In our earlier blogs How File Form GST TRAN-1 Part-1 and Part-2, we discussed about claiming transitional input tax credit on the basis of last return filed and unavailed ITC on capital goods. In this blog, we will discuss about claiming ITC on closing stock held on 30th June, 2017, which is most critical section of filing Form GST TRAN-1.
So, what does claiming of ITC on closing stock actually mean? In the earlier regime, certain duties and taxes under specific business circumstances where not allowed to avail ITC. As a result, those taxes were treated as expenses and added to the product cost. On the date of transition to GST, most of the businesses will have closing stock which has already suffered taxes. In order to eliminate the cascading effect of these taxes, GST allows the businesses to avail the tax credit of duties and taxes paid on closing stock held on 30th June, 2017. The closing stock refers to your inputs (raw materials) and also inputs which are contained in the semi-finished goods and finished goods.
To know what duties and taxes are eligible for claiming tax credit on closing stock, read our blog Taxes Eligible for ITC on Opening Stock of 1st July. Also, to know the different business scenarios under which the claim is allowed and the related conditions, read our blog on Moving to GST: Can I Avail Input Credit on Closing Stock?
The details of tax credit on closing stock held on 30th June, 2017, needs to be captured in table no. 7 of Form GST TRAN-1. This table is categorized into 4 sections,
- Table 7(A): For claiming central taxes paid in the earlier regime such as Basic Excise Duty, CVD, SAD and so on.
- Table 7(B): For claiming taxes paid in the earlier regime but goods/services are received in GST regime.
- Table 7(C): For claiming VAT Including Entry Tax on closing stock having supported by invoice/document evidencing tax payment.
- Table 7(D): For claiming the credit of VAT Including Entry Tax without having supported invoice/document evidencing tax payment.
Let us discuss above sections of Form GST TRAN-1 in detail.
Table 7(A) of Form GST TRAN-1
The table 7(A) of Form GST Tran-1 is applicable for businesses that have paid the central tax such as Excise Duty, CVD, SAD, and so on in earlier regime of indirect tax. This is allowed in the following business scenarios:
- Businesses registered only under VAT but have closing stock as on 30th June, 2017, which has suffered Excise Duty.
- A first stage dealer or a second stage dealer or a registered importer or a depot of a manufacturer.
- Businesses that have not registered under any of the earlier tax regime but registered under GST, and have the closing stock on which the various central levied tax has been paid.
- Businesses engaged in manufacture of exempted goods or provisions of exempted service, but the said goods or services are taxable under GST, and have closing stock as on 30th June, 2017, on which the central tax has been paid.
- Businesses that had opted for composition scheme in earlier regime, and opted to be regular dealers, are allowed to claim the tax credit of central tax paid on closing stock held as on 30th June, 2017.
- Businesses that were engaged in manufacture of both taxable and exempted goods but these exempted goods are taxable under GST, will be entitled to claim the tax credit on closing stock. This is also applicable for service provider.
- Service Provider who was providing works contract service and was availing of the benefit of notification No. 26/2012—Service Tax, dated the 20th June, 2012.
Only in the above the scenarios, and on satisfying the eligibility conditions , the businesses are required to fill Table 7(A) of Form GST TRAN-1.
The table 7(A) of Form GST TRAN-1 is again categorized into 2 sections – Duty paid invoices available and Duty paid invoices are not available.
Duty paid invoices available
This section is applicable to businesses that have invoice which evidence the tax payment such as Rule 11 invoice, and bill of entry in case of imports. The below table is more relevant to the business scenario discussed above in Point nos. 2, 4, 6 and 7.
You need to provide HSN-wise details along with the UoM, closing quantity, closing value and eligible duties and taxes paid on closing stock. The eligible duties and taxes here refers to only those taxes which are allowed to be claimed and any other taxes such has Octroi, LBT, and so on, paid on closing stock will be not allowed. To know more on eligible taxes, read Taxes Eligible for ITC on Opening Stock of 1st July.
To arrive at eligible duties and taxes paid on closing stock,
- List down the purchase bills against which the closing stock is held.
- Write down the duties and taxes in purchase invoice, in proportionate to the closing stock held. In case of any tax component in invoice, ITC was allowed and you have already availed, the amount needs to be claimed in table 5(A) of Form GST TRAN-1.
- Prepare an HSN-wise of summary of closing stock and the amount of eligible tax credit.
The dealers (first stage dealer or second stage dealer) or importers who were registered under Central Excise, can prepare these details easily from RG-23D register.
Duty paid Invoices Not Available
In earlier regime, it was a general practice that the invoice along with break-up of tax element were given only to those businesses that availed CENVAT credit, or to the businesses that were registered under a specific Act like Central Excise. In other cases, just a retail invoice without showing taxes separately were issued. Those businesses that does not have duty paid invoice, need to capture the details of closing stock details (in the form of raw-materials, semi-finished and finished goods) in the below table.
*This is applicable only for Traders. Not Applicable to Manufacture or Service Provider.
In this case, the deemed credit will be credited to the e-credit ledger in the GST Portal, only when such stock is actually supplied, and tax collected is paid to the government. The following is rate of deemed credit allowed when duty paid invoices are not available.
|18% and 28%||60%||30%|
|5% and 12%||40%||20%|
As per the table, if the GST rate applicable on the closing stock is 18% or 28%, you will get a deemed credit of 60% of CGST, or 40% of IGST. Similarly, if it is 5% or 12%, then 40% of CGST, or 20% of IGST will be allowed. To know more about the deemed credit and the related conditions, read GST Migration – Demystifying the Closing Stock Dilemma
Similar to the previous section ‘Duty Paid invoice available’, you need to provide the HSN-wise details along with the UoM, closing quantity and closing value of the Stock. Now, the question that arises is: What should I capture in eligible duties and taxes paid on closing stock? How will I calculate it?
No need to worry about this. You can simply mention ‘0’ in the “eligible duties paid on such goods”. This is because,
- Firstly, the credit in the above scenarios is allowed as deemed credit, and not on the basis of the amount mentioned in eligible duties and taxes paid field.
- Secondly, a business cannot arrive at the eligible duties paid on closing stock in the absence of duty details in the invoice. This is the reason to allow deemed credit.
Based on the above logic, the eligible duties and taxes paid on closing stock field is not relevant in case of non-availability of duty paid invoice. Therefore, you can mention ‘0’.
Businesses claiming transitional credit under the above scenario can easily extract the required details from stock statement.
Steps to File Form GST TRAN-1 with above Details
To file Form GST TRAN-1 with the above details
- Login to GST Portal and navigate to: Servicesà Returns àTransitions forms.
- Click Table 7 of Form GST TRAN-1.
7(A)-Duties and taxes on inputs menu will open by default. Click Add details available at the bottom of the page, to view the Details screen as shown below
In the above section, you need to manually enter the following details:
- HSN Code of goods held in stock as on 30th June, 2017.
- Mention the unit of measurement, closing quantity and closing stock value.
- Under Eligible Duties paid on inputs,
- Mention the amount only if Duty paid invoices are available.
- If duty paid invoices are not available, mention ‘0’, and the credit will be made available on the basis of deemed credit percentage as mentioned above.
- Under Where duty paid invoices are available, select Yes if you have duty paid invoice to claim CENVAT credit or select No if the claim is for deemed credit.
- In Type of Goods, select whether the claim is on account of inputs or inputs contained in semi-finished goods or finished goods, and save the details.
To download GST TRAN-1 format, click here
In upcoming blog, we will be discussing on How to File GST TRAN-1 with details of table 7(B), 7(C) and 7(D).
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