TRANSITIONAL PROVISIONS

[Guest]

We are situated in Haryana; we were traders and registered under the existing law (Service Tax, VAT) and having import export number. We also having Branches in few states in the pre –GST regime they were also registered in VAT, & Service tax.

Now, we have registered in GST and having closing stock as on 30.06.2017. In this stock some goods imported, purchased from manufacture and some stock transfer received from our Branched against Form F.

We want to take credit on closing stock as on 30.06.2017. We have purchased Invoices showing Excise duty and Bill of Entry also. We have Branch’s invoices but not showing Excise amount thereon.

My query is how to calculate excise duty amount on laying goods which was received from branches.

Please elaborate following rule and Sections in layman language.

1. Rule 117 (4) (a)CGST rules 2017,
2. who will file TRAN-2?
3. Sub section (3) of Section 140 of CGST Act

Thanks in advance

[Himansu Sekhar]

If you have bills with excise duty mentioned in them, enter the particulars in TRAN-1 and the credit will be transferred to your credit ledger.

In other cases, the stocks and clearances to be declared in TRAN-1 and TRAN-2 so that 40% or 60% of the tax paid will be credited to your credit ledger.

[KASTURI SETHI]

Rightly explained by Sh.Himansu Sekhar Ji. TRANS-I is for those who are already registered with VAT, Central Excise & Service Tax and TRANS-2 for those who are newly registered under GST laws.

[Ganeshan Kalyani]

Sir, branches are considered as extended warehouse of the factory. Though you have received goods from factory under stock transfer invoice but actually those goods have suffered excise duty. Also, since goods were manufactured by your factory and material was dispatched to branches, so the goods lying at the breaches are duty paid and are considered to have excise invoice i.e. duty paid documents. Hence , in my view you are eligible to claim 100% credit of the duty paid.

[Ganeshan Kalyani]

Sir, i welcome views of the expert collegues in this regard. Thanks.

[KASTURI SETHI]

40 % or 60% stands for deemed credit where duty has been paid and goods are available but invoices are not available. Secondly invoices show exempted final goods but those exempted goods contain duty paid inputs. Now wether it is TRANS -1 or TRANS -2 the department will scritinise ITC taken in these two statements and allow proportionate credit depending upon rate of GST on final products and CE duty or VAT paid on inputs used in dutiable finished goods. If CE duty on input was paid at the rate of 12.5% and now finished goods attract GST @5 full credit will not be allowed. Every body knows ITC availed in TRANS 1 or 2 both are subject to scrutiny in terms of Credit Rules. However at present the legal position is that if you have invoices evidencing payment of CE duty or VAT , full credit is allowed but subject to above. The point is to be noted that entry is to be made for only eligible inputs and people' are making entries haphazardly. There is every likelihood of floods of SCNs on the basis of scrutiny of TRANS 1 and 2. So I request all should be careful. Only this persons will get full credit who conform to the parameters laid down in ITC rules.

AI Summary

Input tax credit claims via TRAN-1 or TRAN-2 require invoice evidence or receive deemed credit and are subject to scrutiny. Input tax credit for pre-GST closing stock must be claimed in transitional statements: TRAN-1 for previously registered taxpayers with invoices evidencing excise duty and TRAN-2 for newly registered persons. Branch stock transfers manufactured and dispatched under stock-transfer invoices are treated as duty-paid and may qualify for full credit if supported by duty-paid documents. Where invoices are absent or goods are exempted but contain duty-paid inputs, a deemed credit mechanism (commonly 40% or 60%) applies. All TRAN-1 and TRAN-2 claims are subject to departmental scrutiny and limitations where GST rates on final products differ from earlier duty rates.