1. GST: Input tax credit limit on existing stock raised to support transition period sales

GST: Input tax credit limit on existing stock raised to support transition period sales

GST Council has raised the limit on input tax credit against excise duty payment to 60% from 40% of GST liability on items with tax rate above 18%, bringing some respite on sale of inventories stocked up before the implementation of the new tax regime on July 1.

By: | Updated: June 5, 2017 11:41 AM
Businessmen had cut inventory of goods as earlier rules provided for claiming tax credit for only up to 40% of their total GST liability against the excise duty paid on purchases before July 1 without the original excise payment receipt. (Image: Reuters)

In a major relief to traders and businessmen across the country, the GST Council has increased the limit on input tax credit to 60% against excise payments from 40% earlier on items with tax rates at 18% and above without excise payment receipts, bringing some respite on sale of inventories stocked up before the implementation of the new tax regime on July 1.

The input tax credit refund against excise on items with tax rates below 18% would remain at 40% of the total GST liability. Further, the council also ruled that entire 100% input tax credit against excise can be availed on high-value items above Rs 25,000 with a chassis number. It must be noted that the input tax credit refund against is already at the full value in cases where the excise payment receipt is available.

Distributors and dealers had begun cutting down on the stock of goods lying with them ahead of the implementation of GST, as the earlier proposed rules provided for them to claim tax credit for only up to 40% of their total GST liability against the excise duty already paid on the goods purchased before July 1 without furnishing the original excise payment receipt.

However, with the increase in the limit of the input tax credit that they can claim, the companies could sigh a breath of relief as it would cushion the impact on sales in the month leading up to the levy of the new tax.

The GST Council, which met on Saturday to decide the tax rate on remaining six items, has finalised all the pending rules, including those on transition and returns forms, for the implementation of the most sweeping tax reform in the country since independence in less than a month from now. The council also decided the tax rate to be levied on the six items, including gold, bidis, biscuits, textiles, apparels and footwear. All the states have agreed to the roll out from July 1, bringing certainty to the implementation of the new regime as scheduled.

Earlier last month, the GST Council, tasked with tasked with framing rules for implementation of most sweeping tax reform India has ever seen since independence, finalised the rate of tax on over 1,200 items and most of the services, while deferring decision on six items including gold to today’s meeting.

The council has proposed four tax slabs at 5%, 12%, 18% and 28% under GST, while exempting essential or daily consumption items and services from tax levy, such as fresh meat, fish, chicken, eggs, milk, curd, natural honey, fresh fruits, vegetables, flour and bread, and healthcare and education services. Other than this, it levied cess over and above the 28% tax on certain luxury goods and sin goods. The GST Council kept 81% of the items in the first three tax brackets, ie, up to 18%. The 12% and 18% tax bracket together account for two-thirds of all items.

GST seeks to unify the entire country into a single market with only one value-added tax levy on all the goods and services across states at the point of consumption, subsuming up to 16 different taxes and levies that are imposed at present. This is expected to make the movement goods across the state borders smoother, faster and easier, though some experts have raised concerns over the complications that could arise out of a multiple tax-slab structure.

(Originally published on www.financialexpress.com on Saturday, June 3; updated on Monday, June 5)

