The Goods and Services Tax (GST) regime in India introduced various forms for GST compliance, including the TRAN 1 and TRAN 2 forms. To make the transition to the new GST tax system easier for businesses, the Central Board of Excise and Customs (CBEC) has created two forms – GST TRAN 1 and GST TRAN 2. These forms are intended for business owners previously registered under the old indirect tax laws. These forms allow registered dealers and manufacturers to claim an input tax credit (ITC) for the taxes paid under the previous tax regime. Here we will delve deeper into the TRAN 1 and TRAN 2 forms, their purpose, and the correct procedures for filing them.

What is TRAN 1

TRAN 1 is an important document that helps businesses to make a smooth transition from the old indirect tax system to the GST regime. It is a form specifically designed for registered business owners previously registered under the old indirect tax laws. The purpose of this form is to allow businesses to carry forward their input tax credit to the new tax system. Filing TRAN 1 is an important step for businesses to smoothly transition to the new tax system and avoid any potential penalties for non-compliance. 

What Is TRAN 2 Form

TRAN 2 is another important form created to help businesses transition from the old indirect tax system to the new GST system. This form is also intended for registered business owners who were previously registered under the old indirect tax laws. However, it serves a different purpose than TRAN 1. While TRAN 1 allows businesses to carry forward their input tax credit to the new system, TRAN 2 is used to claim credit for taxes paid on goods that were in transit at the time of the GST rollout. The TRAN 2 form requires businesses to provide information about the taxes paid on goods in transit at the time of the GST rollout and any other eligible tax credits they wish to claim. It must be filed by the due date to ensure businesses can claim the eligible credit under GST.

Points To Remember Under GST TRAN

• To file Transition Forms under GST, you need to file them separately for each GSTIN.
• Only eligible credits under GST can be carried forward from the previous regime. You cannot claim credit for anything that is not eligible under GST.
• You can apply for credits from the previous regime to GST only if you have filed the previous six-month returns under the old regime. It is important to file previous VAT/ Excise/ Service Tax returns properly.
• Under the GST system, taxes and duties that were previously categorised as central taxes, such as Excise and Service Tax, will now be carried forward as CGST (Central Goods and Services Tax).
• State taxes, like VAT, will be carried forward as SGST under GST.

Steps to file GST TRAN 1

• Taxpayers need to log in to the GST portal using their login credentials.
• Once logged in, go to the ‘Services’ tab on the GST portal and select ‘Returns’ from the drop-down menu.
• When filling out the GST TRAN-1 form, you will be asked to indicate whether you have filed the previous six-month returns under the old laws before implementing GST. You can choose either ‘Yes’ or ‘No’ based on your filing status. Specific options will be provided in the Tran-1 form, depending on your selection.
• Fill in the necessary information in each field of the table and then proceed to click the ‘Save’ button. In case of any validation error, the system will alert you. Otherwise, your form will be saved successfully.

1. Start by entering your information, including the GSTIN, legal name, trade name, etc., and save it.
2. Provide information regarding the credit that must be carried to the GST.
3. Enter the information about capital goods that were not eligible for credit under previous laws but are now eligible to be carried forward to the GST.
4. Enter the details of input stock to receive credit for taxes and duties that were previously paid under previous laws and are now eligible under the GST regime.
5. Enter the details of credit transfer for registered persons with centralised registration under previous laws.
6. Provide details about goods delivered to the job worker and held in their inventory on behalf of the principal, which includes information from both the job worker and the principal business.
7. Provide details about goods held in stock by agents on behalf of the actual owner and their eligibility for Input Tax Credit (ITC).
8. Provide details about transition credits available on transactions where tax, including service tax and VAT, was paid under previous laws and is also applicable under the GST.
9. Finally, provide details about goods that were sent on an approval basis six months before the scheduled date.

• After entering the necessary details, click the ‘Submit’ button to save and submit the Tran-1 form. It’s important to double-check the information before submitting it since the form cannot be modified afterwards.
• If the Tran-1 form is successfully submitted, the transition credit claim will be posted to the applicant’s e-credit ledger. However, the credit can only be used after signing the Tran-1.
• To file the form, click the ‘File’ button and use either a Digital Signature Certificate (DSC) or Electronic Verification Code (EVC). After filing, a message will be generated if the process is successful. You can access the acknowledgement by downloading it.

How To File TRAN 2 under GST

Form GST TRAN-2 is available for dealers and traders who have registered for GST after being previously unregistered. If a dealer does not possess a VAT or excise invoice for the stocks they held on June 30, 2017, they may use TRAN-2 to claim a tax credit on those stocks. However, it’s important to note that manufacturers or service providers are not permitted to file GST TRAN-2.

To claim an input tax credit, a dealer or trader must file TRAN-2 at the end of each month when they sell their stock and provide all necessary details. To be eligible to file TRAN-2, the dealer must satisfy certain requirements.

• The goods must not have been unconditionally exempt from excise/VAT or considered nil rated under Excise/VAT (Value Added Tax).
• There must be documentation available that demonstrates the acquisition of such goods.
• The goods for which credit is being claimed must be stored in a way that makes them easily identifiable.

Important Information That Must Be Filled In TRAN 2

• Your GSTIN (Goods and Service Tax Identification Number)
• The name of the taxable person
• The month and year for which this form is being submitted must be included.
• Details of inputs held in stock on July 1st, for which there is no invoice or document available as proof of tax payment that can be carried forward to the electronic credit ledger.

If you are holding stock without any documentation to support the payment of Excise Duty (Central Tax), you will be required to provide the following information: You need to fill in the stock information in the specified format:

• Enter the HSN code of the opening stock in column 1.
• In column 2, enter the unit of measurement for the opening stock.
• Enter the opening stock amount for the month in column 3.
• In column 4, enter the total number of goods sold during the month.
• Column 5 shows the taxable value of goods sold for the month.
• If goods are sold within the state, enter the CGST amount in column 6.
• If the goods are sold interstate, the IGST paid must be stated in column 7.
• Enter the claimed central tax credit (CGST input credit) in column 8.

1. In case the CGST paid, as shown in column 6, equals or exceeds 9%, the input tax credit (ITC) that can be claimed is 60% of the CGST amount. Otherwise, the ITC is limited to 40% of column 6.
2. If the IGST amount in column 7 equals or exceeds 18%, the allowable ITC is 30% of the IGST amount. If it is below that threshold, the ITC can be claimed up to 20% of column 7.

• To calculate the opening stock quantity for the applicable tax period, subtract the value in column 4 from the value in column 3 and enter the result in column 9.

Conclusion 

Understanding the TRAN 1 and TRAN 2 forms is important for businesses that have transitioned into the Goods and Services Tax (GST). While the TRAN 1 form is used to claim transitional credits for taxes paid under the previous regime, the TRAN 2 form is used to claim credits for taxes paid on stock acquired after the GST rollout. Both forms have specific guidelines that must be followed, and accurate and timely filing is essential to ensure compliance with GST regulations. By following this guide, businesses can successfully navigate the process of filing these forms and claim the tax credits they are entitled to.