Making sure their registered firms under GST do not miss out on the tax advantages and input credits of the previous system is a top priority. These taxes may have been paid when purchasing inputs, raw materials, semi-finished items, and final goods. On July 30th, these taxes will be accessible to most enterprises as an input credit. Moving these to the GST regime is important to take benefit of them.
The Central Board of Excise And Customs (CBEC) has released transition rules and formats, and with the help of these, businesses can move the credit of the old regime to GST.
How To Claim ITC On Old Stock?
Any businesses having a closing stock, whether registered or not before GST, will be entitled to claim credit of tax paid under the pre-GST regime. This claim of ITC also depends on a few conditions, which we will discuss further.
To help business transactions smoothly and carry forward their input tax credit, the CBEC has released 2 transaction forms called TRAN1 and TRAN2. Both these forms can be filled out on Busy.
Who Can File
Who Cannot File
Under the previous system, Registered Persons under GST could be Registered or Unregistered.
Those registered under GST as composition dealer
A registered person under GST but unregistered or under the old regime, A dealer or trader who doesn’t have documents of duty paid
A manufacturer who is excise tax registered and a service provider who is service tax registered
Only one revision of TRAN 1 is allowed. There can be no more changes after the correction.
Aspects Of Transition To GST
Transaction aspects mainly relate to
You want to claim an old regime’s input tax credit under the new regime (Report in TRAN 1)
Ensure that the materials sent to the workers are uninterrupted (Report in TRAN 1)
Report agent-principal dealing and dispatch of goods, work contract (Report in TRAN 1)
Tax refunds and claims under the old regime (Not Reportable in TRAN 1 or TRAN 2)
Any credit you want to carry forward from the old regime must also be eligible for credit under GST.
Accumulated credits of the old regime can be taken to GST. This is allied only if you have filed the past six months’ return under the old regime. So you must file old VAT/Excise/Service Tax returns properly.
Every central tax and duty, including excise and service tax, would be carried forward as CGST.
The CGST will be carried forward for state taxes, such as VAT.
Information Required In TRAN 1
Below is the list of all the details required in TRAN 1
GSTIN – Mention your GSTIN number
Legal Name Of Registered Person – Mention your full legal name.
Trade Name – If you are using any trade name, then mention it here
Verify That You Have Completed and Filed All Returns Necessary Under Existing Law for the Past Six Months – The response should be in yes/no. Only if you filed returns for the preceding six months under the previous regime will you be able to accept the closing balance of past returns’ CENVAT/VAT credit as a credit in your GST electronic ledger.
Tax credit Carried Forward In The Return Filed Uner Existing Laws: Under this, you must provide details of all the CENVAT credits you want to move to GST.
The Details To Be Provided As Under.
Sections 140(1) and 140(4a): Amount of CENVAT credit carried over to the electronic credit ledger as central tax (Central Excise and Service Tax): Applicable for a registered person other than the person paying tax under the old regime and has furnished the returns under the old regime. (Section 140 (1) of the CGST act.
Input credit related to a taxable supply where the registered person was providing/manufacturing both taxable as well as exe3mpte goods and services under the old regime (Section 140(4)(a) of the CGST act).
This person can claim the excise and service tax input credit balance shown in return. So this table must be filled if you are registered as a manufacturer or service provider and have a closing balance of CENVAT credit in your return for the end of the given period.
The following details have to be provided-
Please provide your central excise and service tax registration number(both are unique 15-digit numbers) Registered under current law.
Tax period to which the last return filed under the existing law pertains- Give the period of the last return filed by you. For example, if you are an excise manufacturer, you must file monthly ER-1 and quarterly ER-3. You should include details of both of these returns that were submitted in the previous six months throughout this time.
Provide the return dates as given above. The date of Filing of The Return is Specified in Table Input 3.
Provide the amount of CENVAT credit you have carried forward for each return, and the balance of CENVAT carried over from the previous return.
According to transitional rules, CENVAT credit is permitted as a central tax ITC – Provide the amount of credit you are eligible to carry out of the credit appearing in old return forms.
2. Tax Credit for C forms, F forms and H/I Forms which you want to carry forward:
C Form – When an interstate sale is conducted, a registered dealer issues the c form to a registered seller. Central sales tax (CST), which applies to purchases made using a C form, is 2%.
F Forms: Are employed to make tax-free branch transfers. The branch office or consignment agency receiving the products issues the form F to the head office or principal, who is delivering the items, as part of a branch or stock transfer. The head office uses Form F to prove that goods sent are stock/branch transfers, not sales.
H/I Forms: Used in case of exports for local purchases made without tax payment. This form is provided when an exporter makes an interstate or export purchase. The seller is not obligated to charge or pay any CST on the transaction if the exporter/buyer provides an H form.
Give the following details for each of these forms: TIN of Issuer, Name of Issuer, Form Amount, and Applicable VAT Rate.
State/UT tax credit Tax for unpaid C Forms, unpaid F Forms, and unpaid H/I Forms (For all registrations on the same PAN and in the same state) –
If you are registered under any state VAT and have any pending C Form/F Fom/H or I Form, you must pay the differential tax as you are not eligible to charge a concessional CST rate. The input tax credit that was available in the last return you submitted by you will be used to offset the differential tax payable, and any remaining credit will be carried forward under the GST regime.
