the relevant State VAT Act (cannot exceed Column 7).
• Column 9: Total VAT/Entry Tax credit already availed under the old regime (cannot exceed Column 8).
• Column 10: Balance unavailed credit of VAT & Entry Tax (Column 8 minus Column 9), representing remaining eligible State VAT/Entry Tax credit as SGST/UTGST.

Inputs Held in Stock as per Sections 140(3), 140(4)(b), and 140(6)

This section is for claiming input tax credit by a manufacturer or dealer who was previously unregistered and/or dealt in exempted goods. It applies to inputs held as stock by a business registered under GST if:

• The business was not required to be registered under the old regime.
• It manufactured exempted goods or provided exempted services.
• It provided works contract services and availed abatement.
• It was a first-stage dealer, second-stage dealer, registered importer, or manufacturer’s depot (as per Section 140(3) of the CGST Act).

It also applies if a person manufactured both taxable and exempted goods or provided taxable and exempt services, and the tax on stock/inputs used for exempted supply under the old regime is now taxable under GST (as per Section 140(4)(b) of the CGST Act).

Furthermore, it applies to persons registered as composition dealers under the old regime but now normal taxpayers under GST. These individuals can claim credit for eligible taxes on their stock if they meet these conditions:

• The stock is or will be used for making taxable supplies under GST.
• The input credit is eligible under GST.
• They possess invoices or other documents proving duty payment under the old regime for such inputs.
• These invoices/documents are not more than 12 months old (counting backward from June 30, 2017).
• The service provider is not eligible for any abatement under GST.
• They have not opted for the composition scheme.

In essence, these provisions cover individuals who held stock on June 30, 2017, but could not claim credit for it through returns mentioned in sections 5a, b, or c of FORM GST TRAN-1.

Input Credit Claims (other than those claimed in 5a. above)

Provide the following: HSN (at 6-digit level), Unit, Quantity, Value, Eligible duties paid on such inputs.

• Part 7A: To be filled for inputs or inputs in semi-finished/finished goods by a manufacturer or service provider to claim excise duty or service tax as CGST, where duty-paid invoices/documents are available.
• Part 7B: To be filled only by dealers or traders (not manufacturers or service providers) who were unregistered in the old regime, to provide information on inputs where duty-paid invoices/documents are unavailable. Such persons must also file TRAN-2.

VAT and Entry Tax Paid on Inputs or Input Services

Where input or input services are received on or after July 1, 2017, but duty or tax was paid by the supplier under the old regime, the registered person can claim credit for eligible duties and taxes if the invoice was recorded in books within 30 days from July 1 (extendable by another 30 days by the Commissioner GST). This is covered under Section 140(5) of the CGST Act.

The following details must be submitted:

• Column 1: Name of the supplier.
• Columns 2 & 3: Invoice number and date.
• Columns 4-7: Details of supply (description, quantity, unit of measurement, taxable value).
• Column 8: Eligible duties.
• Column 9: VAT/Entry Tax on such goods.
• Last Column: Date of entry in books (if after 30 days or extended period from July 1, input credit cannot be claimed).

Amount of VAT and Entry Tax Paid on Inputs (Section 140(3), 140(4)(b), and 140(6))

• Columns 1-5: Stock details (description, unit, quantity, value, State Tax - VAT or Entry Tax).
• Column 6: Total input tax credit already claimed under the old regime.
• Column 7: Input tax related to exempt sales (old regime) but now taxable under GST. This credit, not claimed under the old regime, is now eligible if goods are taxable or if a composition dealer is now a normal taxpayer.
• Column 8: The remaining balance eligible as input credit of SGST/UTGST.

Stock of Goods Not Supported by Invoices

This portion must be filled by traders or dealers unregistered under the old regime who lack invoices or prescribed documents proving payment of VAT/Entry Tax to be claimed as SGST after filing FORM GST TRAN-2. This does not apply to manufacturers or service providers. It also applies to states where VAT is paid at a single point (e.g., Punjab, where tax is paid by the manufacturer or importer only).

Provide: Description, Unit, Quantity, Value, Tax paid.

