The introduction of the Goods and Services Tax (GST) in India presented a significant challenge for businesses: ensuring that tax benefits and input credits from the pre-GST regime were not lost. These older taxes might have been paid on various purchases, including inputs, raw materials, semi-finished goods, finished goods, or materials sent to job workers. For many businesses, these input credits were available as of June 30, 2017. Effectively transferring these credits to the new GST regime was crucial for businesses to continue leveraging these benefits.

The Central Board of Indirect Taxes and Customs (CBIC) released specific transition rules and forms to facilitate the smooth movement of old regime credits into GST.

Latest Updates

October 1, 2022

The GST portal reactivated the option for filing or revising previously submitted TRAN 1 and TRAN 2 forms. This reopening followed a directive from the Supreme Court, with the filing window available from October 1 to November 30, 2022. Concurrently, the GST portal issued an advisory explaining the updated processes for claiming transitional Input Tax Credit (ITC).

Claiming Input Tax Credit on Old Stock: Form Selection

Any business possessing closing stock, regardless of its registration status before GST, is entitled to claim tax credit for taxes paid under the previous regime. However, specific conditions apply to this ITC claim, which are detailed further in the regulations.

To assist businesses with a smooth transition and the carry-forward of their Input Tax Credit, two specific transition forms, TRAN 1 and TRAN 2, have been introduced.

Below is a summary of who can file these forms, who cannot, and their original due dates, with an update on the Supreme Court's directive.

Note: TRAN 1 can be revised only once. No further changes are permitted after rectification.^

Following the Supreme Court’s directive, the GST portal re-opened the facility to file or revise earlier TRAN 1/2 from October 1 to November 30, 2022.

Key Aspects of GST Transition

Transition considerations primarily involve:

• Input Tax Credit (ITC) from the old regime that businesses intend to claim under the new GST system (reported in TRAN-1).
• Preventing disruptions for materials sent to job workers (details reported in TRAN-1).
• Reporting agent-principal dealings and goods dispatch, as well as works contracts (reported in TRAN-1).
• Tax refunds and claims under the old regime (these are not reported in TRAN-1 or TRAN-2).

Important Points for GST Transition

• Transition forms must be filed separately for each Goods and Services Tax Identification Number (GSTIN).
• Any credit intended for carry-forward from the old regime must also be eligible for credit under GST.
• Accumulated credits from the old regime can be transferred to GST, provided that all returns for the preceding six months under the old regime have been duly filed. Therefore, accurate filing of past VAT/Excise/Service Tax returns is crucial.
• 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 TRAN 1

Here is a detailed breakdown of the information needed for TRAN 1:

1. GSTIN: Enter your GSTIN.

2. Legal Name of Registered Person: Provide your full legal name.

3. Trade Name: If applicable, state your trade name.

4. Confirmation of Past Returns Submission: Indicate Yes/No for having submitted all required returns under the existing law for the past six months. The closing balance of CENVAT/VAT credit from previous returns can only be claimed in your GST electronic ledger if returns for the preceding six months under the old regime were filed.

5. Tax Credit Carried Forward in Returns Filed Under Existing Laws: This section requires details of all CENVAT credit you intend to transfer to GST. This includes 5a, 5b, and 5c.

   a) CENVAT Credit Carried Forward as Central Tax: This covers Central Excise and Service Tax under Sections 140(1) and 140(4)(a).

   This 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 by persons dealing in both taxable and exempted goods/services under the old regime. Such individuals can claim the excise and service tax input credit balance reflected in their returns. This table should be filled by manufacturers or service providers with a closing CENVAT credit balance in their returns as of June 30, 2017.

   The following details are necessary:

   • Serial Number
   • Registration Number Under Existing Law (Central Excise and Service Tax): Provide your unique 15-digit central excise and service tax registration numbers.
   • Tax Period of Last Return Filed: Specify 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 the Last Return: Provide the filing dates for the returns mentioned above.
   • Balance CENVAT Carried Forward: State the CENVAT credit amount carried forward for each return.
   • Admissible CENVAT Credit as ITC of Central Tax: Indicate the credit amount you are eligible to carry forward from the old regime returns.

   b) Tax Credit for C Forms, F Forms, and H/I Forms to be Carried Forward: This information is required for the period April 1, 2015, to June 30, 2017.

