transitional credit.

[priyesh agrawal]

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.)

AI Summary

Transitional input tax credit: entitlement depends on post GST admissibility and product taxability under the GST regime.
Transitional input tax credit may be carried forward only to the extent the pre GST credit is admissible under GST; credits relating to supplies that are exempt post GST must be disallowed and reversed, while mixed taxable and exempt supplies require proportionate reversal. The TRANS 1 filing, invoice uploads and departmental/system reconciliation will determine final admissible amounts, and product classification (e.g., deoiled versus oil bearing cake) controls taxability and hence credit entitlement.