The details To Be Provided Are As Under-
In column 1, mention the registration number under state VAT, i.e. the TIN.
In column 2, state the closing balance of the input tax credit in the return filed.
In columns 3, 5, and 8, the turnover for which Form C, Form F, and Form H/I, respectively, are pending must be provided
In columns 4, 6, and 9, the differential tax on its respective turnover must be entered. This will be deducted from the closing balance of input tax credit in return and hence will be deducted from column 2
In Column 7, the ITC reversed by you elated to 3 and 5 must be entered. This amount will be eligible to be carried forward as ITC under GST and hence will be added to the amount in column 2
Column 10 is calculated as follows: Column no. 2 – (4+6-7+9) This is the balance ITC of VAT/Entry Tax that will be transferred to you under the GST regime.
3. Details Of Capital Goods For Which Unvailed Credit Has Not Been carried forward under existing law (Section 140 [(2)] -For any unused input credit related to capital goods, you must provide details here. The credit of taxes paid on capital goods is usually spread over more than the financial year. In case you could not fully claim, the input credit of taxes paid on capital goods is generally spread over more than one financial year.
Section 140(2) of the CGST Act basically refers to carrying forward CENVAT credit for capital used which was not carried forward in an earlier return; it will be included in 5a mentioned above.
This information has to be provided under 7a. And 7b. Below
4. The central tax portion of unavailed input tax credit on capital goods Amount of Unavailed cenvant credit for capital goods which you want to carry forward to the electronic ledger as central tax, which is for CENVAT or excise, or countervailing duty or special additional duty (central taxes). In this table, you have to give details of unavailed CENVAT Credit of excise duty or special additional duty or CVD of capital goods-
In columns 2 & 3, provide the invoice number and date of capital goods.
The registration number of the supplier as per the old regime, under excise, which is the ECC number, must be provided in column 4
Give your registration number, which is either service tax registration or ECC number, in column 5
In column 6, provide the value of capital goods; in column 7, the excise duty or CVD paid; in column 8, the SAD paid.
Enter the CENVAT credit, eligible under the old regime, in column 9. This amount cannot exceed the total of columns 7 and 8
Column 10 must contain the CENVAT credit that was previously obtained under the previous administration. Such a sum cannot be more than column 9’s value.
Column No. 9 minus Column No. 10 equals the remaining CENVAT credit that is qualified for the ITC of central tax, which is represented in Column No. 11.
5. State/UT tax part of capital goods’ unused input tax credit: Unused input tax credit amount carried forward to the electronic credit ledger as state/UT tax (For all registrations under the same PAN and in the same state) – You must detail any unclaimed CENVAT credits for VAT or Entry Tax (State/UT Tax) on capital items in this table.
Provide the invoice number and date of capital goods in columns 2 and 3
The supplier’s registration number under the relevant state VAT, i.e. the TIN number, must be provided in column 4.
In column 5 registration number of the recipient must be provided. Enter your VAT registration number, which is your TIN
Column 6 provides the value of capital goods; in column 7, the VAT or the entry tax paid on the capital goods.
Enter the entire entrance tax credit and VAT that qualified under the applicable state VAT act in column 8. This amount cannot be more than the sum of columns 7 and 8.
The total VAT/entry tax credit already availed under the old regime must be provided in column 9.
The balance not availed credit of VAT and entry tax, i.e. column 8 minus column 9, is the remaining or the balance state VAT/Entry tax credit admissible as SGST/UTGST in the GST regime, which is reflected in column 10.
6. Details of inputs held in stock in terms of sections 140(3), 140(4)(b) and 140(6): A manufacturer or dealer who was previously unregistered or who dealt in exempt items may claim an input tax credit under this clause. This part asks for details of input held as stocks. This portion asks for detail of input held as stocks. This portion of TRAN 1 basically applies to a business registered under GST but
In the previous system, such businesses were exempt from registration requirements.
Was manufacturing-exempted goods
Providing exempted services
Who was providing works contract services and was availing abatement
A first-stage or second-stage dealer
A registered importer
A depot of manufacturer
It applies to a person manufacturing taxable and exempted goods or providing taxable and exempted services. And tax in stock/inputs was used for exempted supply under the old regime but is taxable under GST.
Section 140 (4)(b) of the CGST Act also applies to a person registered as a composition dealer (paying tax at a fixed rate or fixed amount) in the old regime but a normally registered taxpayer under GST. A credit of eligible taxes can be claimed for stocks they hold in the following condition.
Such stock is currently being used or will be used to make GST-taxable supplies.
The input credit is eligible under GST.
They have an invoice or other documents evidencing payment of duty under the old regime for such inputs;
Amount of VAT and entry tax paid on inputs supported by invoices or other documents proving tax payment carried forward as SGST or UTGST under sections 140(3), 140(4)(b), and 140 (6)
The details of stock, such as the description, unit, quantity of goods held, the value of goods and state tax (VAT or entry Tax), must b provided in columns 1-5
The total input tax credit previously claimed under the previous regime must be provided in column 6.
