Cenvat credit of Exempted goods.

[Sajesh Sahadevan]

One assessee had two manufacturing units .One unit produced dutiable goods and another units produced exempted goods. Both units were operating in different premises. The assessee was filing monthly return for the clearance of dutiable goods only. When GSTA rolled out , the assessee took the cenvat credit of inputs/input services of exempted goods manufactured into the ER-1 filed for the month of June 2017 in respect of the dutiable goods . The exempted goods still exempted under GSTA and the assessee is following the reversal of proportionate credit after GST in respect of Exempted clearance. Sir, please inform whether the assessee is eligible to take the input/input service credit of exclusively exempted goods into ER-1 and carry forward that in Tran-1 and whether the assessee is eligible to follow the proportionate credit reversal after GST for the exempted clearances made from another premises after 01.07.2017 . Please help.

[KASTURI SETHI]

Credit carried forward through TRANS-I is not legal and proper as the same is hit by Section 140(1)(ii) & (iii) of CGST Act. Section 140(4) also does not help you. Section 140(4) is also subject to Section 140(1) as you have not furnished ER.1 returns for six months in respect of both units. First you are to qualify first step i.e.Section 140 (1). If you do not qualify even one of the conditions mentioned in 140 (1), you are not entitled to carry forward such credit.

[Ganeshan Kalyani]

Input tax credit on inputs used for exempted goods is eligible for credit.

AI Summary

Cenvat credit eligibility affected by transitional Section 140 conditions; TRANS 1 carryforward challenged amid conflicting advice on exempted inputs. Cenvat credit for inputs/input services used exclusively for exempted goods produced at a separate premise was carried forward in TRANS 1 after GST migration; an advisory notes that such carryforward is not permissible because transitional carryforward conditions and return filing prerequisites were not met, while an alternative reply asserts that input tax credit on inputs for exempted goods is eligible.