The objective of this provision is to provide benefit of Input Tax Credits paid under State VAT laws to dealer (registered under GST), on stock in hand as on 01.07.2017 (which is liable to tax under GST), where such input tax credits were not claimed before 01.07.2017 because he was not allowed to claim Input tax credits under that laws due to various reasons like:
- He was not liable to registered under State VAT laws; or
- He was dealing in goods which were exempted or tax free under State VAT laws; or
- He was dealing in goods which have suffered tax at first point of their sale in the State and subsequent sale of which are not subject to tax in the state; or
- He was entitled to claim Input Tax Credits at the time of sale of goods.
In GST, he shall be entitled to take credit of VALUE ADDED TAX in respect of:
- inputs held in stock; and
- inputs contained in semi-finished goods held in stock; and
- inputs contained in finished goods held in stock;
and such stock shall be counted as available in stores on appointed day (i.e. 1st of July, 2017) for GST.
However, law has provided some conditions to claim such credit. There are two different situations:
- Where such dealer has invoices evidencing payment of VAT on purchases
- Where such dealer has NOT invoices evidencing payment of VAT on purchases
We will discuss in detail about both situations and conditions associated to these situations to claim the credit:
Situation 1 : Where such dealer has invoices evidencing Excise Duty paid on purchases:
Where such dealer purchases goods from a dealer registered under VAT and such vendor issues him an invoice in which amount of State VAT paid is clearly mentioned, it will be considered that dealer has invoices evidencing amount of VAT paid on purchases. To claim input tax credits in this case, following conditions must also be complied with:
|Situation 2 : Where such dealer has NOT invoices evidencing payment of State VAT on purchases
Where a dealer has not invoices or other documents evidencing State VAT paid on purchases, he is also allowed to avail the credit of State VAT subject to the following conditions. However, this benefit would be available only for the stock of goods on which tax is paid at first point of their sale in the State and subsequent sale of which are not subject to tax in the state.
Manner of claiming Credits under this situation :