GST Jamku AITransitional arrangements for input tax credit.
Section 140(1)
A registered person, other than a person opting to pay tax under section 10, shall be entitled to take, in his electronic credit ledger, the amount of CENVAT credit [of eligible duties] carried forward in the return relating to the period ending with the day immediately preceding the appointed day, furnished by him under the existing law [within such time and] in such manner as may be prescribed:
Provided that the registered person shall not be allowed to take credit in the following circumstances, namely:—
(i) where the said amount of credit is not admissible as input tax credit under this Act; or
(ii) where he has not furnished all the returns required under the existing law for the period of six months immediately preceding the appointed date; or
(iii) where the said amount of credit relates to goods manufactured and cleared under such exemption notifications as are notified by the Government.
Conditions for Entitlement
However, there are circumstances in which the registered person is not allowed to take credit. These include:
(i) The amount of credit is not eligible as input tax credit under the current Act.
(ii) Failure to submit all required returns under the existing law for the six months immediately preceding the appointed date.
(iii) The credit is linked to goods manufactured and cleared under specific exemption notifications outlined by the Government.
Ensuring Compliance
To benefit from the transitional arrangement, individuals must ensure that all prescribed conditions are met. This involves a careful review of the eligibility criteria and timely submission of returns under the existing law. The provisions aim to facilitate a smooth transition while maintaining compliance with the regulations.
Section 140(2)
A registered person, other than a person opting to pay tax under section 10, shall be entitled to take, in his electronic credit ledger, credit of the unavailed CENVAT credit in respect of capital goods, not carried forward in a return, furnished under the existing law by him, for the period ending with the day immediately preceding the appointed day [within such time and] in such manner as may be prescribed:
Provided that the registered person shall not be allowed to take credit unless the said credit was admissible as CENVAT credit under the existing law and is also admissible as input tax credit under this Act.
Explanation.—For the purposes of this sub-section, the expression "unavailed CENVAT credit" means the amount that remains after subtracting the amount of CENVAT credit already availed in respect of capital goods by the taxable person under the existing law from the aggregate amount of CENVAT credit to which the said person was entitled in respect of the said capital goods under the existing law.
A registered person, excluding those opting for tax payment under section 10, holds the right to claim credit in their electronic credit ledger. This credit pertains to the unavailed CENVAT credit associated with capital goods. The crucial condition is that this credit should not have been carried forward in a return submitted under the existing law. The specified period for this credit extends until the day immediately preceding the appointed day.
Conditions for Credit Claim
To claim this credit, certain conditions must be met. The registered person is mandated to adhere to the prescribed time frame and follow the specified manner, as determined by the regulations. A pivotal requirement is that the credit in question must have been admissible as CENVAT credit under the existing law. Additionally, it should also qualify as input tax credit under the current Act.
Understanding "Unavailed CENVAT Credit"
In the context of Section 140(2), the term "unavailed CENVAT credit" holds significance. It refers to the residual amount remaining after deducting the previously availed CENVAT credit for capital goods under the existing law. This deduction is made from the overall CENVAT credit to which the taxable person was entitled concerning the said capital goods under the existing law.
Conclusion
In conclusion, Section 140(2) outlines the transitional arrangements for claiming input tax credit, emphasizing specific conditions and criteria. This provision aims to ensure a smooth transition for registered persons, fostering compliance and clarity within the tax framework.
Section 140(3)
A registered person, who was not liable to be registered under the existing law, or who was engaged in the manufacture of exempted goods or provision of exempted services, or who was providing works contract service and was availing of the benefit of Notification No. 26/2012-Service Tax, dated the 20th June, 2012 or a first stage dealer or a second stage dealer or a registered importer or a depot of a manufacturer, shall be entitled to take, in his electronic credit ledger, credit of eligible duties in respect of inputs held in stock and inputs contained in semi-finished or finished [goods held in stock on the appointed day, within such time and in such manner as may be prescribed, subject to] the following conditions, namely:—
(i) such inputs or goods are used or intended to be used for making taxable supplies under this Act;
(ii) the said registered person is eligible for input tax credit on such inputs under this Act;
(iii) the said registered person is in possession of invoice or other prescribed documents evidencing payment of duty under the existing law in respect of such inputs;
(iv) such invoices or other prescribed documents were issued not earlier than twelve months immediately preceding the appointed day; and
(v) the supplier of services is not eligible for any abatement under this Act:
Provided that where a registered person, other than a manufacturer or a supplier of services, is not in possession of an invoice or any other documents evidencing payment of duty in respect of inputs, then, such registered person shall, subject to such conditions, limitations and safeguards as may be prescribed, including that the said taxable person shall pass on the benefit of such credit by way of reduced prices to the recipient, be allowed to take credit at such rate and in such manner as may be prescribed.
