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2020-03-17 12:31:45GST CenterEnglishTRAN 1 is an electronic declaration submitted on the portal by a registered person authorized to claim ITC earned under the previous...https://quickbooks.intuit.com/in/resources/in_qrc/uploads/2020/03/TRAN-1-in-GST-Components-Format-and-Provisions.jpghttps://quickbooks.intuit.com/in/resources/gst-center/tran-1/TRAN 1 in GST: Components, Format and Provisions

TRAN 1 in GST: Components, Format and Provisions

18 min read

One of the major challenges faced by the government while implementing GST was to come up with provisions that allow for a seamless transition from the previous indirect tax structure to the new GST system.

It wanted to ensure that all the input tax benefits earned under the previous tax regime were not lost on transiting to the new GST system.

Accordingly, Form GST TRAN – 1 was introduced that allowed taxpayers registered under GST to declare transitional ITC.

This article talks about form GST TRAN – 1, its components, format and transitional provisions under the GST system.

What is GST TRAN-1?

Form GST TRAN -1 is nothing but an electronic declaration that needs to be submitted on the GST common portal by every registered person under GST who is authorized to claim ITC/ benefits earned under the previous indirect tax regime.

Sections 140 – 142 of the CGST act, 2017 together with rules 117 – 12 of CGST rules 2017 deal with various transitional provisions for claiming ITC/benefits earned under previous indirect tax regime via Form GST TRAN -1.

Who Can File GST TRAN-1?

Every registered person under GST who is authorized to claim ITC/ benefits earned under the previous indirect tax regime can file Form GST Tran-1. Such a person may be registered or unregistered under the old regime.

However, those persons registered as composition dealers under the Composition Scheme cannot fie Form GST TRAN-1.

GST TRAN-1 Due Date Notification

As per rule 117 of the CGST rules, 2017, every registered person, other than the composition dealer, can file declaration in Form GST TRAN – 1. Such a person needs to file TRAN-1 within 90 days from the date of implementation of GST i.e. 1st July, 2017.

Thus, on filing such a Form on the above mentioned due date, the eligible person can claim credit of the input tax/benefits due to him under previous indirect tax laws.

The government, however, has been extending the due date for filing declaration in form GST TRAN – 1 by certain taxpayers. This is being done to support those taxpayers who could not file the declaration due to technical errors on the common portal or any other case as may be suggested by the government.

All the orders issued in respect of extension of due date of filing GST TRAN – 1, along with the latest order no 01/2020 dated 7th February, 2020 are given below:

Order No.Date of OrderTRAN – 1 Due Date Extended Till
Order No. 01/2020-GSTDated 7th February, 2020Extended due date for filing GST TRAN – 1 till 31st March, 2020
Order No. 01/2019-GSTDated 31st January, 2019Extended due date for filing GST TRAN – 1 till 31st March, 2019
Order No. 4/2018-GSTDated 17 th September, 2018Extended due date for filing GST TRAN – 1 till 31st January, 2019
Order No. 9/2017-GSTDated 15th November, 2017Extended due date for filing GST TRAN – 1 till 27th December, 2017
Order No. 08/2017-GSTDated 28th October, 2017Extended due date for filing GST TRAN – 1 till 30th November, 2017
Order No. 03/2017-GSTDated 21st September, 2017Extended due date for filing GST TRAN – 1 till 31st October, 2017

Important Points for GST Transition

There are certain important points that need to be kept in mind by the taxpayers for claiming credit for inputs/benefits due to him while shifting from the existing tax laws to the new GST regime.

These are as follows:

  • any amount of credit that is required to be carried forward from the previous indirect tax regime must be admissible as input credit under the GST Act
  • the taxpayer claiming input credit/benefits must have furnished all the requisite returns under the previous indirect tax regime for a period of six months immediately before the implementation of GST. In other words, in case you have not filed VAT/Service tax/Excise returns for six months prior to the GST implementation date, you would not be able to carry forward any credit due to you under previous indirect tax law.

Transition Provisions Under GST

I. Transitional Provisions in Respect of ITC

The government has rolled out a number of provisions to carry forward ITC earned under the previous indirect tax law. A taxpayer, however, can claim such a credit/benefit only if it is allowed under GST.

Thus, ITC under a number of previous indirect taxes such as VAT, excise etc can be claimed as under:

a. Carry Forward of the Closing Balance of Credit Due in Last Returns Filed under Previous Indirect Tax Laws (Section 140 (1), CGST Act, 2017)

Any registered person, other than the composition dealer, can claim the CENVAT credit/VAT carried forward in the last returns filed by him immediately before the GST implementation under the previous indirect tax laws. Such a credit can be availed by the taxpayer in his electronic credit ledger.