   A brief explanation of these forms:

   • ‘C Forms’: Issued by a registered purchaser to a registered seller for interstate sales, reducing Central Sales Tax (CST) to 2%.
   • ‘F Forms’: Used for branch transfers without tax payment. Issued by the receiving branch office/consignment agent to the head office/principal to confirm goods are stock/branch transfers, not sales.
   • ‘H/I Forms’: Used for local purchases made without tax payment for exports. An exporter/buyer issuing an H form exempts the seller from charging or paying CST on the transaction.

   For each form, provide:

   • TIN of Issuer
   • Name of Issuer
   • Serial Number of Form
   • Amount
   • Applicable VAT Rate

   c) Tax Credit for State/UT Tax for Pending C Forms, F Forms, and H/I Forms (for all registrations on the same PAN and in the same State):

   If registered under any State VAT with pending C-Form/F Form/H or I Form, you must pay the differential tax as you are not eligible for concessional CST rates. This differential tax will be deducted from the input tax credit balance in your last filed return, and the remaining credit will be carried forward under the GST regime.

   The required details include:

   • Column 1: State VAT registration number (TIN).
   • Column 2: Closing balance of input tax credit from the return filed for the period ending June 30, 2017.
   • Columns 3, 5, & 8: Turnover for which C-Form, F Form, and 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%, the differential tax rate is 12.5%). This amount will be subtracted from the closing input tax credit balance in Column 2.
   • Column 7: ITC reversed related to Columns 3 & 5. This amount is eligible for carry-forward as ITC under GST and will be added to the amount in Column 2.
   • Column 10: Calculated as Column 2 – (4+6-7+9). This represents the balance ITC of VAT/Entry tax transferable to the GST regime.

6. Details of Capital Goods with 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, the outstanding amount can be claimed here.

   Section 140(2) of the CGST Act specifically addresses carrying forward CENVAT credit for capital goods not fully utilized or carried forward in previous old regime returns. If CENVAT credit was already carried forward in an earlier return, it should be included in section 5a.

   This information is split into 6a and 6b:

   a) Central Tax Portion of Unavailed Input Tax Credit on Capital Goods: This relates to unavailed CENVAT credit for capital goods that you wish to carry forward to the electronic ledger as central tax (CENVAT, Excise, Countervailing Duty, or Special Additional Duty).

   Provide details of unavailed CENVAT credit for 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 number 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 the total of Columns 7 & 8).
   • Column 10: CENVAT Credit already availed under the old regime (cannot exceed the value in Column 9).
   • Column 11: Balance unavailed CENVAT Credit (Column 9 minus Column 10), representing the remaining CENVAT Credit eligible as ITC of Central Tax.

   b) State/UT Tax Portion of Unavailed Input Tax Credit on Capital Goods: This is for unavailed input tax credit carried forward to the electronic credit ledger as State/UT tax (for all registrations on the same PAN and in the same state). Provide details of unavailed CENVAT credit for VAT or Entry Tax (State/UT Tax) on capital goods:

   • Columns 2 & 3: Invoice number and date of the capital good.
   • Column 4: Supplier's relevant State VAT registration number (TIN).
   • Column 5: Your (recipient's) VAT registration number (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 the total of Column 7).
   • Column 9: Total VAT/entry tax credit already availed under the old regime (cannot exceed the value in Column 8).
   • Column 10: Balance unavailed credit of VAT & entry tax (Column 8 minus Column 9), which is the remaining State VAT/Entry Tax credit admissible as SGST/UTGST in the GST Regime.

7. Details of Inputs Held in Stock (Sections 140(3), 140(4)(b), and 140(6)):

   This section allows input tax credit claims by manufacturers or dealers who were previously unregistered and/or dealt in exempted goods. It requires details of inputs held as stocks. This part of TRAN-1 primarily applies to GST-registered businesses that:

   • Were not required to be registered under the old regime, or
   • Manufactured exempted goods or provided exempted services, or
   • Provided works contract services and claimed abatement (builders), or
   • Were a first-stage dealer, second-stage dealer, registered importer, or a manufacturer's depot.

   (Any of the above may apply, as per Section 140(3) of the CGST Act.)

   It also applies to individuals who manufactured both taxable and exempted goods or provided both taxable and exempt services, where tax on stock/inputs used for exempted supply under the old regime becomes taxable under GST (as per Section 140(4)(b) of the CGST Act).

