Input tax credit on closing stock

[Asked by Guest]

dear sir

our client is a retailer dealing in textile and ready made garments . since fabric is exempt from excise can we claim credit on the stock of fabric held as on 30th June 2017 or should we interpret exemption of fabric as conditional exemption and therefore making them eligible for credit under gst provisions under section 140.

Umesh

[KASTURI SETHI]

Fabric was exempted during Central Excise era, Fabric contain duty paid inputs i.e. chemical, dye, yarn or fibre etc. So you can get 40% or 60% credit after intimation of the stock (as on 30.6.17) to the department. At present both textile and ready made garments attract GST. You have two months for applying.

Thanks for the reply , but would like to draw attention to point no 4 b (I) of transitional provision where it specifically says that in order to qualify for credit under gst (transitional provisions) the goods should not have been unconditionally exempt from excise or subjected to nil rate of duty . Since fabric was exempt will it make it ineligible for credit claim ?

[KASTURI SETHI]

Deemed credit @40% would be available. You will pay GST @5% on the pre-GST stock of fabrics. How you call it exempted after 1.7.17 ?

AI Summary

Input tax credit on exempt pre-GST stock: deemed credit permitted with transitional compliance and tax payable on closing stock.
Whether ITC is claimable on fabric exempt from excise pre-GST is resolved by transitional rules: fabric containing duty-paid inputs qualifies for a deemed credit under the transition subject to departmental intimation within the prescribed window; a deemed credit is available while tax is payable on the pre-GST closing stock under the transitional mechanism.