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

Input tax credit on transitional stock under GST: allowed if inputs are for taxable supplies, subject to exemption rules.
The issue concerns whether polyester staple fibre held on the appointed day, which was subject to a fixed duty under Notification No. 1/2011 and treated as exempt under prior cenvat rules, qualifies for transitional credit in Tran 1. Majority views rely on Section 140(3)(i) and Section 140(6) of the CGST Act to permit credit for inputs held in stock if they are used or intended for taxable supplies; a dissenting view invokes the proviso to Section 140(1) to argue that credits related to goods covered by exemption notifications are not admissible.