Moving to GST: Carry forward of closing balance of Credit under VAT/Excise & Service Tax

Moving to GST: Carry forward of closing balance of Credit under VAT/Excise & Service Tax

Present Scenario

The dealers/traders were allowed Input VAT credit but CENVAT Credit levied on Service tax & Excise were not allowed. Now, as they move to GST, they are entitled to take credit of input tax charged on any supply of goods & services.

How to deal with the input tax credit? What all am I eligible for?

As you move to GST, you must have questions as how would you transfer the input tax credit of VAT, Excise, Service tax etc. to GST.

We will explain this in two parts:

I) Carry forward of balance shown in VAT/Excise/Service tax return

II) Carry forward of un-availed credit on capital goods i.e. not shown in VAT/Excise/Service tax return

Also read: How to transfer input credit lying in Closing stock to GST

I) Carry forward of balance shown in VAT/Excise/Service tax return

The closing balance of Input credit in existing tax regime i.e. VAT, Service tax & Excise can be carried forward to GST provided you are not opting for composition scheme under GST.

Since a trader/dealer was allowed only input VAT credit under previous regime, he can transfer the closing balance of Input VAT credit (as shown in VAT return) to GST. While a manufacturer would be eligible to transfer input credit of excise (as shown in Excise return) as well to GST. Similarly, a Service provider would be eligible to transfer input credit on service tax

How to transfer credit?

One needs to satisfy the following conditions to successfully transfer the credit to GST

  1. You must have filed all the returns required under previous law for the previous 6 months
  2. Transferred VAT Input credit will be treated as SGST Input Credit under GST regime.
  3. Transferred Excise or Service tax input will be treated as CGST Input credit under GST
  4. The carry forward of credit is allowed only if such types of credit is also admissible under GST Act

One needs to file Form Tran-1 under GST to avail or transfer input tax credit under, this should be filed within 90 days. Click here to get you Form Tran-1 filled.

 

II) Carry forward of un-availed credit on capital goods i.e. not shown in VAT/Excise/Service tax return

As we know, the credit on capital goods under previous law (i.e. VAT/Excise etc.) were given on instalment and not in a single shot, thus there could be situation where you have some un-availed credit on capital goods.

How to transfer credit?

One needs to satisfy the following conditions to successfully transfer the credit to GST

  1. Taking Credit should be eligible under both the previous law & GST
  2. Transferred credit (of service tax & excise) will be treated as CGST Input credit under GST
  3. Transferred credit (of VAT) will be treated as SGST Input credit under GST

One needs to file Form Tran-1 under GST to avail or transfer input tax credit under, this should be filed within 90 days. Click here to get you Form Tran-1 filled.

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