Tags: GST
  1. B
    Bharath B S
    Jul 25, 2017 at 8:25 pm
    Dear sir,We deal in Mobile and dth recharges earlier service tax paid by Co's like BSNL on MRP as and exempted from service tax But received Service tax bill but not accounted separately nor filled in Service tax reruns as it was exsumpted. Now We are receiving GST Bills. I had Stocks of Recharges services earlier ST Paid on MRP. Can i take GST Input on Closing Stocks
    Reply
    1. T
      T K MOMIN
      Jul 22, 2017 at 2:46 pm
      Local s against Interstate purchase what rules will be applilcable in GST rule ?
      Reply
      1. T
        T K MOMIN
        Jul 22, 2017 at 2:48 pm
        local s against interstate purchase what rules will applicable in GST rule
        Reply
      2. A
        ArvindTK
        Jul 22, 2017 at 7:53 am
        Dear Sir, I am a Dealer from Assam I purchased goods from Maharashtra and CST was Charged against C-Form in the month of June and Goods came in the month of July. Will I get ITC on that goods or not and also have goods which are exempted in Gujarat Vat (Kerosene Stove but Paid Excise 2 ) and has Assam VAT 2 and I have paid s Tax for month of JUNE and balance stock I am having will I get ITC on That. Please Help Arvind
        Reply
        1. K
          KAMLESH DODIYA
          Jul 19, 2017 at 11:43 am
          I M RETAIL TRADERS , I M REGISTER UNDER GUJARAT VAT ON 03/04/2017 AND I PAID ADVANCE TAX FOR REGISTRATION UNDER VAT , I M LUMSUM DEALER IN GUJRAT VAT AND I M ALSO COMPOSITION UNDER GST SO I M CLAIM MY ADVANCE TAX IN GST?
          Reply
          1. R
            Ritesh
            Jul 12, 2017 at 4:40 pm
            I AM STEEL TRADERS. I AM REGISTERED IN EXCISE AND VAT. U HAVE A STOCK OF 2014 , 2015 2016 IS IT POSSIBLE TO GET INPUT CREDIT EXCISE OF SAID STOCK ?
            Reply
            1. S
              shatnha
              Jul 5, 2017 at 1:02 pm
              we are dealer of iron and steel, we are registered under excise. we are having closing stock as on 30.06.2017, how we can claim under gst.where we have to upload the purcase bills. kindly send us the vidio to our mail id
              Reply
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                arvind
                Jul 4, 2017 at 2:27 pm
                sir we are manufacturer of jari it is exempted from tax... now the tax on jari is 12 GST we purchase raw material metallised polyerster film on which we have paid exicse duty vat both on polyester yarn we pay only excise duty.. what will be the impact on ur closing stock we have with us, will we have to pay 12GST on closing stock or we will get any input tax credit on these old stocks or not...
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                1. M
                  Mohan
                  Jul 3, 2017 at 1:53 pm
                  We are traders. We import instruments and sell to customers. We have some stock, so can we claim input tax on our stock. Regards Mohan
                  Reply
                  1. S
                    siva
                    Jul 2, 2017 at 4:31 pm
                    how is make gst invoice
                    Reply
                    1. G
                      G C LAHA
                      Jul 2, 2017 at 1:36 pm
                      We were clearing goods under Central excise notifications which were exempted from payment CED in the VAT regime and opted rule 6 (3A) common record. CENVAT CREDITs were reversed on s basis as per prescribed formulae. As such CENVAT Credit on Inventory Stock have subsumed in the reversal amount . Now how such credit can be availed on Inventory Stock in to GST regime.
                      Reply
                      1. R
                        R
                        Jul 1, 2017 at 6:10 pm
                        For manufacturers, how will the stock as on 30th June'17 be treated? How do the manufacturer get ITC on the existing stock?
                        Reply
                        1. R
                          ravi
                          Jul 1, 2017 at 4:38 pm
                          i have a manufacturing factory of furnitures and sofas, i purchased raw materials like foam , jute wood, cotton fibre , textile items , fabrics. i have lot of stocks in my godowns of raw materials and finish goods also. now i don't know how much tax will be added or deducted in my raw material and finish goods
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                            rajeshvari shaw
                            Jul 1, 2017 at 4:00 pm
                            sir we are trader and mostly goods purchase 14.5 vat now gst rate 28 stock approx 300 so what will i do?
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                              RAMESH KUMAR
                              Jul 1, 2017 at 8:47 am
                              I am a Stationery goods whole r, where 80 of stock consists tax exempted goods. Now the tax under GST is 12 18 . Will I get any tax input, without having the excise bills.
                              Reply
                              1. S
                                SANDIP KUMAR ROY
                                Jul 1, 2017 at 3:30 pm
                                tax input in payable on befalf of gst if it is not taxable than how could you get benefit.
                                Reply
                              2. G
                                Goyal
                                Jun 28, 2017 at 7:42 am
                                As a tyre dealer, I have quite a lot of stock of already entry tax and excise duty paid stock, for which I have no proof to show. How do I claim rebate on this tax?
                                Reply
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                                  Thiagarajan R
                                  Jun 16, 2017 at 6:59 am
                                  Whether the Superstockiest/distributors to have excise registration to avail input tax credit for the excisable goods stock holding after introduction of GST.
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                                    Rajesh gagrani
                                    Jun 12, 2017 at 12:37 pm
                                    Hello, It is a big missing in all discussion. If I have big credit available in my books due to end product ( Solar) is exempt by special notification but input credit is available. As per GST, new rate is 5 on of solar product but input rates are from 18 to 28 . IN such case I will not be able to use my opening credit. I know that for current year I will get refund for differential rate but what about the opening credit. No where, nobody talking on this. Do anybody in this forum have any idea on this, Can anybody help me on this.
                                    Reply
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                                      B C SHARMA
                                      Jun 10, 2017 at 3:35 pm
                                      We are traders and mostly goods purchases interest @2 cst and now GST rate is 28.00 and stock approx 20.00 we take input on stock @ 60 of 20.00 3.36 ( 20.00 28 60 ) it is wrong or righ
                                      Reply
                                      1. A
                                        Arun Kumar
                                        Jun 7, 2017 at 4:48 pm
                                        What will the basis to calculate input tax credit of 60 (Actual duty paid / deemed duty paid) @ 12.5 or CGST 9. ( 5.4 eligible from cgst 9 , or 7.5 eligible from deemed duty of 12.5), which is right.
                                        Reply
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                                          anirudhan v
                                          Jun 6, 2017 at 6:56 pm
                                          Previously it is seen that for allowing 40 of central excise we have to remit the related tax on the items. Then only the input will be allowed on stock. If we remit the tax due on the items and avail the IPT on them, what is the benefit on avai it?
                                          Reply
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                                            AJIT
                                            Jun 5, 2017 at 3:37 pm
                                            WE ARE TRADER OF READYMADE GARMENT AND WE PURCHASE GOOD AS A INTERSTATE ,CAN WE GET INPUT CREDIT IN EXISTING STOCK OF 1CRORE.
                                            Reply
                                            1. C
                                              CA vIMAL KUMAR SHARMA
                                              Jun 6, 2017 at 5:55 am
                                              yes you can take credit but excluding CST paid by you.
                                              Reply
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