Key Transitional Provisions Under CGST Regulations

This document explores Chapter 14 of the Central Goods and Services Tax (CGST) Rules, which outlines the transitional provisions. The information is derived from the official CBEC (now CBIC) guidelines found here: http://www.cbec.gov.in/resources//htdocs-cbec/gst/cgst-rules-01july2017%20.pdf.

Carrying Forward Tax Credits from Previous Laws or Existing Stock on GST Implementation Day

(1) Registered individuals eligible for input tax credit (ITC) under Section 140 must electronically submit a signed declaration in FORM GST TRAN-1 via the common portal within ninety days of the GST appointed day. This declaration must itemize the eligible duties and taxes for which they claim ITC, as defined by Explanation 2 to Section 140.

The Commissioner, following Council recommendations, can extend this ninety-day period by an additional ninety days.

Furthermore, for inputs sourced from Export Oriented Units (EOUs) or Electronic Hardware Technology Park (EHTP) units, credit admissibility will align with sub-rule (7) of rule 3 of the CENVAT Credit Rules, 2004.

(2) Each declaration submitted under sub-rule (1) must include:

a) For claims under sub-section (2) of Section 140, the declaration needs to provide separate details for each capital good as of the appointed day, including:- The tax or duty amount already utilized as input tax credit under existing laws up to the appointed day.- The tax or duty amount still pending for utilization as input tax credit under existing laws up to the appointed day.

b) For claims made under sub-sections (3), (4)(b), (6), or (8) of Section 140, specific information regarding the stock held on the appointed day must be provided.

c) If claiming under sub-section (5) of Section 140, the following particulars are required: - Supplier's name, invoice serial number, and date of issue, or other relevant document allowing credit under the prior law. - Description and value of the goods or services. - Quantity of goods, along with the unit or unit quantity code. - Amount of eligible taxes and duties, or Value Added Tax (VAT) / entry tax charged by the supplier. - Date of recording the receipt of goods or services in the recipient's accounting records.

(3) The credit amount declared in FORM GST TRAN-1 will be posted to the applicant's electronic credit ledger, which is managed in FORM GST PMT-2 on the common portal.

(4) a) (i) Under the proviso to sub-section (3) of Section 140, a registered person not previously registered under existing laws can claim input tax credit on goods held in stock on the appointed day. This applies even if they lack documentation proving payment of central excise duty or additional customs duties (under Section 3(1) of the Customs Tariff Act, 1975), provided these duties were leviable on the goods.

(ii) The ITC mentioned in sub-clause (i) will be granted at 60% of the central tax for goods subject to a 9% or higher central tax rate, and 40% for other goods, calculated on the central tax applicable to their supply post-appointed date. This credit is applied after the central tax due on the supply is paid. If integrated tax is paid on these goods, the credit will be 30% and 20% respectively of that tax.

(iii) This particular scheme will be operational for six tax periods following the appointed date.

b) Central tax credit can be claimed only if the following conditions are met:- The goods were not unconditionally exempt from excise duty under the First Schedule to the Central Excise Tariff Act, 1985, or rated as nil in that Schedule.- The registered person possesses the procurement document for such goods.- The registered person, who furnished stock details as per sub-rule (2)(b) and is using this scheme, submits a statement in FORM GST TRAN 2 at the close of each of the six tax periods, detailing supplies made during that period.- The approved credit amount is posted to the applicant's electronic credit ledger in FORM GST PMT-2 on the common portal.- The goods for which credit is claimed are stored in an easily identifiable manner by the registered person.

Declaration Requirement Under Section 142, Sub-Section (11), Clause (c)

Individuals falling under Section 142, sub-section (11), clause (c), must electronically file a declaration in FORM GST TRAN-1 within ninety days of the appointed day. This declaration must detail the proportion of supplies where VAT or service tax was paid before the appointed day, but the actual supply occurred afterwards, and the corresponding admissible Input Tax Credit.

Reporting Stock Held by Principals and Job-Workers

Any person subject to Section 141 must electronically submit a declaration in FORM GST TRAN-1 within ninety days of the appointed day. This declaration must specify the stock of inputs, semi-finished goods, or finished goods held by them on that day.

Information on Goods Dispatched on Approval

Individuals who dispatched goods on an approval basis under the former law and are subject to Section 142, sub-section (12), are required to submit details of these goods in FORM GST TRAN-1 within ninety days of the appointed day.

Procedure for Recovering Incorrectly Claimed Credit

Any amount credited under sub-rule (3) of rule 117 is subject to verification. If any credit has been wholly or partially claimed incorrectly, proceedings will be initiated under Section 73 or Section 74, as applicable, for its recovery.