Transitional provision under GST-Section 140

Whenever a new law is implemented there is also a parallel phase which talks, that how & what will be the treatment of carry forward of input credit benefits prevailing in existing regime. This issues under GST will be taken care by Transitional provision.

These provisions are covered u/s 140 of CGST Act.

The provision describe, how the input credit benefit of existing regime can be claimed under GST by all the businesses.

1. Sec 140(1) is for manufacturers only: All the manufacturers who were allowed credit in existing regime & such credit is admissible in GST Act too shall avail the credit under this section.

However the manufacturer should have filed the return for last 6 months from the appointment date to avail the benefit.

2.  Sec 140(2) is for Capital goods CENVAT credit: That proportion of CENVAT credit for capital goods, which was not availed & not carried forward in return.

3. Sec 140(3) is for credit of eligible taxes held in stock: This section is for all the businesses but essentially for traders who were not eligible to claim credit of excise duty, CVD, SAD & Service tax. This is on the fulfillment of following conditions:

Conditions to be fulfilled

  1.  Such Inputs or Goods are used or intended to be used for making taxable supplies;
  2.  Eligibility of credit on such inputs under this Act;
  3.  Possession of invoice/ documentary evidence of duty paid under existing law;
  4.  Such invoice/ documentary evidence was issued not earlier than 12 months immediately preceding the    appointed day;
  5. The supplier of services is not eligible for any abatement under the GST law.

4. Sec 140(4) is for credit of inputs held in stock in certain situations :

A registered person who was engaged in manufacture of taxable/ exempted goods or providing taxable/ exempted services, but which are liable to tax under current Act shall be entitled to take credit-

  1. Cenvat credit c/f in his return [as per sec 140(1)]; and
  2. Cenvat credit of eligible duty in respect of inputs-relating to exempted goods or services [as per Sec 140(3)]

5. Sec 140(5) is about credit of input taxes in respect of goods & services which are in transit

A registered person-

  1.  Shall be entitled to take credit of eligible duties and taxes
  2.  In respect of inputs/ input services received on or after the appointed day
  3.  The duty or tax is paid before the appointed day
  4.  Provided the invoice is recorded within 30 days from the appointed day, and
  5.  A statement is also required be furnished in respect of such credit.

6. Sec 140(6) is for dealers who want to switch from composition scheme to GST. Such dealers shall also be allowed the credit on fulfillment of following condition for all the category of goods held in stock on the appointed day:

Conditions to be fulfilled

  1.  Inputs/Goods used for making taxable supplies under GST Act;
  2.  Registered Person is not paying tax under composition scheme of GST Act;
  3.  Registered Person is Eligible for ITC under GST Act;
  4.  Possession of invoices;
  5.  Invoices were issued not earlier than 12 months immediately preceding the appointed day

7. Sec 140(7) is for Input Service Distributor where it has received the services before the appointed date, even if invoices are received later on.

8. Sec 140(8) is for registered person having centralized registration under existing laws is allowed to take credit of CENVAT.

Conditions to be fulfilled

  1. Amt. of Cenvat credit shall be amount carried forward in a return furnished for the period ending with day immediately preceding the appointed day.
  2. If such return is furnished within 3 months of the appointed day, then credit shall be allowed only if such return is an original or revised return where the credit has been reduced from that claimed earlier.
  3. Credit allowed only if admissible under GST Act.
  4. Such credit may be transferred to other registered persons having same PAN.

There are formats for Transitional Provisions called as Transition Formats used to carry forward & avail the credit of existing regime.

The formats are captured in the link below

References for Transitional Provision

Link for Credit Transfer Document




Things you want to know about Bill of Supply in GST?

Who is required to issue Bill of Supply?

> A registered taxable person supplying

  • Zero Rated goods & services i.e. non taxable
  • Paying tax under the composition levy,

> A unregistered person who are not required to pay GST,

shall issue a Bill of Supply containing the prescribed particulars.

A bill of supply issued by the supplier shall contain the following information and details:

  1. Name, address and GSTIN of the supplier;
  2. A consecutive serial number containing only alphabets and/or numerals, unique for a financial year;
  3. Date of its issue;
  4. Name, address and GSTIN/ Unique ID Number, if registered, of the recipient;
  5. HSN Code of goods or Accounting Code for services;
  6. Description of goods or services;
  7. Value of goods or services taking into account discount or abatement, if any; and
  8. Signature of the supplier or his authorized representative

When Bill of Supply is not required

A registered taxable person may not be required to issue BOS, if the value of the goods or services supplied is less than Rs.200 only.

