CENVAT Credit (of Excise duty) allowed on Closing Stock as on 30.06.2017 even if dealer was not an excisable unit or exempted entity under Excise Laws 1


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:

  1. the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957;
  2. the additional duty leviable under sub-section (1) of section 3 of the Customs Tariff Act, 1975;
  3. the additional duty leviable under sub-section (5) of section 3 of the Customs Tariff Act, 1975;
  4. the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Textile and Textile Articles) Act, 1978;
  5. the duty of excise specified in the First Schedule to the Central Excise Tariff Act, 1985;
  6. the duty of excise specified in the Second Schedule to the Central Excise Tariff Act, 1985; and
  7. the National Calamity Contingent Duty leviable under section 136 of the Finance Act, 2001

However, there are some conditions to claim such credit. There are two different situations:

  1. Where such dealer has invoices evidencing Excise Duty paid on purchases
  2. 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:-

  1. such inputs or goods are used or intended to be used for making taxable supplies under CGST Act or IGST Act or UTGST Act;
  2. the said registered person is eligible for input tax credit on such inputs under this Act;
  3. 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;
  4. such invoices or other prescribed documents were issued not earlier than twelve months immediately preceding the appointed day; and
  5. the supplier of services is not eligible for any abatement under this Act.

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:

  1. He should not be a manufacturer of such goods or a supplier of services
  2. Goods should not be unconditionally exempt from the excise duty.
  3. Goods should not be nil rated in First Schedule to the Central Excise Tariff Act, 1985
  4. Document for procurement should be available with the registered person.
  5. Detail of stock held on appointed day shall be declared in FORM GST TRANS-1
  6. The stock of goods on which the credit is availed under this system should be stored in such manner that it can be easily identified by the registered person.
  7. He shall pass on the benefit of such credit by way of reduced prices to the recipient of goods.

Manner of Credit under this system :

When all conditions are satisfied, such registered person under GST shall be allowed the CENVAT credit :

at the rate of 60% of Central GST (i.e. of half portion of whole tax rate) applicable on supply of such goods where Gross Tax Rate (i.e. CGST+SGST) is 18% or more.

 

In case, tax rate is lower than that of 18%, then credit will be allowed only @40% of CGST

 

and, such credit shall be allowed only after the payment of central tax (payable on such supply) being made to government

 

This scheme will be available for six tax periods from the appointed date (1.7.2017). {It means dealer must consume its whole of opening stock as on 01.07.2017 within six months from this date}

 

Details of supplies made in each month (out of such stock) to be filed in Form GST TRAN 2 at the end of  each month upto six tax periods during which the scheme is in operation.

This scheme will be applicable mutatis mutandis under IGST and UTGST.

 


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