GST Transition: How to Migrate Existing Input Credits?

Taxpayers already registered under VAT/Service tax in India also need to register under GST.

Each entity registered under the previous indirect tax laws shall get a certificate of registration on the provisional basis.

This certificate issued would be valid for a period of 6 months. Businesses having a turnover of more than Rs 20 Lakhs have to get registered mandatorily under GST. Small businesses can either opt for composition scheme or they can get voluntarily registered under GST.

All invoices have to be uploaded online, according to the GST Model Law. The process of deduction, payment, and refund of indirect taxes under GST would be carried out electronically.

Every business should have a fully computerized office for ease of compliance under GST. We have various articles explaining the need/process of registration for all different kind of businesses.

  • Input tax credit claimed in the return filed under previous laws for the period prior to the appointed day (1 July 2017) would be transferred to the electronic credit ledger. Existing manufacturers/dealers can claim the CENVAT credit in respect of input held in stock, semi-finished or finished goods held in stock if the following conditions are satisfied-:
  1. Such inputs and/or goods are used or intended to be used for making taxable supplies under GST;
  2. The said taxable person passes on the benefit of such credit by way of reduced prices to the recipient;
  3. The said taxable person is eligible for input tax credit on such inputs under GST;
  4. The said taxable person is in possession of invoices and/or other prescribed documents evidencing payment of duty under the earlier the law in respect of such inputs;
  5. Such invoices and/or other prescribed documents were issued not earlier than twelve months immediately preceding the appointed day;
  6. The supplier of services is not eligible for any abatement under GST.

Input tax credit can be claimed by the manufacturer/dealer only for those goods received after the appointed day, the tax on which has already been paid under previous law. Above credits would only be allowed if the invoice/tax paying document is recorded in the accounts of such person within thirty days of the appointed day. A thirty-day extension may be granted by the competent authority on grounds of sufficient cause for delay.

For example, let’s consider July 1, 2017 as the appointed day for the GST rollout. The taxpayer must make sure that he/she has taken into account all the stock lying on June 30, 2017 and claim input credit during the filing of returns for the period ending June 30, 2017. The taxpayer, thus, must ensure that all such goods and services are eligible for such a credit under the new GST law.

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