Consolidated Bill of Supply shall be prepared by the registered taxable person-

  1. At the end of each day,
  2. In respect of all supplies for value of less than rupees one hundred (Rs. 200),
  3. Consolidated BOS will only cover supplies where bill of supply has not been issued.

Difference between Tax Invoice and Bill of Supply in GST:

It is used for all types of Taxable Sales including exports It is used for all types of exempted sale or sales by composition dealer.

Taxes to be shown separately.

No taxes to be shown separately.

In case of Unregistered Buyer,

  • Name,
  • Address &
  • Place of Delivery

is compulsory required, if Invoice Value before taxes is > 50000

No such provision.
Input Tax Credit (ITC) can be claimed based on Tax Invoice Input Tax Credit (ITC) cannot be claimed based on BOS


Therefore Bill of Supply shall also be issued by non-registered person. The only scenario where not required to be issued, is when the amount of sale is < 200 per transaction.

Hence we recommend that non registered dealers shall obtain registration too in GST & if they cannot obtain the same due to compliance cost burden then always use Bill of Supply for sale of items in the prescribed format.

Reference: (POINT NO. 3)

Written By:

Pallavi Gupta, CA Trainee




What are e-Way bills in GST & How are they going to make business easy ?

e-Way bills is the relaplacement of all the transportation bills like DS-T2 under VAT which were there in existing scenario.


The submission of way bill known as T2 form on line has to be done with the mutual coordination of the buyer and the seller. It is the buying registered dealer who has to use his user id to open the form from the web site,take the necessary information from the selling dealer and fill it. After filling the T2 completely the same has to be forwarded to the selling dealer,who has to carry a copy of it along with the vehicle carrying such interstate purchased goods. A consignment being received without T2 creates more problem to the buying dealer. Further such non issuance creates problem in creation of C forms.


The way bills obtained in the current VAT is notoriously used by VAT Authorities for restricting movement of goods across states.

Under GST there will be a free flow movement of goods, physical verification of the consignment can be done if there is any specific information relating to tax evasion or any other malpractice. Otherwise goods once verified can continue unimpeded through the rest of the journey.

Verifying officer needs to submit summary of inspection within 3 days of  verifying a consignment.

Transporters will have the right to upload queries on the GSTN portal if their vehicle is detained for more than 30 minutes without valid reason.

However one major challenge which has to be planned well on time in GST is strict timelines for validity of e-way bills. The validity has been calculated according to the distance travelled.

Valid for                     Distance

1 day                         Less than 100 km

3 days                      100 kms to 300 kms

5 days                      300 kms to 500 kms

10 days                    500 kms to 1000 kms

15 days                   1000 kms or more

What has to be watched for is that looking to the current state of road infra in some parts of India where both urban & rural area fall,  are these timelines possible to meet or not ?


Therefore business will now be able to access these goods without much interferance of VAT authorities because of free flow movement of goods & making ways bills totally digital & seamless in GST.

References bill in GST bill in GST

Treatment in GST: Closing Stock Input Credit Held Prior GST


Yes you can Avail Closing Stock Input Credit only on meeting conditions talked in this Article.

Businesses which are liable to be registered under GST are

  1. Every person if supplying goods or services more than 20 lakh (Rs.10 lakh for north east states including Sikkim)
  2. If you are purchasing or selling goods outside the state irrespective of the limit mentioned in point 1
  3. If you are receiving or providing services outside the state irrespective of the limit mentioned in point 1
  4. If you are required to pay tax under reverse charg
  5. If you are non-resident taxable person irrespective of the limit mentioned in point 1
  6. Input Service Distributor
  7. An aggregator who supplies services under his brand name or his trade name irrespective of the limit mentioned in point 1
  8. Every electronic Commerce operator like Flipkart, Amazon, etc., irrespective of the limit mentioned in point 1
  9. A person who supplies goods and services through electronic commerce. In other words, if you want to sell on Flipkart, Amazon, then you will need to register yourself first irrespective of the limit mentioned in point 1.
  10. Any person who is required to deduct TDS under GST (not under Income Tax Act, 1961).

