Eligibility of ITC under GST on closing stock held on 30-06-2017

The burning question these days is, if a person is a trader and he has stock in hand as on 30^th June 2017(assuming GST would be applicable from 1^st July 2017), whether he would be eligible for credit of Excise Duty which he has directly paid to the manufacturer, against his output liability in GST .

In today’s update, we would be taking up the situation wherein the trader has purchased goods from the manufacturer directly and has purchase invoices on which Excise Duty has been charged separately. In the next update, we would be discussing about the situation wherein excise duty has not been separately charged on the purchase invoices.

Following are the facts of the situation of todays’ update:

1.     Mr Tense about ITC, is a wholesaler. He has stock of Rs 50 Lakh lying with him.

2.     The goods are presently leviable with excise duty and it is assumed that these goods would also be taxable in GST Regime.

3.     Mr tense about ITC has purchased the goods directly from manufacturer wherein Excise Duty has been charged separately on the purchase invoices. Therefore he knows how much Excise duty has been paid by him at the time of purchase of goods.

With this heavy backgrounds let’s start to answer the boomerangs of Mr. Tense about ITC, who has put a barrage of questions before his consultant i.e. Mr Peace of Mind. He wants to know that whether he would be allowed credit of Excise Duty paid by him at the time of purchase of goods, against his output liability in GST .

Question 1: Whether I would be eligible for credit of the Excise Duty paid by me on purchase of goods, against my output liability in GST .

Answer 1: If you ask me on a broad basis, then yes but this answer is subject to conditions which would be discussed below.

Question 2: On all my purchase invoices, excise duty has been charged separately. Are Invoices, a sufficient proof to claim credit of Excise duty paid, against my output liability in GST .

Answer 2: Yes, Invoices in hand are sufficient proof to claim credit of excise duty paid subject to fulfillment of other conditions.

Question 3: Some of the stock lying with me is more than 12 months old. Whether I would be entitled for credit of excise duty paid on stock lying with me, which is more than 12 month old.

Answer 3: No, you would not be entitled for input tax credit of excise duty which is more than twelve month old.

Question 4: Is there any procedure to be fulfilled or form to be submitted for the purpose of being eligible to claim credit of excise duty paid against my output tax liability in GST.

Answer 4: Yes, you would have to fill within sixty days of the appointed day, an application electronically in FORM GST TRAN- 1, duly signed, on the Common Portal specifying therein, separately, the amount of tax or duty to the credit of which you are entitled.

Question 5: Do I need to declare anywhere stock held by me as on 30^th June 2017.

Answer 5: Yes, you would be required to specify separately details of stock held on 30^th June 2017.

Question 6: How such amount would be allowed to be set off against my output liability in GST, whether I would receive any cheque or any adjustment order what would be the mechanism.

Answer 6: The eligible credit to be carried forward by you in GST would be credited to your electronic credit ledger in GST which would allow you to adjust the credit against your output liability in GST.

Question 7: Whether it is necessary that these goods should be used to make taxable supplies under GST.

Answer 7:Yes, the supplies which you make from the goods lying in your stock as on 30^th June 2017, should be taxable and not exempt in GST. If the goods which are lying with you as on 30^th June 2017 are exempt from tax under GST, then you would not be allowed any credit of the excise duty paid by you in the earlier law.

Question 8: I have heard that there is condition that I should be eligible for input credit under the provisions of GST as well? Now what does that means?

Answer 8: Mr Tense about ITC, this condition means that supposedly you have paid Excise duty of Rs 1 Lakh on the goods  lying with you as on 30th June 2017. However, there is a restriction in GST for any reason on the availment of credit in respect of such goods under GST i.e. may be you have opted for composition scheme or there is restriction on availment of input tax credit on such goods etc.

Thus, even though you have an paid excise duty of Rs 1 Lakh on the goods lying in stock as on 30th June 2017, but still you would not be allowed to set off credit to that extent against your tax liability in GST.

for more information:  https://gst-online.com/trader-stock-lying-30th-june-2017-whether-get-credit-excise-duty-paid-goods-lying-stock/