Transition Provisions in GST

GST Transition provisions

In the model GST law government has given various provisions regarding migration of existing tax credit like CENVAT, VAT ITC, Service Tax Credit etc. Transition provision dealers to transfer credit as per CENVAT Credit rules, VAT ITC as per state rules to GST era. Let through some light on transition provisions in GST.

Statutory Provisions in GST


  1. A registered taxable person shall be entitled to take, in his electronic credit ledger, credit of the amount of CENVAT credit carried forward in a return, furnished under the earlier law by him, in respect of the period ending with the day immediately preceding the appointed day in such manner as may be prescribed.
  2. Provided that the taxable person shall not be allowed to take credit unless the said amount was admissible as CENVAT credit under the earlier law and is also admissible as input tax credit under this Act.
  3. The amount taken as credit under sub section (1) shall be recovered as an arrear of tax under this Act from the taxable person if the said amount is found to be recoverable as a result of any proceeding instituted, whether before or after the appointed day, against such person under the earlier law.

CGST law

  1. A registered taxable person shall be entitled to take, in his electronic credit ledger, a credit of the amount of Value Added Tax carried forward in a return, furnished under the earlier law by him, in respect of the period ending with the day immediately preceding the appointed day in such manner as may be prescribed.
  2. Provided that the taxable person shall not be allowed to take credit unless the said amount was admissible as credit of input tax under the earlier law and is so admissible under this Act.
  3. The amount taken as credit under sub section (1) shall be recovered as an arrear of tax under this Act from the taxable person if the said amount is found to be recoverable as a result of any proceeding instituted, whether before or after the appointed day, against such person under the earlier law.

Crux of Transition Provisions in GST Law


As per GST law, for all the taxes for which dealer was liable to under Pre-GST era then dealer will be able to migrate those unutilized tax credit to GST regime.

Lets have a look at which credit can be transferred in which form:

Transition Provisions in GST
Transition Provisions in GST- Excise, Service Tax, Custom

 

Transition Provisions in GST
Transition Provisions in GST- State VAT
  • Relevant rules like CENVAT Credit Rules, 2004, State VAT rules are to be complied with for transfer of credit.
  • One of the important condition, credit must pertains to goods or services which qualify for input credit under both, the existing law and the GST law
  • As mentioned in the above para, if the tax payer is only manufacturer then he will not able to transfer of credit KKC paid on input service as earlier he was not liable to KKC and credit of KKC can be availed against KKC only. So the taxes to which tax payer presently not liable then such tax credit can not be carried forward as input credit in GST.
  • Credit must have been reflected as input credit carried forward in the return filed for the last month / period under the existing law, viz., last monthly return or quarterly return or the or half yearly return, as the case may be.
  • Credit will be available in the electronic credit ledger of tax payer.
  • In case of incorrect claim under the old law then it will be recovered as an arrear of tax under the GST Act. Applicable interest and penalties will apply under GST laws.
  • It must be clearly understood that CENVAT Credit can only be availed as CGST credit in the Electronic Credit Ledger and VAT credit as SGST credit in the very same Electronic Credit Ledger. Under no circumstances this credit can be interchanged.

Author: smit shah

I am a passionate Chartered Accountant having deep interest in taxation with combination of blogging.

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