Registered persons who were not required to register under the previous law or engaged in manufacturing exempted goods or providing exempted services, including those availing benefits under Notification No. 26/2012-Service Tax dated 20th June 2012, as well as first stage dealers, second stage dealers, registered importers, or depots of manufacturers, are entitled to claim credit for eligible duties. This credit applies to inputs held in stock and inputs contained in semi-finished or finished goods on the appointed day. The conditions for availing such credit are outlined below:
Condition (i): Use for Taxable Supplies The inputs or goods must be used or intended to be used for making taxable supplies under the current Act.
Condition (ii): Eligibility for Input Tax Credit The registered person must be eligible for input tax credit on the specified inputs under the current Act.
Condition (iii): Possession of Invoice or Documents The registered person must possess invoices or other prescribed documents proving the payment of duty under the previous law for these inputs.
Condition (iv): Time Limit for Invoices Invoices or other prescribed documents should not be issued earlier than twelve months immediately preceding the appointed day.
Condition (v): Supplier Not Eligible for Abatement The supplier of services related to these inputs should not be eligible for any abatement under the current Act.
Provided: If a registered person, excluding manufacturers or service providers, lacks invoices or other documents proving duty payment for inputs, they may still claim credit under prescribed conditions. This includes passing on the benefit of such credit through reduced prices to the recipient, following specified conditions, limitations, and safeguards.
Transitional Credit Application Process
This transitional credit must be claimed within the time frame and in the manner prescribed by the authorities. The objective is to facilitate a smooth transition for registered persons moving from the previous tax regime to the current one.
Remember to consult the relevant regulations and guidelines for precise details on claiming transitional credit under Section 140(3).
Section 140(4)
A registered person, who was engaged in the manufacture of taxable as well as exempted goods under the Central Excise Act, 1944 (1 of 1944) or provision of taxable as well as exempted services under Chapter V of the Finance Act, 1994 (32 of 1994), but which are liable to tax under this Act, shall be entitled to take, in his electronic credit ledger,—
(a)the amount of CENVAT credit carried forward in a return furnished under the existing law by him in accordance with the provisions of sub-section (1); and
(b)the amount of CENVAT credit of eligible duties in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the appointed day, relating to such exempted goods or services, in accordance with the provisions of sub-section (3).
Registered persons who were involved in the manufacturing of taxable and exempted goods under the Central Excise Act, 1944 (1 of 1944), or providing taxable and exempted services under Chapter V of the Finance Act, 1994 (32 of 1994), and are now subject to taxation under the current Act, have specific provisions for transitioning their electronic credit ledger.
Entitlements in Electronic Credit Ledger:
(a) Carried Forward CENVAT Credit:
- Registered persons are entitled to include the amount of CENVAT credit carried forward from returns filed under the previous law, as specified in sub-section (1). This ensures a seamless transition of credits accrued under the old regime.
(b) CENVAT Credit on Eligible Duties:
- The registered person can claim the amount of CENVAT credit for eligible duties concerning inputs held in stock and inputs present in semi-finished or finished goods on the appointed day. This pertains specifically to those goods or services that were previously exempted but are now subject to taxation under the current Act, as outlined in sub-section (3).
Navigating the Transition:
During this transition, it is crucial for registered persons to carefully consider and document their eligible credits to ensure a smooth continuation of business activities under the new taxation framework. This provision aims to facilitate the adaptation of businesses to the updated tax regulations without causing undue financial strain.
It is important to note that these provisions are designed to provide a fair and reasonable approach to the transition of credits, offering registered persons an opportunity to maintain financial continuity while adhering to the requirements of the current Act.
Section 140(5)
A registered person shall be entitled to take, in his electronic credit ledger, credit of eligible duties and taxes in respect of inputs or input services received on or after the appointed day but the duty or tax in respect of which has been paid by the supplier under the [existing law, within such time and in such manner as may be prescribed], subject to the condition that the invoice or any other duty or tax paying document of the same was recorded in the books of account of such person within a period of thirty days from the appointed day:
Provided that the period of thirty days may, on sufficient cause being shown, be extended by the Commissioner for a further period not exceeding thirty days:
Provided further that said registered person shall furnish a statement, in such manner as may be prescribed, in respect of credit that has been taken under this sub-section.
A registered person has the right to record eligible duties and taxes in their electronic credit ledger. This applies to inputs or input services received on or after the appointed day. However, the duty or tax should have been paid by the supplier under the existing law. This process must occur within the time frame and in the manner prescribed. The condition is that the invoice or any other duty or tax paying document must be recorded in the books of account within thirty days from the appointed day.