Section 5(a) of Form GST TRAN – 1

The closing balance of the credit in the last returns can be claimed by filing a declaration in section 5(a) titled ‘Amount of Tax Credit Carried Forward in the Return Filed under Existing Laws’ of the TRAN – 1 form.

b. Unavailed Credit on Capital Goods (Section 140 (2), CGST Act, 2017)

As per this provision, any registered person, except the composition dealer, can claim unavailed credit on capital goods due under previous indirect tax laws.

Provided this unavailed credit on capital goods is not carried forward in the return filed for the period ending on the day immediately before the GST implementation date (i.e 1st July, 2017).

Here, ‘unavailed credit’ means the amount of credit left after deducting the amount of credit already availed from the total amount of credit due to be received by the taxpayer under previous indirect tax regime.

Furthermore, the taxpayer can claim such a credit in his electronic credit ledger.

Section 6 of Form GST TRAN – 1

Unavailed credit on capital goods under previous indirect tax laws can be claimed in section 6 titled ‘Details of Capital Goods for which Unavailed Credit has not been Carried Forward Under Existing Law’ of the TRAN – 1 form.

c. Credit of Duties Paid on Inputs Held in Stock Where Registered Person Has Invoices/Documents Evidencing Such a Payment (Section 140 (3), CGST Act, 2017)

A registered person, who was not entitled to be registered under the previous indirect tax regime, can claim credit of duties paid on goods held in stock on date of implementation of GST.

As per the GST act, tax would be payable on goods and services supplied after July 1, 2017.

To avoid collecting tax twice on the same set of goods, the government allowed taxpayers to claim credit of duties paid on goods held in stock under the previous indirect tax laws.

Such a credit can be availed by the taxpayer in his electronic credit ledger provided following conditions are met:

  • such goods/inputs are utilized or proposed to be utilized for making taxable supplies under GST
  • the registered person is entitled to receive ITC on such inputs under GST
  • registered person has the invoice or documents that act as proof of payment of duty on such inputs under previous indirect tax law
  • invoices or documents evidencing such a payment of duty on inputs are not older than one year
  • the supplier of services is not entitled for any abatement under the act
Section 7 of Form GST TRAN – 1

Credit of duties paid on inputs held in stock where the registered person possesses the documents evidencing such a payment is claimed in part 7A of the table under section 7(a) titled ‘Amount of duties and taxes on inputs claimed as credit excluding the credit claimed under Table 5(a) and 7(c) titled ‘Amount of VAT and Entry Tax paid on inputs supported by invoices/documents evidencing payment of tax carried forward to electronic credit ledger as SGST/UTGST under sections 140(3), 140(4)(b) and 140(6)’ of the TRAN – 1 form.

d. Credit of Duties Paid on Inputs Held in Stock Where Registered Person Does Not Have Invoices/Documents Evidencing Such a Payment (Section 140 (3), CGST Act, 2017)

As per Rule 117 (4) of CGST rules, 2017, a registered person, who was not registered under the previous indirect tax regime, can claim ITC on goods held in stock on which duties have been paid under previous indirect tax laws. Provided further that such a registered person does not have invoice/documents evidencing such a payment of duty on inputs.

In this case, the government allows the taxpayer to claim such a credit as per the following scheme:

Amount of CreditFor Goods with Applicable Central Tax Rates
ITC at the rate of 60%On goods that attract central tax @ 9% or more that are cleared after July 1, 2017
ITC at the rate of 40%For other goods of GST paid on stock that is cleared after July 1, 2017

However, ITC as mentioned in the above table shall be credited only when the applicable central tax has been paid by the taxpayer.

Where IGST is paid on goods, the ITC can be claimed as per the following scheme:

Amount of CreditFor Goods with Applicable Central Tax Rates
ITC at the rate of 30%On goods that attract IGST @ 9% or more that are cleared after July 1, 2017
ITC at the rate of 20%For other goods of GST paid on stock that is cleared after July 1, 2017

This scheme is operative for six tax periods from the appointed day. In addition to this, there are other conditions that need to be met in order to claim ITC of central tax specified in the above table.

These are as follows:

  • the documents for procurement of such goods are available with the registered person
  • these goods were not completely exempt from the whole of the excise duty mentioned in Schedule I to Central Excise Tariff Act, 1985 or were not nil rated in the said Schedule
  • the amount of credit would be credited in the electronic credit ledger of the taxpayer
  • stock of goods are stored in such a way that they are easily identified by the registered person
  • the registered person submits a statement in Form GST TRAN 2 by the prescribed time period for each of the six tax periods for which the scheme is operative
Section 7 of Form GST TRAN – 1

Credit of duties paid on inputs held in stock where the registered person does not possess the documents evidencing such a payment is claimed in part 7B of the table under section 7(a) titled ‘Amount of duties and taxes on inputs claimed as credit excluding the credit claimed’ under Table 5(a) and 7(d) titled ‘Stock of goods not supported by invoices/documents evidencing payment of tax (credit in terms of rule 117 (4)) (To be there only in States having VAT at single point)’ of the TRAN – 1 form.

