Transferring closing balance credit of KKC and education cess to GST

In this article, we will understand that whether Transfer of credits of cesses such as Education Cess, Secondary and Higher Education Cess, Swatch Bharat Cess and Krishi Kalyan Cess are allowed or not as per the transitional provisions?

The expression “eligible duties and taxes” means- 

  1. the duty of excise specified in the First Schedule to the Central Excise Tariff Act, 1985
  2. the duty of excise specified in the Second Schedule to the Central Excise Tariff Act, 1985(5 of 1986);
  3. the service tax leviable under section 66B of the Finance Act, 1994 in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the appointed day.”

The list of items does not include cesses viz. education cess, secondary higher education cess, krishi kalyan cess that are allowed to be taken as CENVAT Credit under current regime.

The Transitional provisions under the CGST Act allow carryover of only the Cenvat Credit and Credit of eligible duties mentioned in the explanations given at the end of section 140. Education Cess & Secondary and Higher Education Cess are not mentioned there. Therefore these will not be carried forward as credit of these cesses is not allowed under GST.

Swatch Bharat Cess(SBC) and Krishi Kalyan Cess will not be eligible for carry forward to GST regime as credit of these cesses is not allowed under GST. The cesses will also not be leviable under GST to the extent they are levied as duties of excise (except on excluded items) or Service Tax or as a surcharge.

Thus, to conclude we come to the point that credits of cesses such as Education Cess, Secondary and Higher Education Cess, Swatch Bharat Cess and Krishi Kalyan Cess are not eligible for TRANS-1.

Comments 3

S. SHANMUGAM

February 16, 2018

Hi, the explanation quoted by you is only applicable to the Sub Secion (5) of Sec 140 of CGST Act and not merely applicable to all the transitional credits. The Sub Section is applicable only when

“(5) A registered person shall be entitled to take, in his electronic credit ledger, credit of eligible duties and taxes in respect of inputs or input services received on or after the appointed day but the duty or tax in respect of which has been paid by the supplier under the existing law, subject to the condition that the invoice or any other duty or tax paying document of the same was recorded in the books of account of such person within a period of thirty days from the appointed day:”

In general Sec 140 (1) reads as,
“140. (1) A registered person, other than a person opting to pay tax under section 10, shall be entitled to take, in his electronic credit ledger, the amount of CENVAT credit carried forward in the return relating to the period ending with the day immediately preceding the appointed day, furnished by him under the existing law in such manner as may be prescribed”
Since the definition of CENVAT Credits includes All the Edu, S&H and KK cesses, these all are definetly eligible to transfer in the GST regime also as per the above section.

Venkat

March 17, 2018

Whether we can utilise the said Cess amount against the GST.

We have not availed the said credit of Cess in transitional return. Is there any other alternative to avail such credit.

ARCHANA JAIN

March 8, 2018

I totally agree with S.Shanmugam, KKC was eligible cenvat credit and hence is eligible for carry forward in GST regime.



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