GST Fundamentals: How to transition easily from the old to new?

GST Fundamentals: How to transition easily from the old to new?


Shalmali Patkar

Shalmali Patkar

358 week ago — 5 min read

GST has kicked in and is in full swing. The Government went the extra mile to help raise awareness about the new processes that would come with the advent of GST. However, with a change such as this, clarity is still being sought on the registration and input tax credit. This article aims to provide that clarity.


The Transition of Registration:

All taxpayers registered under existing tax laws such as State VAT, Central Excise, Service Tax etc. need to migrate into the GST regime. Each such taxpayer shall get a certificate of registration on a provisional basis in FORM GST REG-25. This certificate will be valid for a period of 3 months within which a registered taxpayer shall either submit prescribed documents for final registration in FORM GST REG–26 or if such person is not liable to be registered under GST then can cancel his provisional registration within 30 days electronically in FORM GST REG-29 at the GSTN portal.


The Transition of credit of input taxes paid on goods in stock:

1. A manufacturer/dealer having an existing registration can carry forward his Cenvat credit/ VAT credit as CGST/SGST credit in respect of input held in stock, semi-finished or finished goods held in stock if the following conditions are satisfied-:

  • The Taxpayer has filed his last return under applicable law (VAT, Services Tax, Excise) and has declared the complete stock lying along with input credit.
  • Such goods which are shown as stock in VAT return must be taxable under GST regime, in case such goods or services are exempt or non-taxable, the taxpayer will not be eligible to carry forward the credit under GST.
  • Filed GST TRAN 1 within 90 days from 01/07/2017


2. A dealer who was not registered earlier or engaged in the manufacture of exempted goods/provision of exempted services, or provided works contract service or a composition taxpayer, a first/second stage dealer or a registered importer can also enjoy ITC of inputs in stock held on 1st July if the following conditions are satisfied:

  • Filed GST TRAN 1 within 90 days from 01/07/2017
  • Kept invoice(invoice age up to 12 months) or any other document like Credit Transfer Document showing tax payment(else you will  get  60–40% of GST rate as input credit)
  • Filed GST TRAN 2 for every 6 tax period (stock movement details)
  • Such inputs and/or goods are used or intended to be used for making taxable supplies under GST
  • The said taxable person passes on the benefit of such credit by way of reduced prices to the recipient


3. If any person does not register under GST (even though he is liable to), then he will not be eligible to claim the input tax credit of excise & VAT paid on stock and will also be liable to a penalty.


4. The Credit of both Central and State taxes paid on goods in transit on the day of transition i.e 01-07-2017 is available on the basis of duty paying documents.


5. Transition provisions under GST illuminate that any balance of input tax credit on capital goods purchased in the previous tax regime, against which partial input credit has been availed, will be allowed to be availed in the new regime as well.


Miscellaneous points:

  • No tax is payable on the supply of goods and services under GST to the extent the tax was paid on such supply under the earlier law.
  • No tax is required to be paid on return of goods within six months where taxes were paid and goods removed prior to 01-07-2017.
  • No tax shall be payable on return of goods from job worker to the principal within six months, where the goods were sent for job work before 01-07-2017.


Key takeaway:

Transition under GST requires an extensive due diligence at taxpayers’ end.

  • One is ought to file the last return under the old regime with assiduity and make sure that the complete stock is accounted in his return.
  • One should also document all the invoices with respect to purchases under the previous regime with utmost care. This will help in claiming 60%/40% of credit in case he misses to report such stock while filing the last return.
  • One should carry forward the credit on such inputs held in stock as explained above even if he is presently ineligible to take such credit.


What is your stance regarding the transition provisions under the GST regime?


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