Therefore today you may not be registered as your threshold limit does not exceed the prescribed limit of Rs 1.5 crores in case of manufacturing but registered under VAT. Under above mentioned scenario, the common question every business will have is “Can I avail Closing Stock Input credit held on the last day prior to GST implementation”? Yes, you will be allowed to avail Closing Stock Input credit (CENVAT, input VAT, Service Tax, Etc.), Closing stock in form of inputs (raw- materials), semi- finished goods, and finished goods. However, there are conditions that you need to meet to be eligible to avail Closing Stock Input credit held prior GST. Eligibility conditions to avail Closing Stock Input Credit if

  • The closing stock held either in form of raw materials, semi-finished goods, or finished goods, and must be intended to be used for taxable supplies.
  • You are eligible for input tax credit under GST. In GST, you are eligible for Input Tax credit if you are a regular tax payer only. A taxable person opting for composition levy under GST is not allowed to claim Input Tax credit.
  • You have invoices or any other prescribed duty/tax paying documents in respect of the closing stock of inputs (including semi-finished goods and finished goods).
  • The benefit of such credit is passed on, by way of reduced prices, to the recipient. In the current tax regime, duty/tax is added as product cost where the Input Tax Credit is not allowed. On transition to GST, ITC will be allowed, and this should naturally result in the reduction of base cost, and subsequently reduced final price to customers.
  • The date of invoices or any other prescribed duty / tax paying documents is within 12 months from the date of transitioning to GST.
  • The supplier of services is not eligible for any abatement under the act.

Let us understand this with an example. Burberry Bakeries is a registered excise dealer in Bakery products & raw material. On 1st March, 2017, Burberry Bakeries purchased some cake baking ingredients, and the details of transaction are given below:

Date Stock Item Qty Rate / qty Total Value Vat @ 12.5% Excise Duty 12.5%
01-03-2017 Cocoa Powder 100 kg  150/ kg 15000 2109 1875

As on 31st March, 2017, the closing stock of Raw material held by Burberry Bakeries is 50 kg

  • As per the current tax structure, Burberry Bakeries can avail the Input VAT of Rs 2109 as credit, and can set this amount against the output VAT. However, excise duty is not allowed as Input Tax credit. Therefore, it is added to the product cost. Now, on transitioning to GST, Burberry Bakeries is allowed to avail Closing Stock Input credit of excise duty.

Under GST let’s recalculate the excise duty on closing stock, which can be availed as Input credit.

Closing Stock as on 31-3-2017 100 kg
Duty Per Unit (( Total Excise Duty 1875 / Quantity 100 Kg )* 50 Kg) 937.5 / kg

But the eligibility to avail Closing Stock Input Credit is only on fulfilling following conditions:

  1. The closing stock of 50 kg held must be used or intended to be used for taxable supplies.
  2. The benefit of such credit must be passed on, by way of reduced prices, to the recipient.
  3. They are eligible for Input Tax credit under GST.
  1. They should have invoices or any other prescribed duty/tax paying documents in respect of closing stock of inputs (including semi-finished goods and finished goods).
  2. The date of invoices or any other prescribed duty/tax paying documents must be within 12 months from the date of transitioning to GST.


The benefit of Closing Stock Input Credit held prior to GST shall be allowed in GST regime only on fulfillment of above defined conditions.


Impact of GST in Business Processes across Industries

GST will affect all industries Business Processes, irrespective of the sector. It will impact the entire value chain of operations , namely:-

1. Procurement

Purchasing across states is set to become a lot more hassle free as a unified tax structure will allow for seamless movement across state borders. Currently interstate logistics is a major pain area with a long queue of trucks waiting for clearance by state tax and octroi authorities is a common sight on Indian highways. This will soon be relegated to the past as free movement of goods will be possible within India. It is estimated that this will reduce distribution costs by as much as 10-15% and reduce the time taken for transport at the same time. Along with lesser inventory to be maintained due to shorter transport times, this will also open up a wider base of suppliers that will push costs further down.