   Additionally, it applies to persons registered as composition dealers (paying fixed tax) in the old regime who are now normal GST taxpayers.

   All these individuals can claim credit for eligible taxes on stocks held, provided 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 or documents are not older than 12 months 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, this applies to individuals with stock as of June 30, 2017, who could not claim credit through returns mentioned in 5a, 5b, or 5c of FORM GST TRAN-1.

   a) Input Credit Claims Other Than Those Claimed in 5a:

   Provide the following:

   • HSN (at 6-digit level)
   • Unit
   • Quantity
   • Value
   • Eligible duties paid on such inputs

   Part 7A is for inputs or inputs in semi-finished/finished goods where duty-paid invoices or other documents are available, to be filled by a manufacturer or service provider claiming excise duty or service tax as CGST input tax credit.

   Part 7B is only for non-manufacturers or non-service providers who were unregistered in the old regime – primarily for dealers or traders to provide information on inputs where duty-paid invoices or documents are unavailable. Such persons must also fill TRAN-2.

   b) VAT and Entry Tax Paid on Inputs/Input Services with Documents, Carried Forward as SGST/UTGST:

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

   The following details must be submitted:

   • Column 1: Supplier's name.
   • Columns 2 & 3: Invoice number and date.
   • Columns 4-7: Supply details (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 of account (if after the 30-day period or extension from July 1, input credit cannot be claimed).

   c) Amount of VAT and Entry Tax Paid on Inputs Supported by Invoices/Documents, Carried Forward as SGST/UTGST (Sections 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 taxable under GST. This ITC would not have been claimed in the old regime and is now eligible if goods are taxable or if a composition dealer in the old regime is now a normal taxpayer.
   • Column 8: The remaining balance eligible as input credit of SGST/UTGST.

   d) Stock of Goods Not Supported by Invoices/Documents (for States with Single-Point VAT):

   This section is for traders or dealers unregistered under the old regime who lack invoices or prescribed documents for VAT/Entry Tax payment, which would be claimed as SGST ITC after filing FORM GST TRAN-2. Manufacturers or service providers cannot fill this table. This applies to states where VAT is paid at a single point (e.g., by manufacturer or importer only), such as Punjab.

   Provide the following:

   • Description
   • Unit
   • Quantity
   • Value
   • Tax paid

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

   This 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 filed ST-3 service tax return (April to June 2017).
   • Column 4: Date of filing returns for April-June 2017 (due date: 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 GST-registered entities with the same PAN that had centralized registration under the old service tax regime.
   • Column 6: GSTINs of all recipient branches that had centralized service tax registration and the same PAN, to whom the credit is transferred.
   • Columns 7 & 8: Document number and date for credit distribution.
   • Column 9: Input tax credit of central tax transferred to each branch (total cannot exceed Column 5 total).

9. Details of Goods Sent to Job Worker and Held in Stock (Section 141):

   a) Sent as Principal: A principal who sent goods to a job worker must fill in:

   • Job worker's GSTIN (if registered).
   • Columns 2 & 3: Unique challan number and date for goods transfer.
   • Column 4: Type of goods (inputs/semi-finished/finished goods).
   • Columns 5-9: HSN Code, description, unit of measurement (e.g., kgs, boxes), quantity, and value of the stock held with the job worker.

   b) Held as Job-Worker: If you are a job worker, provide details of goods held for the Principal in 9(b):

   • Principal's GSTIN (if registered).
   • Columns 2 & 3: Unique challan number and date for goods transfer to the Principal.
   • Column 4: Type of goods (inputs/semi-finished/finished goods).
   • Columns 5-9: HSN Code, description, unit of measurement, quantity, and value of the stock.

10. Details of Goods Held as Agent on Behalf of Principal (Section 142(14) of SGST Act):

    Section 142(14) permits agents to claim credit for tax paid on goods or capital goods belonging to the principal and held at the agent's premises on the appointed day, provided:

    • The agent is registered under GST.
    • Both principal and agent declare details of stock held by the agent as of June 30, 2017.
    • Invoices for these goods/capital goods were issued no more than 12 months before July 1, 2017.
    • The principal has either reversed any claimed input tax credit or not availed it for these goods/capital goods.

    a) Details of Goods Held as Agent: If you are an agent, provide details of unsold stock held for the Principal as of June 30, 2017, in 10(a):

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

    b) Goods Sent as Principal Held by Agent: If you are a principal, provide details of stock sent to the agent and unsold as of June 30, 2017, in 10(b):

    • Column 2: Principal's GSTIN.
    • Columns 3-7: Stock details (description, unit of measurement, quantity, value, and input tax to be claimed by your agent).

