Clear Transitional Provision under GST is to ensure that smooth transition happens to new tax regime & compliance completion

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




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