Transitional Provisions

List of Transitional Provisions

3 Categories The transition provisions can be categorized under three heads:

A. Relating to Input Tax Credit
B. Continuance of existing procedures such as job work for a reasonable
period without any adverse consequence under GST law
C. All claims (pending as well as future) pertaining to existing laws filed
before, on or after 1-7-2017

Category A: Relating to ITC

Basic Rule of
ITC on Inputs

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Basic rule of
ITC on capital
goods

Transition
Categories

Quantity or
extent of ITC
Transition

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Deemed
Credit in case
of no invoice
for traders
only

Credit in Input Tax Credit of CENVAT/VAT in respect of input, semi-finished and finished goods
respect of in stock attributable to exempted goods or services which are now taxable can also
exempted be taken in the same manner.
and non-
exempted
goods /
services
Input or
Input Service
in transits

30 days can be further extended by commissioner for 30 more days.

Tax paid Those taxpayers who paid tax at fixed rate or fixed amount in lieu of the tax payable
under the under the existing law but are working under normal scheme under GST can claim
existing law credit on their input stock, semifinished and finished stock on the appointed date,
under subject to the following conditions:
composition (i) Such input stock used for taxable supply under this Act
scheme (ii) Registered Person is not covered under section 10 (composition scheme) of this
Act
(iii) Registered Person is eligible for ITC under this Act
(iv) Registered Person is in possession of the invoice or other duty payment
documents
(v) Such invoices are not more than twelve months old on the appointed day

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Duty based
on capacity
of
production

Credit on The input tax credit on account of any services received prior to 1-7-2017 by an
input service Input Service Distributor shall be eligible for distribution as credit under this Act
by an INPUT even if the invoices relating to such services are received on or after 1-7-2017.
SREVICE
DISTRIBUTO Registered person, can be filed the return for the period ending 30th June 2017 by
R showing credit that can be carried forward by him on or before the due date or
within 3 months from 1-7-2017 as the case may be.

It is not necessary that to distribute the credit in the ratio of the turnover of these
locations.

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Example 1

Mr. Ayaan is a trader in the state of Tamil Nadu having a stock of `50,000/- as on appointed date. He
supplied goods for `60,000/- and on which he has paid CGST @14% i.e. `8,400 (`60,000 × 14%). As per
section 140(3) of CGST Act, 2017 and rules made thereunder, he can claim credit to the extent of 60%
of CGST paid i.e. 5,040 (`8,400 × 60%).

Q.1. Mr. X is a taxable person under GST (who is a wholesaler), is having a stock worth of Rs.
5,00,000/- as on 01-072017. Such person has supplied goods for Rs. 5,60,000/- and on which he
has paid CGST @ 9% and SGST @ 9%.
How much ITC is allowed under sec. 140(3) of GST in the following independent cases:
(a) If he is in possession of duty paid document for the stock (namely BED is Rs. 62,500 and
VAT Rs. 28,125).
(b) If he is not in possession of duty paid document for the stock, but has invoice evidencing
purchase of good.
Answer:
(a) ITC allowed is equal to BED is Rs. 62,500 as CGST credit and VAT of Rs. 28,125 as SGST
credit.
(b) In accordance with the provisions of Transition Rules, he can claim credit to the extent of
60% of CGST paid, i.e., Rs. 30,240/- 50,400 @ 60%) as CGST credit.
In accordance with the provisions of Transition Rules, he can claim credit to the extent of 60%
of SGST paid, i.e., Rs. 30,240/- 50,400 @ 60%) as SGST credit._
(C) Credit in respect of exempted and non-exempted goods or provisions of exempted as well
as non-exempted services [u/s 140(4)]:

Q.2. M/s X Ltd. manufacturer of product 'A' and 'B'. Product 'A' is cleared on payment of duty
whereas product 'B' is exempt from payment of excise duty. Inputs used exclusively for product 'A'
of Rs. 2,00,000 suffered excise duty Rs. 25,000 and product 'B' of Rs. 1,00,000 suffered excise duty
paid Rs. 12,500.
Common inputs of Rs. 3,00,000 is used for product 'A' as well as 'B' which also suffered excise duty
Rs. 37,500.
As on 1-7-2017, Finished goods of Product 'A' worth Rs. 10,00,000 and Product 'B' worth of Rs.
5,00,000 is in Stock. How much ITC credit is allowed to M/s X Ltd under GST under Section 140(1)
and 140(4) of the CGST Act, 2017. w.e.f. 1-7-2017 Product 'A' as well as 'B' taxable with CGST 6% as
well as SGST6%. Note: Manufacturer is in possession of relevant duty paid documents on inputs.
Answer
ITC c/f under Sec 140(1) is as follows:
Inputs used exclusively for Product 'A' = 25,000
Inputs used commonly for "A & B" = 25,000
(Rs. 37,500 x Rs. 10 Lakhs / Rs. 15 Lakhs)
ITC allowed under Sec 140(3) is as follows:
Inputs used exclusively for Product 'B' = Rs. 12,500
Inputs used commonly for "A & B" = Rs. 12,500
(Rs. 37,500 x Rs. 5 Lakhs / Rs. 15 Lakhs)
Total ITC under section 140(4)_ = 75,000