11. Details of Credit as per Section 142(11)(c):

    This applies to works contractors who paid both VAT and Service Tax on a supply. GST is now leviable, and they can 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 date.
    • Column 6: GST paid by the contractor.
    • Last Column: VAT and Service Tax paid to the extent of supplies made after July 1, 2017, claimed as ITC of SGST and CGST, respectively.

12. Details of Goods Sent on Approval Basis Six Months Prior to July 1, 2017 (Section 142(12)):

    This is for goods sent on an approval basis no earlier than six months before 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 recipient (if applicable).
    • Column 5: Name and address of recipient.
    • Columns 6-10: HSN Code, description, unit (e.g., Kgs/Mtr), quantity, and total value of goods sent.

Filing TRAN 2

Form TRAN-2 can be filed by a dealer/trader registered for GST who was previously unregistered under the old regime. Such a dealer, lacking VAT or excise invoices for stocks held on June 30, 2017, can use TRAN-2 to claim tax credit on their stock. A manufacturer or service provider cannot file Form GST TRAN-2. TRAN-2 must be filed monthly by a dealer or trader when stock is sold, reporting details to claim input tax credit.

They must meet these conditions:

• The goods were not wholly exempt from excise/VAT or nil-rated under Excise/VAT.
• This scheme is effective for six months from July 1, 2017, meaning stock must be cleared by the end of December to claim credit.
• A document proving procurement of such goods is available.
• The stock on which credit is claimed is stored in a way that allows easy identification.

Details to be Filled in TRAN 2

• GSTIN: Provide your GSTIN.
• Name of Taxable Person: Enter your name.
• Tax Period: Specify the month and year for this form.
• Details of Inputs Held in Stock on July 1 for Which No Invoice/Document Evidencing Tax Payment is Available, Carried Forward to Electronic Credit Ledger:

Stock Held with No Supporting Document Showing Payment of Excise Duty (Central Tax)

If you do not have a document proving Excise Duty payment, fill the following details for the stock:

• 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 for the month.
• Column 6: CGST if sold intrastate.
• Column 7: IGST paid if goods sold interstate.
• Column 8: Claimed credit of central tax (input credit of CGST):
  1. If CGST paid in Column 6 is 9% or more, ITC claimed is 60% of Column 6. Otherwise, it is 40% of Column 6.
  2. If IGST paid in Column 7 is 18% or more, ITC claimed is 30% of Column 7. Otherwise, it is 20% of Column 7.
• Column 9: Quantity of opening stock for the relevant tax period, calculated by deducting Column 4 from Column 3. (Column 3 minus Column 4).

Unavailed ITC Related to Capital Goods

Taxpayers under the pre-GST regime were not always able to claim 100% ITC for capital goods at the time of purchase. If a registered person bought capital goods and could not claim the full tax amount paid by July 1, 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. Amount of ITC availed or utilized up to July 1.
3. Amount of ITC remaining unavailed or unutilized up to 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 as of July 1, this stock is considered held by the principal manufacturer, for which 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.

Basic details required in the form:

• Challan number and date.
• Type of goods (raw material, semi-finished/finished goods).
• Description of goods (HSN, unit, quantity, value).
• GSTIN of 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 the stock remains with the agent or dealer as of July 1, this stock is also considered held by the principal, allowing tax credit. 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.

Basic details required in the form:

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

Conditions for Claiming ITC

A registered person under GST can claim credit for tax paid on purchased goods held in closing stock on the appointed date. If an invoice or other document proving VAT Act or Central Excise tax payment is unavailable, credit will be allowed based on the IGST, CGST, and SGST rates of the closing stock under GST, according to its HSN code. When the taxpayer sells these goods, they must first pay appropriate taxes on the outward supply, and then ITC will be allowed based on the tax rate paid for that outward supply.

For example:

Mr. Avinash has 1000 units of umbrellas in 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% 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 period, a statement with supply details must be filed in Form TRAN-2 by the end of the tax period.

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

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

Further Reading

• Transition Provisions, Rules and Formats Summary
• Download Form Tran 1 and Tran 2