INTRODUCTION - Handbook of GST Law & Procedures (CBIC) [October 2024] - GST

CHAPTER XIV TRANSITIONAL PROVISIONS 1. INTRODUCTION 1.1. This Chapter deals with the transitional provisions contained in CGST Act, 2017, to facilitate the taxpayers to take Input Tax Credit (ITC) on the CENVAT credit balance or CENVAT credit on goods in stock, etc. at the time of migration from the erstwhile Central Excise and Service Tax regime to GST regime. Presently the relevance of these transitional provisions is only academic, so as to deal with litigation, if any in this regard. The provisions of CGST Act, 2017 and CGST Rules, 2017, relevant to this Chapter are as under Sr. No. Section / Rules Provision pertaining to 1. Section 139 Migration of existing taxpayers 2. Section 140 Transitional arrangements for input tax credit 3. Section 141 Transitional provisions relating to job work 4. Section 142 Miscellaneous transitional provisions 5. Rule 117 Tax or duty credit carried forward under any existing law or on goods held in stock on the appointed day 6. Rule 118 Declaration to be made under clause (c) of sub-section (11) of section 142 7. Rule 119 Declaration of stock held by a principal and job worker 8. Rule 120 Details of goods sent on approval basis 9. Rule 120A Revision of declaration in FORM GST TRAN-1 10. Rule 121 Recovery of credit wrongly availed 1.2. Prior to introduction of the Goods and Services Tax (GST), the Central Government, State Government and the Local Bodies like Municipal Corporations, etc. levied different types of indirect taxes, viz. Central Excise Duty, Service Tax, Sales Tax, Value Added Tax (VAT), Commercial Tax/Octroi, etc. The GST replaced multiple taxes levied and collected by the Centre and States by subsuming such different types of taxes into a single levy. 1.3. Availability of Input Tax Credit (ITC) of taxes paid on inputs, input services and capital goods for set off against the output tax liability is one of the key features of GST. This avoids cascading effect of taxes and ensures uninterrupted flow of credit from the seller to buyer. To ensure a seamless flow of input tax from the existing laws, viz. the Cenvat Credit Rules, 2004, Sales Tax/VAT law, into the GST regime, Transitional arrangements for input tax credit were included in the GST Acts to provide for the entitlement and manner of claiming input tax in respect of appropriate taxes or duties paid under the existing laws. 1.4. Transitional provisions are incorporated under GST to enable existing taxpayers to migrate to GST in a transparent and exact manner. It means that besides migrating from the Central Excise or Service Tax Registration to GST Registration, the amount of Cenvat Credit claimed on inputs, capital goods and input services carried forward in the last return filed for Central Excise and Service Tax immediately before the appointed day i.e. 01.07.2017, shall be transferred to the Electronic Credit Ledger of the taxpayer concerned, provided the amount of credit is admissible under the GST law. The transition provisions were more pertinent during the initial implementation of GST. 1.5. The concept of GST was completely new and many of the taxpayers were unaware of the provisions prevalent under GST for transition from old to new regime, which resulted in numerous litigations. A major concern for persons registered under GST is to make sure they don t lose out on the tax benefits and input credits of the old regime. 1.6. These taxes may have been paid while purchasing, inputs, raw materials, semi-finished goods, finished goods, or on materials sent to job worker. For most taxpayers, these taxes were available as input credit till 30.06.2017, and moving the balance taxes to GST regime was important to take benefit of them by utilizing such credit towards discharge of GST on the supplies made during the GST regime. To help businesses transition smoothly and carry forward their input tax credit, the CBIC had released transition forms namely TRAN-1 and TRAN-2. 1.7. During the current scenario, transition provisions are significant only for the matters pending in litigation in different stages at Courts.