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Claiming ITC on Old Stock under GST

Under GST, ITC or Input Tax Credit on old stock can be claimed. But before knowing how it is important for us to know what ITC is?

What is ITC?

Input tax credit (ITC) is one of the key features of GST Goods and Services Tax. ITC under GST means reducing the burden of taxes by setting off the taxes paid on inputs from the taxes paid or payable on outputs. However, before the implementation of GST, there was no such provision to do so. In other words, ITC helps in removing the cascading effect.

Transition Provisions under GST

GST is a multi-stage value added tax whenever there is a consumption of goods or/and services. As GST subsumed multiple taxes into one, the GST council has kept the transitional provision under GST quite simple to ensure smooth and hassle-free transition so that no Input Tax Credit (ITC) is lost on old stock.

There are three heads under GST transition provisions and they are:

(i) Claiming Input Tax Credit (ITC) on old stock

(ii) Continuance of existing procedures like job work

(iii) All pending claims related to the existing laws filed before, on or after the appointed day

Trans-1 Form

A trans-1 form is a transition form that needs to be filed by the registered taxable person under GST who may be registered or unregistered under the previous tax regime. However, this form will not be applicable to the composition scheme holder. The due date for filing this form is 27th December 2017.

(A) To claim previously paid VAT/Central Excise/Service Tax

In case if the person has already filed Returns of State VAT/Central Excise/Service Tax. He/she needs to show and carry balance input/mod-VAT in Return as of 30th June 2017.

(B) Not registered under Central Excise but registered under State VAT.

The person can claim the entire taxable amount of Central Excise on closing stock provided that central excise invoices should not be prior to 30th June 2017.

(C) Finished Goods taxable under GST but Raw material taxable and Finished Goods Exempt under the VAT Act.

The person can claim the entire taxable amount of VAT on closing stock provided that input invoices of finished, semi-finished, or raw material are not prior to 1st July 2017.

(D) Central Excise paid stock from 1-7-2016 to 30-6-2017

In case if the Central Excise is not separately mentioned on invoices. However, goods are taxable then there can be two scenarios

(i) When the GST rate is less than 18% then 40% credit of total input of Central Excise.

(ii) When the GST rate is above 18% then 60% credit of input of Central Excise.

However, it shall be noted that the taxpayer can claim this amount within 6 months starting from 1st July 2017. Moreover, the credit claimed will not be available to manufacturers and it shall be passed on to the consumers.

Types of Transition Forms

S.No. Form Name Applicability Non-Eligibility Due Date
1. Trans-1 Person may or may not be registered under previous tax regime but registered under GST Composition Scheme Holder 27th December 2017
2. Trans-2 Any dealer who does have documents related to duty paid but needs to obtain GST Registration. A person registered Excise Duty Act and Service Tax Act July 2017 to December 2017.