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TRANSITIONAL PROVISION UNDER GST – SEC 140(2)

September 15, 2017

Credit of unavailed CENVAT credit in respect of capital goods

THE LAW:

140(2)- Credit of unavailed CENVAT credit in respect of capital goods, not carried forward in a return, shall be allowed.

Section 140(2) 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, credit of the unavailed CENVAT credit in respect of capital goods, not carried forward in a return, furnished under the existing law by him, for the period ending with the day immediately preceding the appointed day in such manner as may be prescribed.

PROVIDED that the registered person shall not be allowed to take credit unless the said credit was admissible as CENVAT credit under the existing law and is also admissible as input tax credit under this Act.

Explanation - For the purposes of this sub-section, the expression “unavailed cenvat credit” means the amount that remains after subtracting the amount of CENVAT credit already availed in respect of capital goods by the taxable person under the existing law from the aggregate amount of CENVAT credit to which the said person was entitled in respect of the said capital goods under the existing law.

THE LAW SIMPLIFIED

This transition provision enables a person to avail CENVAT credit of the balance amount (unavailed portion) in respect of capital goods, that has not been availed under the erstwhile laws provided such credits are admissible under the GST laws.

Under the Central Excise law, CENVAT credit in respect of capital goods, becomes available in installments like upto 50% of the CENVAT credit becomes eligible in the financial year of purchase and balance CENVAT credit is available in the any of the subsequent financial years. Thus, such balance of CENVAT credit in respect of capital goods which is yet to be availed can be availed under the provisions of this Section. Rule 117(2)of CGST Rules, 2017 requires the information regarding unavailed credit to be filed on the Common Portal.

Meaning of significant terms:

Unavailed CENVAT credit

“Unavailed CENVAT credit” means the amount that remains after subtracting the amount of Cenvat credit already availed in respect of capital goods by the taxable person under the erstwhile law from the aggregate amount of Cenvat credit to which the said person was entitled to, in respect of the said capital goods under the erstwhile law.

Capital goods

“Capital goods” referred above, means the goods as defined under Clause (a) of Rule 2 of CENVAT Credit Rules, 2004 and under GST Laws.

“Capital goods” means:

(A)

the following goods, namely:- 

 

(i)

all goods falling under Chapter 82, Chapter 84, Chapter 85, Chapter 90, heading No. 68.05 grinding wheels and the like, and parts thereof falling under heading 6804 of the First Schedule to the Excise Tariff Act;

 

(ii)

pollution control equipment;

 

(iii)

components, spares and accessories of the goods specified at (i) and (ii);

 

(iv)

moulds and dies, jigs and fixtures;

 

(v)

refractories and refractory materials;

 

(vi)

tubes and pipes and fittings thereof; and

 

(vii)

storage tank, used-

   

(1) in the factory of the manufacturer of the final products, but does not include any equipment or  appliance used in an office; or

   

(2) for providing output service;

(B)

motor vehicle registered in the name of provider of output service for providing taxable service as specified in sub-clauses (f), (n), (o), (zr), (zzp), (zzt) and (zzw) of clause (105) of section 65 of the Finance Act;

Under GST laws, Sec 2 (19) of CGST Act, 2017 mentions “capital goods” means goods, the value of which is capitalized in the books of account of the person claiming the input tax credit and which are used or intended to be used in the course or furtherance of business.

In terms of Rule 117 of CGST Rules, 2017 particulars relating to every item of capital goods inrespect of tax/duty awaited or utilised by way of credit under the erstwhile law shall be indicated. Similar details in respect of unavailed portion under the erstwhile laws shall also be stated.

Conditions for claiming unavailed credit in relation to capital goods

Such credit should be available under existing law as well as under GST laws.

Details of credit to be carried forward in respect of capital goods

The following duties will be carried forward in case of capital goods:

  1. Central Excise paid on ‘capital goods’
  2. Countervailing duty paid on ‘capital goods’
  3. Special Additional Duty paid on ‘capital goods’

 

Illustrations related to the aforesaid section*

Eg 1: A manufacturer purchased a capital asset worth Rs. 11,25,000 (including excise duty of Rs. 1,25,000) on 5th May, 2017. In the month of June, 2017, he could avail CENVAT Credit to the extent of 50% only i.e. Rs. 62,500. The unavailed CENVAT Credit on capital goods as on 1st July, 2017 (appointed day) will be Rs. 125,000 – 62,500 = Rs. 62,500, which he will be eligible to claim 140(2).

Eg 2: CENVAT Credit on Capital Goods used outside the factory of manufacturer is not allowable. So, it will not be admissible as input tax credit in the GST Law either.

* Source- ICAI Background material under GST dated 26/8/2017

Procedure for claiming the aforesaid credit

As per Rule 1(2)(a) 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.

The amount of credit will be available as a balance in the electronic credit ledger of the tax payer. CENVAT Credit can only be availed as CGST Credit in the Electronic Credit Ledger.

Extract of Form GST TRAN-1 relating to the above section:

Table – 6- Details of capitals goods for which unavailed credit has not been carried forward under existing law (section140 (2)).

(a) Amount of unavailed cenvat credit in respect of capital goods carried forward to electronic credit ledger as central tax

Sl no

Invoice / Document

no.

Invoice / document

Date

Supplier’s registration no.

under existing

law

Recipients’ registration no.

under existing

law

Details of capital goods on which credit has been partially availed

 

Total eligible cenvat credit under existing

law

Total cenvat credit availed under existing law

 

Total cenvat credit unavailed under existing law (admissible as ITC of central tax) (9-10)

 

 

 

 

 

 

Value

 

Duties and taxes paid

 

 

 

 

 

 

 

 

 

 

ED/

CVD

SAD

 

 

 

 

1

2

3

4

5

6

7

8

9

10

11

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

 

 

 

 

 

 

(b) Amount of unavailed input tax credit carried forward to electronic credit ledger as State/UT tax

(For all registrations on the same PAN and in the same State)

Sl no

Invoice / Document

no.

Invoice / document

Date

Supplier’s registration no.

under existing

law

Recipients’ registration no.

under existing

law

Details regarding capital goods on which credit is not availed

 

Total eligible VAT [and ET] credit under existing

law 

Total VAT [and ET] credit availed under existing law

 

Total VAT [and ET] credit unavailed under existing law (admissible as ITC of State/UT tax) (8-9)

 

 

 

 

 

 

Value

 

Taxes paid VAT [and ET]

 

 

 

 

1

2

3

4

5

6

7

 

8

9

10

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

 

 

 

 

 

Note – The following decisions have been taken in the 21st GST Council Meeting held on  9th September 2017

  1. The due date for submission of FORM GST TRAN-1 has been extended by one month i.e. 31st October, 2017.
  2. FORM GST TRAN-1 can be revised once.

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.

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