TaxTMI 
TaxTMI 
Verification of Transitional Credit (TRAN-1) claimed under GST in Electronic Credit Ledger.
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....rovides for the manner in which the Transitional Credit is to be taken under the GST law. 1.2. For verification of the Transitional Credit taken to the Electronic Credit Ledger, Economic Intelligence Unit (EIU) has already shared the data with the respective Joint Commissioner of State Tax who in-turn must have shared this data with the respective Nodal Officer(s). The instructions issued earlier clearly stated that the verification of the TRAN-1 credit is to taken in a time bound manner and to be taken to the logical end. This exercise should have been completed at earliest. However, no feedback is received from concerned Joint Commissioner(s) about the outcome of the verification of the TRAN-1 credit so undertaken. 1.3. It is hereby clarified that the MGSTD (State Tax) authorities should only verify the Transitional Credit in respect of MVAT and Entry Tax. In other words, the State Tax Authorities should not undertake the verification of the CENVAT credit pertaining to the Central Excise Act or, as the case may be, the Service Tax Act. 1.4. As you all are aware that the date for submission or revision of FORM-GST-TRAN-1 at GSTN portal was finally extended to the 27th Dec....
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....hall not exceed the amount of excess credit carried forward shown in the return filed for the period ending June-2017. 3.3. Further, the input tax credit as attributed to the inter-State sales, Branch Transfer/Consignment Transfer, or deemed export, sales to Special Economic Zone and where declarations or certificates i.e. Form-C, Form-F, Form-H, and Form-I as provided under the Central Sales Tax Act, 1956 has not been received then to such extent, the tax payer is not entitled to take credit of ITC into Electronic Credit Ledger. This can be explained with the help of the Example given below: Example-A (1) Say tax payer "A" has filed the return for the period ending June-2017 and disclosed the excess credit carried forward at Rs. 10,00,000/-. The said tax payer is entitled to take credit into Electronic Credit Ledger upto Rs. 10,00,000/-. It should be kept in mind that in no circumstances the said tax payer could claim such credit in the Electronic Credit Ledger in excess or Rs. 10,00,000/-. (2) Needless to state that such credit is further subject to the reduction on account of non-receipt of declarations or Certificates under CST Act, 1956 Viz. Form-C, Form-F, Form-H ....
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.... • 5(a)-Amount of credit carried forward to Electronic Credit Ledger as State tax (Section 140(1) and 140(4)(a)]; • 5(b)-Details of statutory forms received for which credit is being carried forward. (It may be kept in mind that the information in respect of Statutory forms and declarations is to be given starting from 1st April 2015 and ending on 30th June 2017. • 5(c)- Amount of credit carried forward to Electronic Credit Ledger as State tax. The details with regards to turn-over of sales/transfer etc. vis-à-vis form pending is given in this Table. This information is also required to be given starting from 1st April 2015 to 30th June 2017. 3.7. In case, after verification of the details as aforesaid or from the data communicated by EIU, the Nodal Officer has noticed that the tax payer has claimed excess credit in the Electronic Credit Ledger visà-vis amount in the return for period ending June-2017, then the Nodal Officer, shall call for the information about the credit taken under each Table of TRAN-1. For this Nodal Officer shall issue the notice in FORM-603 and ask the tax payer to submit the requisite details in support of ....
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....ct or; (2) was engaged in the sales of exempted goods or tax free goods or; (3) the goods which have suffered tax at the first point of their sale in the State and the subsequent sales of which are not subject to tax in the State under existing law but which are liable to tax under this Act or (4) where the person was entitled to take credit of input tax at the time of sale of goods (Eg. Set-off u/r 52A and 52B of the MVAT Rules, 2005) provided that no set-off in this situation is claimed by the tax payer albeit contrary to the provisions of aforesaid rules. 5.2. Entitlement of such credit to be taken into Electronic Credit Ledger is subject to the following conditions: (1) such inputs or goods are used or intended to be used for making taxable supplies under this Act; (2) the said registered person is eligible for input tax credit on such inputs under this Act; (3) the said registered person is in possession of invoice or other prescribed documents evidencing payment of tax under the existing law in respect of such inputs; and (4) such invoices or other prescribed documents were issued not earlier than twelve months immediately preceding the 1st July 2017 i....