In column 7, input tax related to exempt sales (old regime) but taxable under GST must be filed. The input tax credit would not have been claimed by the old regime and is eligible now if such goods are taxable or where a composition dealer in the old regime is now registering as a normal taxpayer.
The remaining balance will be eligible for input credit of SGST/UTGST in column 8.
The stock of goods not supported by invoices/documents evidencing payment of tax (for only those states having VAT at a single point)
7. Details of transfer of cenvat credit for registered persons having centralized registration under existing law [section 140(8)]
This is applicable for transferring input tax credits related to service tax. The following details are required:
Provide service tax registration number in column 2
The tax period of the last service tax returns ST-3 filed will be April to June (in column 3)
For the months of April through June, the filing date is in column 4.
The closing balance of CENVAT credit was carried forward in the ST-3 return for April-June. Such credit can be transferred to any of the registered people with the same PAN for which the centralised registration was obtained in the old regime (column 5)
All branches with centralised service tax registration and the same PAN to which the credit is transmitted had the same GSTIN (Column 6)
A document must be issued to distribute the credit. The number of documents must be mentioned in column 7, and the date of the document must be mentioned in column 8
Mention the input tax credit of central tax transferred to each branch in column 9. The sum of columns 9 and 5 cannot be more than one another.
8. Details of goods sent to the job worker and held in his stock on behalf of the principal under section 141
A principal who has sent goods to the job worker must fill-
Provide the GSTIN of the job worker if registered under GST.
In column 2, provide the unique number of the challan issued while transferring the goods to the job worker, and the challan date must be mentioned in Column 3
In column 4, give the types of goods – whether it is input/semi-finished/finished goods.
Columns 5-9 provide further details with the HSN code of the good held with the job worker, the description, and the unit of measurement.
9. Held as Job-Worker: If you are a job worker, then you must give details of goods held by you for the principal in 9 (b) –
If the principal is a GST-registered person, please provide his GSTIN.
In column 2, provide the unique no. of the challan issued while transferring the goods to the principal, and the challan date must be mentioned in column 3.
In column 4, give the type of goods – whether it is input/semi-finished/ finished goods.
Columns 5-9 provide further details on the HSN codes of the goods held with the Job worker, the description, and the unit of measurement.
10. Details of the goods kept in stock as the principal’s agent pursuant to section 142(14) of the SGST act. According to Section 142(14), if any capital goods or goods belonging to the principal is at the agent’s premises on the day of the appointment, the agent may claim a tax credit for the tax paid on such goods or capital goods if he satisfies the requirements listed below.
The agent is registered under GST.
Both principal and agent must declare the details of the stock of goods or capital goods lying with such agents.
Such capital goods had not yet been the subject of invoices older than a year.
The principal has either reversed (if he claimed any input tax credit) or not availed of the input tax credit for such goods or capital goods.
11. Details of goods held as an agent: If you are an agent, you must provide information regarding the stock you hold for the unsold principal in serial number 10. (a)
Provide the GSTIN of the principal in column 2
In columns 3-7, give the details of the stock held by you, like the description, The unit of measurement, the quality held by you and the value of the stock, and the input tax on the same to be taken by you.
Goods sent as principal held by the agent: If you are a principal, you must provide the agent with information about the stock you sent as of June 30, 2017, serial number 10(b), that has not been sold.
In columns, 3-7, give the details of the stock you hold, like the description, the unit of measurement, the quantity you hold, the value of the stock, and the input tax on the same to be taken by your agent.
12. Details of Credit As Per Section 142(11)
This is for works contractors who pay VAT and service tax on any supply. GST shall be leviable and shall be entitled to take credit of VAT and service tax is paid by him on any supply, then GST shall be leviable, and he shall be entitled to take credit of VAT and Service Tax paid by him to the extent of supplies made. Below are the details required.
Column 1 should contain the registration number or TIN (State VAT registration number).
Service Tax Registration Number in column 2
The invoice number and invoice date are in columns 4 & 5, respectively.
He must put the GST that he paid in column 6.
In the last column, the VAT and service tax paid by him to the extent of supplies made are claimed as ITC of SGST and CGST, respectively.
13. Details of Goods Sent On Approval Basis [Section 142(12)]: This is for goods that are sent on an approval basis. The following Details are required.
In column 2, the document number is based on which goods are transferred.
The document’s date, the date on which goods are sent, will be mentioned in column 3
In column 4, the GSTIN of a recipient of goods if it is applicable.
The name and addresses of the recipients of goods are mentioned In column 5
In columns 6-10 – details of goods like the HSN codes, description of goods, the unit, quantity of goods transferred and the total value of goods sent.
The TRAN 1 format and due date play a critical role in the transition of old input credit to the Goods and Services Tax (GST) regime in India. The TRAN 1 form enables taxpayers to claim an input tax credit for taxes paid under the old tax regime and carry it forward to the new system.
By understanding the requirements and deadlines for the TRAN 1 form, taxpayers can ensure a smooth transition to the GST system and take advantage of the input tax credit available to them. It is recommended that taxpayers seek professional guidance and support to ensure compliance with the transition process.