Transfer of CENVAT Credit for Centralized Registration (Section 140(8))

This section applies to the transfer of input tax credit related to service tax. The following details are required:

• Column 2: Service tax registration number.
• Column 3: Tax period of the last ST-3 service tax return filed (e.g., April to June 2017).
• Column 4: Date of filing returns for April-June 2017 (due date was August 15, 2017).
• Column 5: Closing balance of CENVAT credit carried forward in the ST-3 return for April-June 2017. This credit can be transferred to any registered person with the same PAN under which the centralized registration was obtained in the old regime.
• Column 6: GSTIN of all branches (receivers) with the same PAN and centralized service tax registration, to whom credit is transferred.
• Columns 7 & 8: Document number and date of the document issued to distribute the credit.
• Column 9: Input tax credit of central tax transferred to each branch (total cannot exceed Column 5).

Goods Sent to Job Worker and Held in Stock (Section 141)

If a principal has sent goods to a job worker, and these goods are with the job worker as of July 1, this stock is also considered held by the principal manufacturer, and credit for tax paid on it will be allowed.

Both the principal manufacturer and job worker must file details for goods:

1. Held as a job worker on behalf of the principal.
2. Sent to a job worker for job work by the principal.

The basic details required in the form are:

• GSTIN of the job worker (if registered under GST).
• Challan number and date issued for transferring goods.
• Type of goods (inputs/semi-finished/finished goods).
• HSN Code, description, unit of measurement (e.g., kgs, boxes, tonnes), quantity, and value of the stock.

Goods Held in Stock as Agent for Principal (Section 142(14))

Section 142(14) stipulates that if goods or capital goods belonging to the principal are at the agent's premises on the appointed day, the agent can claim credit for tax paid on these goods or capital goods, provided:

(i) The agent is registered under GST. (ii) Both principal and agent declare details of stock (goods or capital goods) lying with the agent on June 30, 2017. (iii) Invoices for such goods or capital goods were issued no earlier than 12 months before July 1, 2017. (iv) The principal has either reversed (if any ITC was claimed) or not availed ITC for such goods or capital goods.

Details of Goods Held as Agent

If you are an agent, you must provide details of unsold stock held on behalf of the principal as of June 30, 2017, in Section 10(a):

• Column 2: Principal's GSTIN.
• Columns 3-7: Details of stock held (description, unit, quantity, value, and input tax to be claimed by you).

Goods Sent as Principal Held by the Agent

If you are a principal, you must provide details of unsold stock sent to the agent as of June 30, 2017, in Section 10(b):

• Column 2: Agent's GSTIN.
• Columns 3-7: Details of stock held (description, unit, quantity, value, and input tax to be claimed by your agent).

Credit Details as per Section 142(11)(c)

This section applies to works contractors who paid both VAT and Service Tax on a supply. If GST is now leviable on that supply, the contractor is entitled to claim credit for VAT and Service Tax paid to the extent of supplies made after July 1, 2017.

Required details:

• Column 1: Registration number or TIN (State VAT registration number).
• Column 2: Service Tax Registration Number.
• Columns 4 & 5: Invoice number and invoice date.
• Column 6: GST paid.
• Last Column: VAT & Service Tax paid, claimed as ITC of SGST & CGST respectively, to the extent of supplies made after July 1, 2017.

Goods Sent on Approval Basis Prior to July 1, 2017 (Section 142(12))

This section covers goods sent on an approval basis no earlier than six months prior to July 1, 2017. The following details are required:

• Column 2: Document number for goods transfer.
• Column 3: Document date when goods were sent.
• Column 4: GSTIN of the recipient (if applicable).
• Column 5: Name and address of the recipient.
• Columns 6-10: Details of goods (HSN Code, description, unit, quantity, and total value).

Filing Form TRAN-2

Form TRAN-2 can be filed by a dealer or trader registered for GST who was unregistered under the old regime, or who lacks VAT or excise invoices for stock held on June 30, 2017. This form allows them to claim tax credit on such stock. Manufacturers or service providers cannot file Form GST TRAN-2.

TRAN-2 must be filed monthly by a dealer or trader to report stock sales and claim input tax credit. They must meet the following conditions:

• Such goods were not unconditionally exempt from excise/VAT or were not nil-rated under Excise/VAT.
• This scheme was operational for six months from July 1, 2017, meaning stock had to be cleared by the end of December 2017 to claim credit.
• Possession of a document proving procurement of such goods.
• The stock on which credit is claimed must be stored in an easily identifiable manner.

Details to be Provided in Form TRAN-2

• GSTIN: Your GSTIN.
• Name of Taxable Person: Your name.
• Tax period: The month and year for which the form is filed.
• Details of inputs held on stock on July 1 for which you do not have any invoice/document evidencing payment of tax carried forward to electronic credit ledger.