e. Credit for Supply of Exempted Goods under Previous Indirect Tax Law Which are Taxable Under GST (section 140(4))

A registered person supplying taxable as well as exempted goods under previous indirect tax laws which are now taxable under GST can claim:

  • ITC carried forward in the last return filed under previous indirect tax laws. This can be claimed as per the provisions of section 140(1), as mentioned above.
  • credit for duties paid on goods held in stock on July 1, 2017 in respect of such exempted goods or services. Such a credit can be claimed as per provisions of section 140(3) as mentioned above.
Section 5(a) and Section 7(a) and 7(c) of Form GST TRAN – 1

The closing balance of the credit in the last returns can be claimed by filing a declaration in section 5(a) titled ‘Amount of Tax Credit Carried Forward in the Return Filed under Existing Laws’ of the TRAN – 1 form.

Likewise, credit of duties paid on inputs held in stock where the registered person possesses the documents evidencing such a payment is claimed in part 7A of the table under section 7(a) titled ‘Amount of duties and taxes on inputs claimed as credit excluding the credit claimed under Table 5(a)’ and 7(c) titled ‘Amount of VAT and Entry Tax paid on inputs supported by invoices/documents evidencing payment of tax carried forward to electronic credit ledger as SGST/UTGST under sections 140(3), 140(4)(b) and 140(6)’ of the TRAN – 1 form.

f. Credit for Input/Input Services in Transit (section 140(5))

There can be cases where a registered person receives inputs or input services on or after the appointed day. But he pays tax or duties for the same under the previous indirect tax regime.

In such cases, the registered person can claim credit for eligible duties or taxes. Provided the invoice or document evidencing payment of duty or taxes has been recorded in the books of accounts within 30 days from the appointed day.

Also, the registered person must file a statement for the credit availed under this section in a prescribed manner.

Section 7(b) of Form GST TRAN -1

Credit for input/input services in transit can be claimed in section 7(b) titled ‘Amount of eligible duties and taxes/VAT/[ET] in respect of inputs or input services under section 140(5) and section 140(7)’ of the TRAN -1 form.

g. Credit for Duties Paid on Input Stock on which Tax was Paid at a Fixed Rate or Fixed Amount under Previous Indirect Tax Regime (section 140(6))

The taxpayers who paid tax at a fixed rate or fixed amount in place of tax payable under the previous indirect tax but are normal taxpayers under GST can claim credit on input stock, semi-finished and finished stock on the appointed date.

However, such a credit can be claimed only if the following conditions are met:

  • such input stock is utilized for making taxable supplies under GST
  • the registered person is not a composition dealer under section 10 of the GST act
  • registered person has the invoice or documents evidencing payment of duty on such input stock
  • these invoices are not older than one year on the appointed date
Section 7(a) and 7(c) of Form GST TRAN – 1

Credit of duties paid on inputs held in stock where the registered person possesses the documents evidencing such a payment is claimed in part 7A of the table under section 7(a) titled ‘Amount of duties and taxes on inputs claimed as credit excluding the credit claimed under Table 5(a)’ and 7(c) titled ‘Amount of VAT and Entry Tax paid on inputs supported by invoices/documents evidencing payment of tax carried forward to electronic credit ledger as SGST/UTGST under sections 140(3), 140(4)(b) and 140(6)’ of the TRAN – 1 form.

h. Credit on Services Received by an Input Service Distributor (section 140 (7))

The ITC on services received by an Input Service Distributor (ISD) before the appointed date is entitled to be distributed as credit under GST. Such a credit is distributed even if the invoices in respect of such services are received on or after the appointed date.

Section 7(b) of Form GST TRAN -1

Credit for input/input services in transit can be claimed in section 7(b) titled ‘Amount of eligible duties and taxes/VAT/[ET] in respect of inputs or input services under section 140(5) and section 140(7)’ of the TRAN -1 form.

i. Input Tax Credit in case of Centralized Registration Under Previous Indirect Tax Regime (section 140(8))

A registered person having a centralised registration under the previous indirect tax regime can claim credit carried forward in the return filed by him under the previous indirect tax laws.

However, such a credit can be claimed by the registered person in his electronic credit ledger only if the following conditions are met:

  • the return pertains to the period ending with the day immediately before the appointed date. Furthermore, such a return must be filed within three months of the appointed date.
  • such a credit is admissible under GST
  • the credit can be transferred to any of the registered persons who have the same PAN for which centralised registration was taken under previous indirect tax law
Section 8 of Form GST TRAN -1

ITC in case of centralised registration under previous indirect tax law can be claimed in section 8 titled ‘ Details of transfer of cenvat credit for registered person having centralized registration under existing law (Section 140(8))’ of the TRAN -1 form

Reclaiming the Reversed Credit on Input Services (section 140(9))

Any credit availed on input services under the previous indirect tax regime can be reversed if the registered person fails to pay the consideration for supply of such services within three months from the appointed day.