Q.3. Mr. X has cleared goods from his factory on 20th May 2017 for sale to Mr. Y for Rs. 5,00,000.
Effective rate of E.D @12.5%. However, E.D Rs. 62,500 has been paid on 6 th June 2017. The
consignment received by Mr. Y on 5th July 2017.
Find the following:
(a) Mr. Y is eligible for ITC if so what amount?
(b) Time limit within which receipt of inputs should record in the books of account of Mr. Y.
(c) Mr. Y recorded receipt of inputs in the books of account on 15-8-2017, if so can be avail
the ITC?

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Answer:
(a) Yes. Mr. Y is eligible to avail the ITC of Rs. 62,500 provided he deals with taxable supplies
being registered person.
(b) Inputs or Input Services recorded in the books of account < 30 days from 1-7-2017.
Therefore, Mr. Y should be account for by 30th July 2017.
(c) Since, period of 30 days may, on sufficient cause being shown, be extended by the
Commissioner for a further period not exceeding 30 days.
In the given Mr. Y can take credit on inputs on 15th Aug 2017, provided permission granted by the
Commissioner for extension not exceeded 30 days.

Q.4. Mr. X imported goods from USA on 28th June 2017 for 15,00,000. Customs duties like BCD
150,000, CVD 168,750, Cess Rs. 3,563 and Spl.CVD. of Rs. 24,893 also paid on 29 th June 2017.
The consignment received by Mr. Y into his factory on 20th July 2017. The services of Customs
Broker and C&F are used for imported inputs. Service Tax 110,000, SBC of Rs. 500 and KKC of
Rs. 500 has been paid on 30th June 2017 along with value of services to the provider of services.
Mr. Y is eligible for ITC if so what amount?
Answer:
Statement showing ITC to Mr. X under GST
S. No. Duties and Taxes Tax Amount in t Remarks
1 BCD Nil Not allowed as ITC
2 CVD 68,750 Allowed as ITC under CGST
3 Cess Nil Not allowed as ITC
4 Spl. CVD 24,893 Allowed as ITC under CGST
5 Service Tax 10,000 Allowed as ITC under CGST
6 SBC Nil Not allowed as ITC
7 KKC nil Not allowed as ITC
Total u/s 140(5) 1,03,643

Q.5. M/s X Academy being provider of taxable services has obtained centralized registration in
Chennai for its offices in Hyderabad and Cochin under the Finance Act, 1994. The Chennai Office
has the balance credit of `5 Lakhs as on 30-06-2017. Can M/s X Academy distribute the credit to
Hyderabad and Cochin. If so in which ratio. Explain?
Answer:
Registered person, can be filed the return for the period ending 30th June 2017 by showing credit that
can be carried forward by him on or before the due date or within 3 months from 1-7-2017 as the case
may be. In the given case, credit can be distributed by M/s X Academy to Hyderabad and Cochin. Since,
all the units has same PAN.

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Case Laws

1. Adfert Technologies (P.) Ltd.[2019] 111 taxmann.com 27 (Punj. & Har.) Decision: Where
petitioners, migrated from VAT regime to GST regime on introduction of GST, sought direction to
respondents to permit carry forward of unutilized CENVAT credit of duty paid under Central Excise
Act, 1944 and Input Tax Credit (ITC) of VAT paid under Punjab VAT Act, 2005 or Haryana VAT Act,
2003 on account of non-filing or incorrect filing of prescribed statutory Form i.e., TRAN-1 by stipulated
last date, i.e., 27-12-2017 due to technical glitches, petitioners were permitted to file Form TRAN-1
either electronically or manually on or before 30-11-2019. While doing so, the Hon’ble Court noted
that the Respondent authorities were having complete record of already registered persons and at present
they are free to verify fact and figures of any Petitioner thus in spite of being aware of complete facts
and figures, the Respondent cannot deprive Petitioners from their valuable right of credit. Note: Against
this order of the Hon’ble P&H HC SLP was filed by the Revenue Dept. which was dismissed by the
Apex Court in Adfert Technologies (P.) Ltd. (supra).