2. Manufacturing

 Manufacturing is a very complex industry while reducing the cost of production & improving the incremental value for customers is one of the major challenge for every business. The new GST regime will trigger a transformation shift from a complex multi- layered indirect taxation system to a unified indirect taxation system. Under the new regime reduction in tax cascading may lead to lower cost. Therefore it will compel organizations to re- align bottlenecks in production process to make business opportunities better.

3. Distribution

Under GST the distribution model needs to be revamped due to free flow of tax movement in case of inter state supply of goods . Now businesses will not think of opening warehouses just because of cutting CST cost, instead they will think in more competitive manner & follow benchmark process like Hubs & Spoke Model where warehouse will be opened as a central depot & based on the customer demand delivery of goods shall be made. Avoiding unnecessary blocking of funds.

4. Warehousing

GST presents an opportunity for industry players to consolidate their warehouses and set up larger facilities, which will bring in supply chain efficiency. Therefore Model like Hubs & Spokes Model will be of real sense for logistic companies.

5. Sales

Since GST has made availement of credit arising from inputs a detailed task by following defined steps mentioned in GST. Therefore it automatically leads that tax collected  from sales made to customers should be deposited timely in order to allow them with credit benefits, else loosing on credit benefit is just like standing on edge & loosing the customer in GST regime.      

6. Purchase

 So far businesses with vendors was done even without contracts & agreements as credit benefit was not dependent on payment of tax by the vendor or not. But because in GST one can book the credit benefit only once there supplier has deposited tax. Now to make sure that vendors abide by these rules & let business function smoothly, there should be fixed terms & condition at the beginning which shall be done through agreements.   

We will try to sensitise about GST impact in each of these chains & many other chains.

Stay tuned 🙂


Organizations with heterogeneous transactional system may face the greatest challenge as they will have to make changes in terms of technology across all the systems & ensure everything works together seamlessly post GST implementation.

7 things about HSN commodity code in GST that you must know in 2017

In the earlier regime of Indirect taxes, especially VAT there were challenges in identifying the right product code, which further leads to mismatches & then demand, recoveries from the department.

This problem to a larger extent has been solved under GST through an introduction of HSN Codes in the case of Products, which earlier was used in Customs & Excise only. Whereas Services will be classified under Service Accounting Code.

7 items to must know in understanding HSN Commodity code in GST are here:

1. Order’s Classification

The order in which “Chapters” are defined under “list of 21 Sections” of HSN code finder is usually listed based in order of complexities or degree of manufacture.

2. HSN Decoding

The HSN Commodity Codes consists of 8 digits in India which are interpreted in 4 blocks like

  • First 2 digits indicate 99-Chapters.
  • Second 2 indicate “1244-Headings”.
  • Third 2 digits indicate “5224-Sub Headings”
  • last 2 digits indicate “Sub Sub Headings”.

3. HSN Future Use

Chapter No. 77 indicates for future use while (Chapters 72 to 83) covers base metals and articles.

4. HSN National Use

Chapter No. 98 & 99 are for National use.

5. HSN Commodity Codes Categorization

Goods in HSN Commodity Codes are “Categorized” in major 2 categories:

  • Agriculture & fixed with the land.
  • Man Made commodity.

 6. Goods Classification

The “Classification” of goods is possible with the help of HSN Directory, which is based on close analysis of Sections, Chapters, Headings & Sub Headings.

 7. HSN Code based on Turnover

Under GST turnover of the taxpayer will play a crucial part in determining HSN Code. The broader rules are as follows:

  • Taxpayers Turnover of < 1.5 crores, not required to mention HSN Code in Invoice.
  •  Taxpayers Turnover < 5 crores but > 1.5 crores, required to mention 2 digit HSN Code in Invoice.
  • Taxpayers Turnover > 5 crores, required to mention 4 digits HSN code in the invoice.




In the 1st year of GST the turnover will be taken on estimation (self-declaration basis) & then in the next year & onwards previous year’s turnover will be considered for HSN selection.

Mentioning HSN Commodity Codes in the invoice will be really useful as taxpayers are not required to mention a description of goods & services again in returns. Minimizing duplication. Therefore under GST invoices will capture HSN Commodity Codes based on Turnover.

I hope this article clarifies your understanding about the HSN code for GST. If you have any suggestion then feel free to ask here or email me at [email protected]

Useful links for reference.…/…/concept-hsn-codes-gst.html