Input Tax Credit

Input Tax Credit

Provisions have been made for the smooth transition of Input Tax Credit available under VAT, Excise Duty or Service Tax to GST.  A registered dealer opting for composition scheme will not be eligible to carry forward ITC available in the previous regime.

Here are some of the cases where ITC transition provisions will be applicable:

1. Closing balance of credit on Inputs:

The closing balance of ITC as per the last return filed before GST can be taken as credit in the GST regime.

The credit will be available only if the returns for the last 6-months i.e. from January 2018 to June 2018  were filed in the previous regime (i.e. VAT, Excise and Service Tax returns had been filed).

Form TRAN 1 has to be filed by 27th December 2018 to carry forward the Input Tax Credit. Also, TRAN 1 can be rectified only once.

2. Credit on Capital Goods:

Before GST, only a part of input tax paid on Capital Goods could be taken as credit.

For example, if ITC on a Capital Good purchased in the year 2016-17 is Rs 10,000,

50% i.e. Rs 5,000 can be claimed as ITC in the same year and balance Rs 5000 can be claimed in the next year.

In such cases, there could be some amount of un-utilized credit available on the capital goods. This credit can be carried forwarded to GST by entering the details in Form TRAN 1.

3. Credit on Stock:

A manufacturer or a service provider who has goods lying in the closing stock on which duty has been paid can also take the credit for the same. The dealer has to declare the stock of such goods on the GST Portal.

The dealer should have the invoices for claiming this credit. Also, the invoices should be less than 1 year old.

What if you don’t have invoices?

Manufacturers or service providers who do not have an invoice evidencing payment of duty, cannot claim the credit under the GST regime.

Only traders can claim credit in case invoice is unavailable, subject to the following conditions:

• The stock should be identified separately
• The credit can be taken by the trader only if the benefit of the same is passed on to the final consumer