Tran 1 credit on goods procured under Notfn No. 1/2011

[Kavali Ramanjeneyulu]

Sir,

one taxpayer was manufacturing yarn by using Polyster Staple fibre . Polyster staple fibre i.e. input was attracting 2% duty under Notification No. 1/2011 CE . As on 30.06.2017 . Under cenvat credit rules, goods attracting 2% duty under Notification No.. 1/2011-CE fall under the definition of Exempted goods. He was having closing balance Polyster Staple fibre and took credit in Tran 1 under table 7a. It is requested to clarify whether the said goods i.e. Polyster Staple Fiber will be used in the taxable supply under GST from 1.7.2017 is eligible for credit under Tran-1 as it was not eligible for credit under Cenvat Credit Rules .

AI Summary

Debate on Yarn Manufacturer's Eligibility for GST Credit: Sections 140(1), 140(3)(i), and 140(6) in Focus A taxpayer manufacturing yarn using polyester staple fiber, which attracted a 2% duty under Notification No. 1/2011 CE, sought clarification on whether the fiber is eligible for credit under GST's Tran-1, despite being considered exempt under Cenvat Credit Rules. One expert cited Section 140(3)(i) of the GST Act, affirming eligibility if used for taxable supplies. Another agreed, referencing Section 140(6) for closing stock eligibility. However, a dissenting opinion argued the input tax credit is not eligible, as the fiber is exempt under the notification, aligning with Section 140(1) conditions that restrict credit for exempt goods.