Chapter 26: Transitional Provisions

The transition from the earlier indirect tax structure (Excise, Service Tax, VAT, CST, etc.) to the Goods and Services Tax (GST) on 1st July 2017 marked a major reform in India’s taxation system.

Statutory Reference: Sections 139 to 142 of the CGST Act, 2017 and corresponding State GST Acts.

1.1 Objective:

To ensure a smooth migration of taxpayers and seamless transfer of unutilized credits and pending proceedings from the old regime to the new GST framework.

1.2 Migration of Taxpayers:

All persons registered under Central Excise, Service Tax, or VAT were automatically migrated to GST via provisional registration.

A Provisional ID and password were issued by CBEC/State VAT departments.

Upon verification, a final registration certificate (GSTIN) was granted (Rule 24 of CGST Rules).

1.3 Migration Steps:

1️⃣ Enrolment on the GST Common Portal (www.gst.gov.in). 2️⃣ Verification of PAN, mobile, and email. 3️⃣ Upload of documents (proof of business, photographs, constitution). 4️⃣ Issuance of final GSTIN upon validation and approval.

Note: Unregistered persons liable to register under GST for the first time had to apply afresh under Section 22 or 24.

One of the key challenges during transition was ensuring that eligible credits under the old regime were seamlessly carried forward to GST to avoid cascading of taxes.

2.1 Legal Basis:

Section 140 of the CGST Act (since omitted by Finance Act 2020 but effective for transition period).

Rule 117 of the CGST Rules, 2017.

2.2 Types of Transitional Credits:

2.3 Conditions for Carry Forward:

1️⃣ Eligible under both old and new laws. 2️⃣ Return for the last tax period under old law filed. 3️⃣ No claim of credit relating to exempted goods/services. 4️⃣ Declaration filed within prescribed time (extended multiple times through judicial orders).

Judicial Relief:

Filco Trade Centre Pvt. Ltd. v. Union of India (2022, SC) – Supreme Court allowed reopening of TRAN-1/TRAN-2 filing window for 60 days to enable all taxpayers to claim missed credits.

CBIC implemented this through Order No. 01/2022-GST (July 22, 2022), reopening filing from 1 Oct–30 Nov 2022.

To ensure business continuity, several transitional provisions dealt with pending registrations, returns, assessments, and appeals under the old regime.

3.1 Pending Refunds and Appeals (Section 142):

Refund claims filed before, on, or after the appointed day were to be disposed of under old laws.

Amounts determined as refundable would be paid in cash (not as ITC).

Pending appeals, revisions, or assessments under earlier laws to be continued and concluded under those laws.

3.2 Pending C-Forms and Declarations:

Dealers were allowed to issue and submit C-Forms, F-Forms, H/I-Forms etc., for inter-State transactions pertaining to pre-GST period, even after 1 July 2017.

3.3 Old Demands and Dues:

Any tax, interest, fine, or penalty outstanding under old laws remained recoverable as arrears under GST (Sec. 142(8)).

Recovery to be made as per Section 79 of the CGST Act.

Any appeal pending on the appointed date to be disposed of under the old law, but recovery made under new mechanism.

3.4 Goods in Transit:

Goods removed before 1 July 2017 but received after → liable under old law if tax already paid.

Credit admissible if duty-paying documents available (Rule 117(4)).

4.1 Claim through TRAN-1 and TRAN-2

TRAN-1: To carry forward closing balance of CENVAT/VAT credit.

TRAN-2: For dealers not previously registered or without invoices, but holding stock of duty-paid goods.

Due Date: Originally within 90 days from appointed day (1 July 2017), extended repeatedly, and reopened through Supreme Court directions.

Fields in TRAN-1: 1️⃣ Amount of eligible credit carried forward. 2️⃣ Details of capital goods credit. 3️⃣ Credit on inputs held in stock. 4️⃣ Credit transfer document (CTD) details (for dealers with duty-paid stock).

4.2 Verification by Department:

Cross-verified with old returns (ER-1, ST-3, VAT returns).

Mismatch cases referred to jurisdictional officer for clarification.

4.3 Common Issues and Judicial Interpretations:

4.4 Credit Transfer Document (CTD):

Manufacturers could issue CTD to dealers for stock held before GST, enabling them to claim ITC on excise-paid goods, subject to:

Value > ₹25,000 per item.

Duty-paying document evidence.

Goods identifiable by distinct serial numbers.

Any amount of tax, interest, or penalty recoverable under old laws treated as arrears of tax under GST (Sec. 142(8)).

Amounts admitted or deposited under old laws to be adjusted against GST liabilities, if applicable.

If balance remains unadjusted, taxpayer can claim refund under old law (Sec. 142(3)).