BACKGROUND
The assessee is dealing in extracting oil from cotton seed. earlier in VAT both oil and cotton seed cake were taxable but due to rate differences, they have a huge amount of credit lying in their stock in VAT regime.
ISSUE
in GST cotton seed oil cake is exempt as is used as cattlefeed. so if we carry the credit under sec 140(1) to GST will we be allowed to carry whole credit or has to reverse proportionate credit.
Further what will happen if credit is in excess of the tax paid on the stock lying on 30.06.2017(eg: input credit is of 15 lac, but tax paid on stock lying as on 30.06.2017 is of ₹ 5lac only.)
Oil Extraction Business Faces Transitional Credit Issues Under GST: Section 140(1) and Exempt Goods Clarified A discussion on transitional credit under GST involved an oil extraction business from cotton seeds facing issues due to the exemption of cotton seed oil cake under GST, which was taxable under VAT. The query revolved around whether the entire VAT credit could be carried forward or if a proportionate reversal was necessary. Various participants highlighted the provisions of Section 140(1) of the CGST Act, the applicability of notifications, and the distinction between taxable and exempt goods. The consensus was that if the final product is exempt, the credit must be reversed. However, if taxable supplies are involved, proportionate reversal applies. (AI Summary)