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....T Rules, as reduced by the provisions of rule 53 of MVAT Rules. (b) Under MVAT Act barring few exceptions, the set-off was allowed to be claimed, in the month in which the purchases are made, and the set-off was reduced in the month in which the tax free sales or exempted sales takes place. In other words, under MVAT Act, there is no prohibition to claim set-off in the month in which purchases are made. (c) Hence, under MVAT Act, the tax payer is entitled to claim set-off in respect of the inputs held in the stock or the inputs contained in the semi-finished or finished goods held in the stock in the return filed for the month of June2017 except in the cases where the inputs contained in semi-finished or finished goods are covered under the immoveable property. . (d) It may be kept in mind that goods that are held in the stock, the sales of which would take place on or after 1st July 2017 and therefore, in respect of the aforesaid goods held in the stock, and there would be no reversal [as required under rule 53(8) of MVAT Rules] of the credit in the subsequent months as the supply of such goods would take place under GST era. (e) Under GST, in F....
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....tension, if any, given by the Joint Commissioner, shall be kept on record. 7.5. In the event, the tax payer has claimed the said credit in breach of aforesaid provisions then the tax payer may be advised to reverse the said ITC through the return in FORM-GSTR-3B of the subsequent month for which the return is pending. 8. This part of the Internal Circular explains the credit entitlement of a Builder and Developer under GST: Sub-sections (1) and (6) of section 140- The Transitional Credit Entitlement of a Builder and Developer is explained below: 8.1. The provisions of this sub-section are applicable to a registered taxable person who was paying tax at a fixed rate or paying a fixed amount in lieu of the tax payable under MVAT Act. Thus, tax payers paying taxes under composition scheme @ 1% as per provisions of section 42(3A) of MVAT Act, will be entitled to take the credit of VAT in respect of inputs held in stock as on 30th June 2017. 8.2. The tax payer shall be entitled to take into his Electronic Credit Ledger the credit of VAT in respect of inputs held in stock as on 30th June 2017, subject to the following conditions: (1) such inputs or goods are used or inte....
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....as per the provisions of section 140(1) of the MGST Act. 8.6. Claim of Credit under section 140(6) of MGTS Act: (a) In case a builder was not paying the taxes as per rule 58 and instead had opted to pay fixed amount in lieu of VAT i.e. under Composition Scheme [Section 42(3A)] then, such builder would be entitled to take credit of VAT into Electronic Credit Ledger, in respect of inputs held in stock. (b) In order to determine the credit of VAT availability to the said Builder and Developer in respect of the inputs contained in semi-finished goods i.e. contained in work in progress; and inputs contained in finished goods, it is necessary to examine the provisions relating to the "Inputs", "Goods" and section 140(6) of the MVAT Act. (c) Thus, the provisions of section 140(6) of the MGST Act reads as under: "(6) A registered person, who was either paying tax at a fixed rate or paying a fixed amount in lieu of the tax payable under the existing law shall be entitled to take, in his electronic credit ledger, credit of eligible duties in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the appointed day subje....
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.... as "goods" being the immoveable property to the extent inputs contained in semi-finished or finished goods as on 1st July 2017. 8.7.5. The section 2(6) of the Registration Act, 1908 defines the term "immovable property" which includes land, buildings, hereditary allowances, rights to ways, lights, ferries, fisheries or any other benefit to arise out of land, and things attached to the earth or permanently fastened to anything which is attached to the earth, but not standing timber, growing crops nor grass. 8.7.6. Thus from the above definition the things permanently attached to earth shall mean the immoveable property and hence Building or the work in progress i.e. the inputs contained in semi-finished or finished goods, will not get covered under the term "goods" as defined under the MGST Act and therefore, inputs that are in the nature of work-in progress i.e. contained in semi-finished and finished goods are not "goods" within the meaning and scope of the MGST Act. Due to the aforesaid reasons the tax payer shall not be entitled to claim the VAT credit in that respect. 8.7.7. To explain this, the provisions contained in SCHEDULE-II Paragragh-5(b) are reproduced below. ....
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....er Bag 2000 6,00,000 81,000 (2) Cement purchase during the period 01.07.2016 to 30.06.2017 having cost Rs. 300 per Bag 6000 18,00,000 2,43,000 (3) Cement lying in stock as on 30.06.2017 having cost Rs. 300 per Bag. 3000 9,00,000 1,21,500 (4) It may be seen from the above TABLE that credit of Rs. 1,21,500/- of VAT pertaining to the inputs i.e. 3000 Bags of cement held in the stock as on 30th June 2017, may be availed as transitional credit and may be taken into Electronic Credit Ledger i.e. TRAN-1. Provided that the said cement is purchased between the periods starting from the 1st July 2016 to 30th June 2017 i.e. the invoices are not older than a year. (B) Credit entitlement in respect of inputs contained in semi-finished goods or finished goods held in stock (1) As explained in the Para-A above, in order to take the credit of VAT pertaining to inputs contained in semi-finished or finished goods held in stock as on 1st July 2017, into Electronic Credit Ledger, it shall be necessary that said credit of VAT pertains to the goods and as such the inputs containe....