Such a credit can be reclaimed if the registered person makes the payment for supply of such services within three months from the appointed day.

Section 5(a) of Form GST TRAN – 1

The closing balance of the credit in the last returns can be claimed by filing a declaration in section 5(a) titled ‘Amount of Tax Credit Carried Forward in the Return Filed under Existing Laws’ of the TRAN – 1 form.

II. Transition Provisions in Respect of Job Work, Goods Returned/ Sent on Approval

a. Inputs, Semi – Finished Goods, Finished Goods Sent for Job Work Returned Within Prescribed Period from the Appointed Day (Section 141(1), 141(2) and 141(3))

There can be cases when inputs, semi – finished and finished goods received by a business are sent for further processing (job work) to a job worker under the previous tax law prior to July 1, 2017.

In such cases, no tax would be charged on such inputs under GST if such inputs, semi finished and finished goods are returned to the said place of business within 6 months from July 1, 2017.

This period of 6 months can be extended by the commissioner of GST by another 2 months

However, if such inputs are not returned to the said place of business within the prescribed time, as mentioned above, then ITC would be recovered as per the provisions of section 142(8)(a).

In case of semi – finished goods, the manufacturer may transfer such goods to the premises of a registered person to make supplies from there on payment of tax in India or without payment of tax for exports within prescribed time period.

Furthermore, in case of finished goods, the manufacturer may transfer such goods on payment of tax in India or without payment of tax for exports within prescribed time period.

In addition to this, no tax would be payable on such inputs, semi – finished and finished goods only if both the manufacturer and job worker clearly declare the details of inputs/goods held in stock by the job worker on behalf of the manufacturer in prescribed form and time.

Section 9 of Form GST TRAN – 1

The ITC on inputs sent by a business to a job worker for further processing and which are returned with 6 months from July 1, 2017 can be claimed by filing a declaration in section 9 titled ‘Details of goods sent to job-worker and held in his stock on behalf of principal under section 141’ of the TRAN – 1 form.

Other Transition Provisions in respect of the pending as well as future claims in respect of existing laws prior to, on or after the GST implementation date

a. Goods Removed within 6 months Prior to July 1, 2017 but Returned Within 6 Months from July 1, 2017

There can be cases where a registered person paid the duty on goods under the previous indirect tax law at the time of removal of such goods from the place of business.

Furthermore, such goods were removed within 6 months prior to July 1, 2017.

In such cases, if these goods are returned to the place of business within 6 months from July 1, 2017, the registered person can claim a refund for duty paid on such goods under the previous indirect tax law provided:

  • the goods are returned by an unregistered person
  • such goods can be identified by a proper officer

On the contrary, if these goods are returned by a registered person, then such a return would be treated as a supply for which ITC can be claimed.

b. Goods Sent on Approval Basis Within 6 Months Prior to July 1, 2017, but Returned Within 6 Months from July 1, 2017 (section 142 (12))

There can be cases where goods are sent on approval basis within 6 months prior to July 1, 2017, are rejected by the buyer and are returned to the seller.

Furthermore, such goods are returned to the seller within 6 months from July 1, 2017. In such a case, no tax shall be paid by the registered person.

Furthermore, this period of 6 months can be extended by the commissioner for a period not more than 2 months. Also, the tax on the returned goods shall be paid by the buyer if the goods are taxable under GST and are returned after the prescribed time period.

TDS Deducted in VAT (section 142 (13))

There can be cases where a supplier had made sale of goods for which TDS was to be deducted under the VAT law of a State/UT.

Furthermore, the supplier had also issued an invoice for such a supply prior to July 1, 2017. In such cases, no TDS would be deducted by the the deductor as per section 51, if the for such a supply is made to the supplier after July 1, 2017.

d. Revision in Prices of Existing Contracts (section 142(2) and section 142(3))

There can be two cases here. These are as follows:

  • There is an upward revision in the prices of a contract on or after July 1, 2017 that was entered into before July 1, 2017. In such a case, the supplier will issue to the recipient a supplementary invoice or debit note within 30 days from such a revision. Furthermore, this supplementary invoice/debit note shall be treated as the one issued in respect of an outward supply under GST.
  • There is a downward revision in the prices of a contract on or after July 1, 2017 that was entered into before July 1, 2017. In such a case, the supplier will issue to the recipient a credit note within 30 days from such a revision. Furthermore, this credit note shall be treated as the one issued in respect of an outward supply under GST. However, the registered person would be able to reduce his tax liability by issuing a credit note only if the recipient of the credit note has reduced his ITC corresponding to the reduction of tax liability
Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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