GST Transition

|Updated on: May 28, 2021


One of the most crucial areas of concern as businesses transition into the GST regime - is the GST transition rules and GST transitional provisions. The ease of the GST migration process is largely dependent on how effectively these GST transitional provisions will be followed.

Your GST Transition Checklist

Transition of Registration

The first and foremost aspect of the GST transition checklist is the transition of GST registration. Any dealer who is registered under State VAT, Central Excise, Service tax etc. in the current regime, and holds a valid PAN - shall be given a provisional certificate of registration in GST in Form GST REG-25, as part of the GST migration process. Post the issuance of the provisional registration certificate, the dealer will have a time of 90 days in which the prescribed documents will need to be submitted in Form GST REG-24 to convert the provisional registration into a final registration. If the information provided is complete and satisfactory, the final registration certificate will be issued in Form GST REG-06. During the transition, if a taxable person is not required to register under GST, but was previously registered (Central and State law), he has an option to cancel the provisional registration issued by submitting the Form GST REG-28 – within 30 days of transition to GST i.e. by 31st July 2017.

ITC of last returns filed in the current regime

A registered taxable person shall be entitled to take, in his electronic credit ledger, credit of the amount of CENVAT, VAT and Entry Tax carried forward in a return, furnished under the earlier law by him, for the month/quarter ending 30th June 2017. However, the ITC can be claimed by a dealer, only if he has furnished all the returns required under the existing law for the period of 6 months preceding the date of GST implementation i.e. 1st of July, 2017.

ITC on VAT/Excise paid on Capital Goods

Currently, the ITC against the purchase of capital goods is not immediately available, and that too, it is available for only some specified capital goods. As per the CENVAT Credit Rules of 2004, only 50% credit can be availed during the first year and the remaining 50% credit can be availed in any of the subsequent financial years. Similarly, in most of the states, the ITC for capital goods is made available in the form of instalments spread across several months; in others, the ITC is available only when the capital goods are put to business use. One of the key changes brought about in the GST regime is the ability of a dealer to claim the full balance of VAT/Excise credit on capital goods as ITC.

Credit of excise paid on goods in stock

Probably the most pressing concern of all GST transition rules is the fate of excise duty paid for goods lying in stock, and their treatment in the GST migration process. There will be primarily 3 cases to consider in the GST transition checklist:

  • Case 1: Excise Invoice Available - Dealers who have purchased from manufacturers, 1st stage and 2nd stage dealers will have an invoice with excise duty mentioned and will be able to take 100% credit of excise paid.
  • Case 2: Credit Transfer Document Available- Dealers who are retailers and have purchased from parties other than the above, will not have any invoice mentioning the amount of excise paid, as the same would have been borne by him as cost. However, if he has been issued a Credit Transfer Document by the manufacturer, this will serve as evidence of excise duty paid. Such a document can be issued by a manufacturer for goods having the value of more than INR 25000 per item, bearing the brand name of the manufacturer, if verifiable inventory and supply chain records are maintained.
  • Case 3: Neither Excise Invoice or CTD Available - In such a scenario, the dealer can take an input tax credit of 60% of CGST paid on outward supplies under GST where the CGST rate is 9% or more (i.e. GST rate is 18% or more) and 40% of CGST paid on outward supplies under GST in other cases for a period of six months, on stocks which were not unconditionally exempted earlier. In case of inter-state supplies, the credit allowed on IGST paid will be 30% and 20% respectively.

Irrespective of these scenarios, all registered persons entitled to take credit of excise duty, shall submit a declaration electronically in FORM GST TRAN- 1, duly signed, on the Common Portal, within a period of ninety days.

Credit on goods in transit

As per the GST transition rules, a registered taxable person can claim input tax credit of both central / state taxes (applicable in current regime) paid on goods/services received after GST. The condition is that the invoice must be recorded in the books of accounts within 30 days from GST implementation date. However, the original period of 30 days can be extended by 30 more days, on the basis of sufficient reasons. The registered taxable person will furnish a statement or relevant documents in respect of credit that has been taken.

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