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.... i.e. after 1^st June 2016) 2000 6,00,000 81,500 (6) Cement lying in stock as on 30.06.2017 @ Rs. 300 per Bag. 3000 9,00,000 1,21,500 (5) It is seen from the above Table that the transitional credit in respect of the opening stock of cement i.e. 2000 Bags held as on 01.07.2016 and which is contained in work in progress i.e. contained in the semi-finished goods or finished goods, shall not be available, as the invoices for the same would have been more than one-year-old. [Please see condition of section 140(6)(v)]. In other words, the transitional credit as shown in above Table from serial number (1) to (5) shall not be available as it pertains to the inputs held in semi-finished or finished goods which are immoveable property. 8.7.9. To conclude that the tax payer that is Builder and Developer shall be entitled to claim the transitional Credit as per the provisions of section 140(6) of the MGST Act, only in respect of the inputs held in the stock and shall not be entitled to take credit of VAT into Electronic Credit Ledger under GST in respect of the inputs contained in the semi-finished or finished goods held in the stock i.e.....
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....or different contingencies and the treatment with regards to the claim of transitional input tax credit. 8.8.2. Credit entitlement as per the provisions of section 142(11)(c) of the MGST Act: (1) It would be worth to examine the provisions of section 142(11)(c) of the MGST Act vis-à-vis liability to pay tax and credit entitlement under GST in respect of construction contracts that are continued on or after 1st July 2017. (2) The section 142(11)(c) reads as under:- "where tax was paid on any supply, both under the Maharashtra Value Added Tax Act, 2002 and under Chapter V of the Finance Act, 1994, tax shall be leviable under this Act and the taxable person shall be entitled to take credit of value added tax or service tax paid under the existing law to the extent of supplies made after the appointed day and such credit shall be calculated in such manner as may be prescribed". (3) Thus aforesaid section provides that where the tax was paid on any supply both under the MVAT Act and under Chapter V if the Finance Act, 1994 then the tax is leviable under MGST Act, in respect of the supply of services that takes place on or after the 1st July 2017 and therefore....
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.... the proportionate credit in respect of aforesaid contingencies to be taken by the tax payer into his Electronic Credit Ledger. The rule 118 of MVAT Rules reads as under: "118. Declaration to be made under clause (c) of sub-section (11) of section 142.- Every person to whom the provision of clause (c) of subsection (11) of section 142 applies, shall within a period of ninety days from the appointed day, submit a declaration electronically in FORM GST TRAN-1 furnishing the amount of Value Added Tax that has been paid before the appointed day, on such supplies to which this provision is applicable and the amount of Tax Credit admissible thereon, which is to be carried forward. Explanation- The amount of tax credit admissible shall be the amount calculated under sub-clause (ii) of clause (b) of sub-section (3B) of section 42 of the Maharashtra Value Added Tax Act, 2002.". 8.8.3. In the light of the discussion aforesaid, in case of a developer where the contracts are continued on or after the 1st July 2017 and such developer desires to take the transitional credit in that respect, the developer was required to file FORM-GST-TRAN-1 on or before the due date i.e. 27t....
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....n or after the 1^st July 2017 1,00,000 (8) Less: Credit of VAT in respect of inputs held in stock. 1,00,000 (9) Balance GST payable 2,80,000 (10) Credit that may be taken into Electronic Credit Ledger 0 (11) GST payable 2,80,000 9. Statutory actions to be initiated for verification of TRAN-1 credit found in admissible: 9.1. The Nodal Officer shall undertake the verification of the credit of VAT/Entry Tax taken to the Electronic Credit Ledger under the GST law. The Nodal Officer, shall collate the data received from the EIU and shall verify the VAT Credit taken into Electronics Credit Ledger in the first phase in the cases where the such VAT credit is Rs. 1 Lakh or more. 9.2. In all such cases following shall be verified,- (1) The Nodal officer shall first ascertain the VAT credit claim vis-à-vis sections i.e. 140 or 142 of the MVAT Act. (2) Accordingly the return filed for the month of period ending June-2017 and amount of VAT credit carried forward in the said return and that of claimed in the Electronic Credit Ledger. In case the said credit found to be in excess of the credit carried forward i....