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Published on:
February 23, 2023
By
Prerna

Transitional Credit (TRAN-1) claimed under GST in Electronic Credit Ledger

GST was implemented in India on July 1, 2017. The introduction of GST ushered in a new era of indirect taxation in the country. With GST in place, businesses are required to register under GST and file their returns as per the tax provisions. One of the concepts introduced under GST is the transitional credit.

Transitional credit is the credit of tax paid under the previous indirect tax regime, such as excise duty, service tax, and VAT, that can be used for the payment of GST liability. Under GST, the transitional credit can be claimed by filing a TRAN-1 form within 90 days from the implementation of GST.

The transitional credit claimed is recorded in the electronic credit ledger of the taxpayer. This credit can be used for payment of GST in the future. However, it is important to note that the transitional credit can only be claimed for goods and services that were taxed under the previous indirect tax regime and are now taxable under GST.

Here are some important points to consider while claiming transitional credit under GST:

Eligibility Criteria for claiming Transitional Credit

As per the GST law, the following conditions must be satisfied to claim transitional credit:

1. The taxpayer should have registered under GST

2. The taxpayer should have been registered under the previous indirect tax regime

3. There should be a balance of credit in the last return filed under the previous indirect tax regime

4. The goods and services for which the credit is being claimed must be taxable under GST

Transitional Credit under GST for Stock on Hand

The transitional credit can also be claimed for stock that was held on the date of implementation of GST. The credit can be claimed against the tax liability under GST, subject to certain conditions. The conditions for claiming transitional credit for stock on hand are:

1. The taxpayer should have been registered under the previous indirect tax regime

2. The taxpayer should have been carrying forward the credit in the last return filed under the previous indirect tax regime

3. The taxpayer should have the invoice or other documents evidencing payment of duty/tax under the previous indirect tax regime

4. The goods should not be exempt under GST

Transitional Credit under GST for Capital Goods

The transitional credit can also be claimed for capital goods that were held on the date of implementation of GST. The credit can be claimed against the tax liability under GST, subject to certain conditions. The conditions for claiming transitional credit for capital goods are:

1. The taxpayer should have been registered under the previous indirect tax regime

2. The taxpayer should have been carrying forward the credit in the last return filed under the previous indirect tax regime

3. The taxpayer should have the invoice or other documents evidencing payment of duty/tax under the previous indirect tax regime

4. The capital goods should be taxable under GST

Conclusion

Transitional credit is an important concept under GST. It allows businesses to carry forward the credit of tax paid under the previous indirect tax regime and use it for the payment of GST liability. However, it is important to understand the eligibility criteria and conditions for claiming transitional credit under GST. By properly claiming the transitional credit, businesses can reduce their tax liability under GST and improve their cash flow.

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Updated on:
March 16, 2024