Provisions for Time Extension
The Commissioner may extend the thirty-day period if sufficient cause is shown, but not for more than an additional thirty days.
Reporting Requirements
The registered person, who benefits from this provision, is required to furnish a statement as prescribed. This statement should detail the credit that has been taken under this sub-section.
Implementation and Compliance
This section outlines the mechanism for crediting duties and taxes, ensuring that proper records are maintained and reported within the specified time frame. It provides flexibility for time extension under certain conditions. Compliance with the reporting requirements is essential for transparency and accountability.
Section 140(6)
A registered person, who was either paying tax at a fixed rate or paying a fixed amount in lieu of the tax payable under the existing law shall be entitled to take, in his electronic credit ledger, credit of eligible duties in respect of inputs held in stock and inputs contained in semi-finished or finished [goods held in stock on the appointed day, within such time and in such manner as may be prescribed, subject to] the following conditions, namely:—
(i) such inputs or goods are used or intended to be used for making taxable supplies under this Act;
(ii) the said registered person is not paying tax under section 10;
(iii) the said registered person is eligible for input tax credit on such inputs under this Act;
(iv) the said registered person is in possession of invoice or other prescribed documents evidencing payment of duty under the existing law in respect of inputs; and
(v) such invoices or other prescribed documents were issued not earlier than twelve months immediately preceding the appointed day.
Section 140(7)
Notwithstanding anything to the contrary contained in this Act, the input tax credit on account of any services received prior to the appointed day by an Input Service Distributor shall be eligible for distribution as [credit under this Act, within such time and in such manner as may be prescribed, even if] the invoices relating to such services are received on or after the appointed day.
A registered person who used to pay tax at a fixed rate or a predetermined amount instead of the tax under the old law can now avail themselves of tax credits for eligible duties. This can be done by updating their electronic credit ledger. However, this process is subject to certain conditions outlined below.
Conditions for Availing Tax Credit:
Usage for Taxable Supplies:
- The inputs or goods in question must be used or intended for use in making taxable supplies under the current Act.
Exclusion from Section 10:
- The registered person claiming the credit should not be paying tax under section 10 of the Act.
Eligibility for Input Tax Credit:
- The registered person must be eligible for input tax credit on the specified inputs under the current Act.
Possession of Documents:
- The registered person should have the necessary invoices or prescribed documents proving the payment of duty under the old law for the mentioned inputs.
Document Timeline:
- Invoices or prescribed documents should not have been issued more than twelve months before the appointed day.
Conclusion: In summary, Section 140(6) allows registered individuals meeting these conditions to claim tax credits for eligible duties related to their existing stock of inputs or semi-finished/finished goods. This provides a transition mechanism for those who were under a fixed tax regime in the previous law.
Section 140(8)
Where a registered person having centralised registration under the existing law has obtained a registration under this Act, such person shall be allowed to take, in his electronic credit ledger, credit of the amount of CENVAT credit carried forward in a return, furnished under the existing law by him, in respect of the period ending with the day immediately preceding the appointed day [within such time and in such manner] as may be prescribed:
Provided that if the registered person furnishes his return for the period ending with the day immediately preceding the appointed day within three months of the appointed day, such credit shall be allowed subject to the condition that the said return is either an original return or a revised return where the credit has been reduced from that claimed earlier:
Provided further that the registered person shall not be allowed to take credit unless the said amount is admissible as input tax credit under this Act:
Provided also that such credit may be transferred to any of the registered persons having the same Permanent Account Number for which the centralised registration was obtained under the existing law.
In situations where a registered individual, who previously held centralized registration under the old law, acquires registration under the current Act, they are permitted to claim credit in their electronic credit ledger. This credit is based on the CENVAT credit amount carried forward in a return filed under the previous law for the period up to the day just before the appointed day. The process and timeframe for claiming this credit are determined as per the regulations.
Conditions for Credit Transfer
If the registered person submits their return for the period ending just before the appointed day within three months of that day, the credit is allowed. However, this is subject to the condition that the return is either an original one or a revised return where the credit claimed earlier has been reduced.
Admissibility under Current Act
It's important to note that the registered person can only claim credit if the amount is considered admissible as input tax credit under the current Act.
Transferability of Credit
Moreover, this credited amount may also be transferred to any other registered persons who share the same Permanent Account Number for which centralized registration was obtained under the previous law.
Conclusion
In conclusion, Section 140(8) outlines the provisions for credit transfer for individuals transitioning from centralized registration under the old law to obtaining registration under the current Act. The conditions for claiming credit, its admissibility, and the possibility of transfer are crucial aspects that individuals must consider during this transition.
Section 140(9)
Where any CENVAT credit availed for the input services provided under the existing law has been reversed due to non-payment of the consideration within a period of three months, such [credit can be reclaimed within such time and in such manner as may be prescribed, subject to] the condition that the registered person has made the payment of the consideration for that supply of services within a period of three months from the appointed day.