2. Rohan Dyes and Intermediates Ltd. v. Union of India[2020] 115 taxmann.com 387 (Guj.) In this
case, Hon’ble Gujarat High Court relying on its earlier decision given in Siddharth Enterprises held
that: In case where petitioner could not upload the form GST TRAN-1 due to technical glitches and in
spite of various representations made by the petitioner, he was not allowed to upload the form GST
TRAN-1, the petitioner is entitled to claim credit of CENVAT as on 30th June 2017 as per the provisions
under section 140(1) of the Act, 2017 read with Rule 117 of the Rules 2017. Taking into consideration
Order No. 01/2020-GST dtd. 07.-2.2020 of CBEC, the Hon’ble Court directed the Department to
consider the Petitioner’s declaration till 31-3-2020

3. Brand Equity Treaties Ltd. v. Union of India [2020] 116 taxmann.com 415 (Delhi) This is a case is
of immense importance wherein Hon’ble Delhi HC interalia resolved the following issues: Basis the
decision of the Apex Court given in Eicher Motors Ltd. (supra) and Dai Ichi Karkaria Ltd. (supra)
(wherein the Apex Court held that the provision for facility of credit as a vested right (which is
indefeasible in nature) and also held that the facility of credit is as good as tax paid till the tax is adjusted
on future good) noted that “..On enactment of the CGST Act, no mechanism was provided for the refund
of the credit that existed on the said date. The only mechanism was for utilization of such credit by
migrating the same to the GST regime by way of filing declaration Form TRAN-1. The manner and
procedure to carry forward the said CENVAT credit under Sub-Section (1) of Section 140 was to be
‘prescribed’….Evidently, there is no other provision in the Act prescribing time limit for the transition
of the CENVAT credit, and the same has been introduced only by way of Rule 117. This provision also
contains a proviso, which vests power with the Commissioner to extend the period on the
recommendations of the Council….there is nothing sacrosanct about the time limit so provided. It is
not as if the Act completely restricts the transition of CENVAT credit in the GST regime by a particular
date, and there is no rationale for curtailing the said period, except under the law of limitations. The
period of 90 days has no rationale and as noted above, extensions have been granted by the Government
from time to time, largely on account of its inefficient network.” High Court further opined that
“Conscious of the circumstances that are prevailing, we feel that taxpayers cannot be robbed of their
valuable rights on an unreasonable and unfounded basis of them not having filed TRAN-1 Form within
90 days, when civil rights can be enforced within a period of three years from the date of commencement
of limitation under the Limitation Act, 1963.” In view of the above, Hon’ble Delhi High Court held that
entitlement of credit of taxes/duties paid on purchases made under the erstwhile regime is a vested right
and cannot be taken away by virtue of Rule 117 of the CGST Rules, 2017

4. In Eicher Motors Ltd. v. Union of India 1999 taxmann.com 1769, the Hon’ble Supreme Court of
India considered MODVAT Credit as an ‘absolute right’ regarding the input is used in the manufacture
of the final product and on the date when the Assessee paid the tax on the raw materials or the inputs.
In this regard, the Hon’ble Court observed that: “..Thus, the right to the credit has become absolute at
any rate when the input is used in the manufacture of the final product. The basic postulate, that the
scheme is merely being altered and, therefore, does not have any retrospective or retro-active effect,

13.7
submitted on behalf of the State, does not appeal to us. As pointed out by us that when on the strength
of the rules available certain acts have been done by the parties concerned, incidents following thereto
must take place in accordance with the scheme under which the duty had been paid on the manufactured
products and if such a situation is sought to be altered, necessarily it follows that right, which had
accrued to a party such as availability of a scheme, is affected and, in particular, it loses sight of the fact
that provision for facility of credit is as good as tax paid till tax is adjusted on future goods on the basis
of the several commitments which would have been made by the assessees concerned. Therefore, the
scheme sought to be introduced cannot be made applicable to the goods which had already come into
existence in respect of which the earlier scheme was applied under which the assessees had availed of
the credit facility for payment of taxes. It is on the earlier scheme necessarily the taxes have to be
adjusted and payment made complete. Any manner or mode of application of the said rule would result
in affecting the rights of the assessees. We may look at the matter from another angle. If on the inputs
the assessee had already paid the taxes on the basis that when the goods are utilised in the manufacture
of further products as inputs thereto then the tax on these goods gets adjusted which are finished
subsequently. Thus, a right accrued to the assessee on the date when they paid the tax on the raw
materials or the inputs and that right would continue until the facility available thereto gets worked out
or until those goods existed.” Notably, the Supreme Court in addition to the above also held that
provision for facility of credit is as good as tax paid till tax is adjusted on future goods on the basis of
the several commitments which would have been made by the assessees concerned.

5. R.R. Distributors Pvt. Ltd v. Commissioner Of Central Tax, GST [W.P. (C) 4143 of 2020, dated 27-
5-2021] Very recently i.e. on 27-5-2021, Hon’ble Delhi High Court in this case aptly held that the non-
filing of part 7B of table 7(a) and table 7(d) of TRAN-1 Form cannot impair the rights of the petitioner
to claim transitional ITC, if he is otherwise eligible. The Hon’ble Court further noted that failure on the
part of the Petitioner to give relevant details in TRAN-1 Form can only be taken as a procedural lapse
which should not cause any impediment to its right to claim transitional ITC. In view thereof, the Court
directed the Respondents to either open the online portal so as to enable the Petitioner to file the rectified
TRAN-1 Form electronically or accept the same manually with necessary corrections, on or before 30th
June 2021.

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