Carry forward of tax credit claimed in the tax returns
THE LAW:
140(1)-Amount of CENVAT credit carried forward in the return allowed as input tax credit.
Section 140(1) states, 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 erstwhile law in such manner as may be prescribed.
PROVIDED that the registered person shall not be allowed to take credit in the following circumstances, namely:—
(i) where the said amount of credit is not admissible as input tax credit under this Act; or
(ii) where he has not furnished all the returns required under the erstwhile law for the period of six months immediately preceding the appointed date; or
(iii) where the said amount of credit relates to goods manufactured and cleared under such exemption notifications as are notified by the Government.
THE LAW SIMPLIFIED
This transition provision enables a taxable person to carry forward unutilized input credit under the CENVAT Credit Rules, 2004.
The above law states that any amount of unutilized input credit carried forward in a return under the erstwhile tax regime may be carried forward into the GST regime except in the case of a person who opts to pay tax under composition scheme under section 10 in a GST regime.
The above mentioned credit will be carried forward, only if the following conditions are satisfied
a. The said credit is admissible as input tax credit under the provisions of the CGST Act.
b. The registered person has mandatorily filed all the requisite returns under the existing laws regularly during the last 6 months i.e for the period January to June 2017.
Example- A person who is registered under service tax as well as under Central Excise and having unavailed cenvat credit in central excise return, has not filed his service tax returns. Credit cannot be taken unless he has furnished all the returns required under the erstwhile law for the period of six months immediately preceding the appointed date.
c. If out of the credit carried forward, any amount of credit relates to goods which are manufactured and cleared under any exemption notification as notified by the Government, then such CENVAT Credit shall not be eligible for carry forward. No such list of notification are identified (as yet) by the Government.
For example – if Mr A is engaged in manufacture of commodity X which is taxable under the existing laws, but is exempted under the GST regime, CENVAT Credit in respect of such goods shall not be eligible for carry forward.
Note - Swachh Bharat Cess and Krishi Kalyan Cess will not be allowed to be carried forward. For the purposes of this Chapter “Central Value Added Tax (CENVAT) Credit” shall have the same meaning as assigned to them in the Central Excise Act, 1944 (1 of 1944) or the rules made there under. In view of Rule 3 of CENVAT Credit Rules, 2004, the term ‘CENVAT Credit’ also includes Krishi Kalyan Cess. Accordingly, on a combined reading of aforesaid Explanation and Rule 3 of CENVAT Credit Rules, 2004, it appears that Credit of Krishi Kalyan Cess may be carried forward. However, at the same time it will be pertinent to highlight that there is a restriction that credit of Krishi Kalyan Cess can be utilized for payment of Krishi Kalyan Cess only and since Krishi Kalyan Cess is not being separately levied under GST, thus the availment of same can be doubtful. Further KKC and SBC are not included in list of "eligible duties and taxes" as provided in Explanation to section 140. Which clarifies that credit of KKC would not be available under GST regime.
Procedure for claiming the aforesaid credit
As per Rule 1(1) of Transition rules, the registered person shall be allowed to take the credit under the above section only if he submits the FORM GST TRAN-1 electronically on the GSTN portal within 60 days of the appointed date.
Extract of Form GST TRAN-1 relating to the above section:
Table – 5- Amount of tax credit carried forward in the return filed under existing laws:
(a) Amount of Cenvat credit carried forward to electronic credit ledger as central tax (Section 140(1) and Section 140(4)(a))
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Sl. no. |
Registration no. under existing law (Central Excise and Service Tax) |
Tax period to which the last return filed under the existing law pertains |
Date of filing of the return specified in Column no. 3 |
Balance Cenvat Credit carried forward in the said last return |
Cenvat Credit admissible as ITC of central tax in accordance with transitional provisions |
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1 |
2 |
3 |
4 |
5 |
6 |
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Total |
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(b) Details of statutory forms received for which credit is being carried forward
Period: 1st Apr 2015 to 30th June 2017
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TIN of Issuer |
Name of Issuer |
Sr. No. of Form |
Amount |
Applicable VAT Rate |
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C-Form |
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Total |
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F-Form |
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Total |
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H/I-Form |
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Total |
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(c) Amount of tax credit carried forward to electronic credit ledger as State/UT Tax(For all registrations on the same PAN and in the same State)
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C Forms |
F Forms |
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H/I Forms |
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Registration No. in existing law |
Balance of ITC of VAT and [Entry Tax] in last return |
Turnover for which forms Pending |
Difference tax payable on (3) |
Turnover for which forms Pending |
Tax payable on (5) |
ITC reversal relatable to [(3) and] (5) |
Turnover for which forms Pending |
Tax payable on (7) |
Transition ITC 2- (4+6-7+9) |
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Note – The following decisions have been taken in the 21st GST Council Meeting held on 9th September 2017
- The due date for submission of FORM GST TRAN-1 has been extended by one month i.e. 31st October, 2017.
- FORM GST TRAN-1 can be revised once.
Illustrations related to carry forward of credit under Section 140(1)*
Illustration – 1: GST is applicable from 1st July, 2017 and the amount of credit as per the return for the period ending 30th June, 2017 is as follows:
|
Particulars of Input tax Credit |
Credit amount as per return |
|
Central Excise |
200,000 |
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Service Tax |
100,000 |
|
Education Cess |
10,000 |
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Secondary and Higher Education Cess |
5,000 |
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Krishi Kalyan Cess |
5,000 |
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Swachh Bharat Cess |
5000 |
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Additional Duty u/s 3(1) of CTA – CVD |
40,000 |
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Additional Duty u/s 3(5) of CTA – SAD |
30,000 |
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Input Tax Credit under VAT |
50,000 |
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Total |
445,000 |
What will be the amount of opening CGST to be brought forward as per the GST Law as on 1stJuly, 2017?
Ans. The amount of CGST to be brought forward on 1stJuly, 2017 will be calculated as follows:
A. If the tax payer is a Manufacturer
|
CGST Components |
CGST Value |
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Central Excise |
200,000 |
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Service Tax |
100,000 |
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Education Cess |
- |
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Secondary and Higher Education Cess |
- |
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Krishi Kalyan Cess |
- |
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Swachh Bharat Cess |
- |
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Additional Duty u/s 3(1) of CTA – CVD |
40,000 |
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Additional Duty u/s 3(5) of CTA – SAD |
30,000 |
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Total |
370,000 |
Note:
1. Swachh Bharat Cess and Krishi Kalyan Cess will not be allowed to be carried forward.
2. Input credit under VAT will not be allowed to be carried forward as CGST, but also allowed on GST
3. Credit of EC and SHEC shall not be allowed to be carried forward.
B. If the tax payer is a Service Provider
|
CGST Components |
CGST Value |
|
Central Excise |
200,000 |
|
Service Tax |
100,000 |
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Education Cess |
- |
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Secondary and Higher Education Cess |
- |
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Krishi Kalyan Cess |
- |
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Swachh Bharat Cess |
- |
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Additional Duty u/s 3(1) of CTA – CVD |
40,000 |
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Additional Duty u/s 3(5) of CTA – SAD |
- |
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Total |
340,000 |
Note:
1. Service Provider not entitled to avail credit of SAD, Swachh Bharat Cess.
2. Additional Duty u/s 3(1) of CTA – CVD will be available if it is paid on import purchase of specified goods.
3. Credit of EC and SHEC shall not be allowed to be carried forward.
*Source- ICAI Background material under GST dated 26/8/2017
Disclaimer - The information provided in this document is for general information only. It is based on the information available publicly. The user of this document should be aware that the interpretation or implications of relevant GST rules may change/vary depending upon circumstances.