In certain situations, the law allows for the reclaiming of CENVAT credit related to input services. This provision is outlined in Section 140(9) and involves a specific set of conditions.
Reversal of CENVAT Credit
If a registered person had previously availed of CENVAT credit for input services under the previous law but had to reverse it due to non-payment of the consideration within three months, there is an opportunity to reclaim that credit.
Conditions for Reclaiming Credit
The reclaiming process is subject to certain conditions. The registered person must ensure that the payment of the consideration for the supply of services is made within three months from the appointed day.
This provision serves as a mechanism to address situations where CENVAT credit was initially reversed but can be reclaimed under specified circumstances. It is essential for individuals and businesses to be aware of and comply with these conditions to benefit from the reclaiming process under Section 140(9).
Section 140(10)
The amount of credit under sub-sections (3), (4) and (6) shall be calculated in such manner as may be prescribed.
Explanation 1.—For the purposes of [sub-sections (1), (3), (4)] and (6), the expression "eligible duties" means—
(i) the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957);
(ii) the additional duty leviable under sub-section (1) of section 3 of the Customs Tariff Act, 1975 (51 of 1975);
(iii) the additional duty leviable under sub-section (5) of section 3 of the Customs Tariff Act, 1975 (51 of 1975);
(iv)
(v) the duty of excise specified in the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986);
(vi) the duty of excise specified in the Second Schedule to the Central Excise Tariff Act, 1985 (5 of 1986); and
(vii) the National Calamity Contingent Duty leviable under section 136 of the Finance Act, 2001 (14 of 2001),
in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the appointed day.
Meaning of "Eligible Duties"
For the purposes of sub-sections (1), (3), (4), and (6), the term "eligible duties" includes:
(i) The additional duty of excise under section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957);
(ii) The additional duty under sub-section (1) of section 3 of the Customs Tariff Act, 1975 (51 of 1975);
(iii) The additional duty under sub-section (5) of section 3 of the Customs Tariff Act, 1975 (51 of 1975);
(iv) [List continues...]
(v) The duty of excise specified in the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986);
(vi) The duty of excise specified in the Second Schedule to the Central Excise Tariff Act, 1985 (5 of 1986);
(vii) The National Calamity Contingent Duty under section 136 of the Finance Act, 2001 (14 of 2001);
These apply to inputs held in stock and inputs contained in semi-finished or finished goods on the appointed day.
Explanation 2.—For the purposes of [sub-sections (1) and (5)], the expression "eligible duties and taxes" means—
(i) the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957);
(ii) the additional duty leviable under sub-section (1) of section 3 of the Customs Tariff Act, 1975 (51 of 1975);
(iii) the additional duty leviable under sub-section (5) of section 3 of the Customs Tariff Act, 1975 (51 of 1975);
(iv)
(v) the duty of excise specified in the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986);
(vi) the duty of excise specified in the Second Schedule to the Central Excise Tariff Act, 1985 (5 of 1986);
(vii) the National Calamity Contingent Duty leviable under section 136 of the Finance Act, 2001 (14 of 2001); and
(viii) the service tax leviable under section 66B of the Finance Act, 1994 (32 of 1994),
in respect of inputs and input services received on or after the appointed day.
For the purposes of sub-sections (1) and (5), "eligible duties and taxes" mean:
(i) Additional duty of excise under section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957);
(ii) Additional duty under sub-section (1) of section 3 of the Customs Tariff Act, 1975 (51 of 1975);
(iii) Additional duty under sub-section (5) of section 3 of the Customs Tariff Act, 1975 (51 of 1975);
(iv) [List continues...]
(v) Duty of excise specified in the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986);
(vi) Duty of excise specified in the Second Schedule to the Central Excise Tariff Act, 1985 (5 of 1986);
(vii) National Calamity Contingent Duty under section 136 of the Finance Act, 2001 (14 of 2001);
(viii) Service tax under section 66B of the Finance Act, 1994 (32 of 1994);
This applies to inputs and input services received on or after the appointed day.
Explanation 3.—For removal of doubts, it is hereby clarified that the expression "eligible duties and taxes" excludes any cess which has not been specified in Explanation 1 or Explanation 2 and any cess which is collected as additional duty of customs under sub-section (1) of section 3 of the Customs Tariff Act, 1975 (51 of 1975).
To remove doubts, it's clarified that "eligible duties and taxes" exclude any cess not specified in Explanation 1 or Explanation 2. Also, it excludes any cess collected as additional duty of customs under sub-section (1) of section 3 of the Customs Tariff Act, 1975 (51 of 1975).