Guidance note on CGST transitional credit

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....credit as transitional credit through TRAN 1 and also through return in FORM GSTR 3B or availing same credit twice through two different tables of Form TRAN I. 1.3 One more factor which would be verified is the growth of CENVAT credit in the period September, 2016 to June, 2017. During this period steep increase in credit claim has been noticed for some taxpayers. Accordingly, it has been decided to collect information from this small category of taxpayers, and verify the correctness of credit availed by them by checking the tax payment by their suppliers. 2. Description of Entries in TRAN-I Table In the Form TRAN 1 there are only six entries which decide all the CGST credit which is posted in the electronic credit ledger. These entries are briefly described below. S. No. Table No. in TRAN-I Provision in CGST Act Indicative list of nature of Credit 1. Col. 6 in table h(a) 140(1), 1406(4)(a) and 140(9) This table captures detail of the CENVAT credit carried forward in the return (ER- 1/2/3 or ST-3 relating to the period ending with 30.06.2017, subject to conditions specified in section 140(1) of CGST Act, by the manufacturers/ service providers. 2. Column 11 of ta....

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....ivers and a corresponding debit entry in made in the ledger of the Centrally registered unit. 6. Column (7) in Table 11 Section 142 (11)(c) read with Rule 118 of CGST Rules Transition of credit in respect of supplies which attracted both VAT and Service Tax in pre-GST era and where VAT and Service Tax both were paid, before 1st July 2017, on any supply but the supply is made after 1st July, 2017. The taxable person is entitled to take as CGST credit, the service tax paid under the existing law to the extent of supplies made after 1st July, 2017 as he would be liable to pay CGST in respect of such supplies. (VAT credit cannot be taken as Service tax credit and vice versa). 3. CHECKS FOR VERIFICATION OF ENTRIES IN TRAN-I TABLE: Following checks would done in respect of the entries provided in various tables of TRAN I. The list of checks is not exhaustive but is indicative only. 4. Checks for Table S{a): 4.1.1 Check 1: Whether the credit has been taken against closing balance Of CENVAT credit in ER-1/2/3 or ST-3. Credit can be taken only where the last return was filed and credit taken in Table 5(a) should not be more than closing balance of credit in ER- 1/2/3 or ST-3 m....

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....sions of rule 6 in the period prior to GST. Case I: Only exempted goods/services were being manufactured or provided: Rule 6(2) of CENVAT credit rules did not allow any credit in the CENVAT register if only exempted goods were being manufactured. No credit can flow from return in Rule 6(2) of CENVAT credit rules did not allow any credit in the CENVAT register if anly exempted goods were being manufactured. No credit can flow from return in relation to inputs is such cases. The entry in table 5(a) therefore should be NIL. The apportionment of credit on inputs and complete reversal thereof under rule 6 took place at the time of removal of goods. Therefore, in such cases only credit of inputs and inputs contained in semi-finished which existed in stock on the day of the transition and for which conditions prescribed in cl (i) to (v) of section 140(3) are satisfied would be available. Where the stock shown is very high, verification using VAT return or any other collateral document where stocks are declared would be done. Case II: Exempted and non-exempted goods/services were being manufactured or provided: Rule 6(3) of the CENVAT credit rules provided the procedure for apportion....

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....t of such person as per the conditions prescribed in law. Where goods under movement are shown in exorbitant quantity, transport verification may be considered. It would be checked that the condition for availing ISD credit as prescribed in law are satisfied. 9. Checks for Table 8: 9.1 Check 11: Centralised registered units have distributed their credit through table 8. The units receiving the credit were not required to file TRAN I to receive this credit. The receiving units have got credit on the basis of credit distributed by the Centrally registered unit. It would be checked that the receiving units have not fil TRAN I to avail this credit as this would lead to double credit to receiving unit. Also the confirmation would be obtained from the Centrally registered unit that resultant credit in the ledger of the distributing Centrally registered unit was reduced by the amount of credit distributed through Table 8. 10. Check for Table 11: 10.1 Check 12: It would be checked that the service tax claimed as credit was indeed paid under the existing law and supplies were indeed made after 1st July, 2017. Credit of VAT cannot be taken as CGST credit and vice-versa. 11. Gener....