A Complete Guide to TRAN 1 and TRAN 2 Forms

GST

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

Steps to file GST TRAN 1

  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.

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.

Important Information That Must Be Filled In TRAN 2

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:

  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.

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.

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