Yes, it is true that a person registered under GST laws shall be entitled to take credit of eligible duties even if he was not registered under earlier laws and not filed any return under existing law.
The objective of this provision is to provide benefit of Input Tax Credits paid under Central Excise laws (eligible duties ) to dealer (registered under GST) on stock in hand as on 01.07.2017 where such input tax credits were not claimed before 01.07.2017 because he was not allowed under that laws due to various reasons like:
- he was not liable to be registered under existing law (Excise Duty or Service Tax); or
- he was engaged in the manufacture of exempted goods or provision of exempted services; or
- he was providing works contract service and was availing of the benefit of notification No. 26/2012—Service Tax, dated the 20th June, 2012; or
- he was a first stage dealer; or
- he was a second stage dealer; or
- he was a registered importer; or
- he was a depot of a manufacturer
In GST, he will be allowed to take credit of eligible duties 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.
Eligible duties (in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock) include:
However, there are some conditions to claim such credit. There are two different situations:
- Where such dealer has invoices evidencing Excise Duty paid on purchases
- Where such dealer has NOT invoices evidencing Excise Duty paid 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 an excisable unit and such unit issues him excise invoice in which excise duty separately mentioned. In this case, it will be considered that dealer has invoices evidencing amount of excise duty paid on purchases. To claim this amount as input tax credits, he have to fulfill all of following conditions:-
Once all conditions satisfied, he will be entitled to claim eligible duties paid on inputs, inputs contained in semi-finished goods and on finished goods.
Situation 2: Where such dealer has NOT invoices evidencing Excise Duty paid on purchases:
Where a dealer has not invoices or other documents evidencing excise duties (e.g. dealer is registered under State VAT law and is procuring inward supplies from another VAT/CST Dealer not having Excise registration), he is also allowed to avail the credit of Excise Duty subject to the following conditions:
Manner of Credit under this system :
When all conditions are satisfied, such registered person under GST shall be allowed the CENVAT credit :
This scheme will be applicable mutatis mutandis under IGST and UTGST.