Stock Held Without Duty Payment Invoice (Excise Duty)

If you lack a document showing payment of Excise Duty, you must provide the following stock details:

• Column 1: HSN code of the opening stock for the month.
• Column 2: Unit of measurement of the opening stock.
• Column 3: Quantity of opening stock.
• Column 4: Quantity of goods sold in the month.
• Column 5: Taxable value of goods sold.
• Column 6: CGST if sold intra-state.
• Column 7: IGST paid if goods sold inter-state.
• Column 8: Credit of central tax (input credit of CGST) claimed:
• If CGST in Column 6 is 9% or more, ITC claimed is 60% of Column 6. Otherwise, it is 40%.
• If IGST in Column 7 is 18% or more, ITC claimed is 30% of Column 7. Otherwise, it is 20%.
• Column 9: Quantity of opening stock for the relevant tax period, calculated by deducting Column 4 from Column 3.

Unavailed Input Tax Credit (ITC) for Capital Goods

Under the pre-GST regime, taxpayers were not always able to avail 100% ITC on capital goods at the time of purchase. If a registered person purchased capital goods and could not claim the full tax amount paid, the remaining ITC can be claimed under GST. For each capital good, invoice-wise details of the following must be specified:

1. Total Cenvat Credit associated with the capital goods.
2. The amount of ITC availed or utilized until July 1.
3. The amount of ITC remaining unavailed or unutilized until July 1.

Stock Sent or Received for Job Work

When a principal manufacturer sends goods for job work, and these goods are with the job worker on July 1, this stock is treated as held by the principal manufacturer, and tax credit will be allowed.

Both the principal manufacturer and the job worker must file details for goods:

1. Held as a job worker on behalf of the principal.
2. Sent to a job worker for job work by the principal.

The basic details required in the form include:

• Challan number and date.
• Type of goods (raw material, semi-finished, or finished goods).
• Description of goods (HSN, unit, quantity, value).
• GSTIN of the manufacturer or job worker.

Goods Sent to Agent or Consignment Dealer for Sale

If a principal dealer or manufacturer sends goods to an agent or consignment dealer for sale, and that stock remains with them on July 1, it is considered stock held by the principal dealer or manufacturer, and tax credit will be allowed.

Both the principal dealer/manufacturer and the agent/consignment dealer must file details for goods:

1. Held as an agent or consignment dealer on behalf of the principal.
2. Sent to an agent or consignment dealer by the principal dealer or manufacturer.

The basic details required in the form include:

• GSTIN of the principal dealer or manufacturer.
• Description of goods (unit, quantity, value, and ITC to be claimed).

General Conditions to Claim Input Tax Credit

Percentage of Available Input Tax Credit Claim

A registered person under GST is allowed credit for tax paid on purchased goods held in closing stock on the appointed date. If an invoice or other document proving VAT Act, Central Excise payment is unavailable, credit is allowed based on the IGST, CGST, and SGST rates of the closing stock under GST, according to the HSN code.

When the taxpayer sells goods from this closing stock (as of June 30), they must first pay the appropriate taxes on the outward supply. After this, they will be allowed ITC based on the tax rate paid for that outward supply.

For example: Mr. Avinash has 1000 units of umbrellas as closing stock on June 30. On July 15, he sells 100 umbrellas for Rs. 100 each, with IGST at 12%.

• Taxable value: Rs. 10,000/-
• Tax amount: Rs. 1,200/-

Since the IGST rate is less than 18%, ITC will be allowed at 20%. Therefore, ITC allowed will be 20% of Rs. 1,200/-, which is Rs. 240/-.

A registered person can claim ITC in this manner for six tax periods from the appointed date (July 2017 to December 2017). For each such period, a statement detailing supplies must be filed in Form TRAN-2 by the end of the tax period.

Conditions for Claiming Central and State Tax Credit (MRP Scheme States)

In states offering a Tax on MRP Scheme, conditions for claiming Central Tax and State Tax credit include:

• The central tax or state tax payable on the supply must have been paid.
• The goods were not wholly exempt from Excise Duty or Nil-rated under the relevant State VAT Act.
• The registered person possesses the document for procurement of such goods.
• Details of stock held at the end of each of the six tax periods, including supply details, are furnished in FORM TRAN-2.
• The allowed credit amount is credited to the Electronic Credit Ledger.
• The stock on which credit is availed is stored in a way that allows easy identification by the registered person.