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TMI BlogGuidelines for verifying the Transitional Credit in light of the order of the Hon’ble Supreme Court in the Union of India vs. Filco Trade Centre Pvt. Ltd., SLP(C) No. 32709-32710/2018, order dated 22.07.2022 & 02.09.2022X X X X Extracts X X X X X X X X Extracts X X X X ..... dia vs. Filco Trade Centre Pvt. Ltd., SLP(C) No. 32709-32710/2018. The operative portion of the judgment is as follows: 1. Goods and Service Tax Network (GSTN) is directed to open common portal for filing concerned forms for availing Transitional Credit through TRAN-1 and TRAN-2 for two months i.e. w.e.f. 01.09.2022 to 31.10.2022. 2. Considering the judgments of the High Courts on the then prevailing peculiar circumstances, any aggrieved registered assessee is directed to file the relevant form or revise the already filed form irrespective of whether the taxpayer has filed writ petition before the High Court or whether the case of the taxpayer has been decided by Information Technology Grievance Redressal Committee (ITGRC). 3. GSTN has to ensure that there are no technical glitch during the said time. 4. The concerned officers are given 90 days thereafter to verify the veracity of the claim/transitional credit and pass appropriate orders thereon on merits after granting appropriate reasonable opportunity to the parties concerned. 5. Thereafter, the allowed Transitional credit is to be reflected in the Electronic Credit Ledger. 6. If required GST Counci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , hereby issues the following guidelines for verifying the Transitional Credit: 5. Verification of the Transitional Credit 5.1 The jurisdictional tax officers can access the TRAN-1/TRAN-2 filed/revised by the applicant on their Back Office (BO) systems. Further, a self-certified downloaded copy of TRAN-1/TRAN-2 filed/revised by the applicant shall also be made available to the jurisdictional tax officer by the said applicant as mentioned in Para 4.5 of Trade Circular No. 11T of 2022 dated 26.09.2022. 5.2 The verification of the transitional credit shall be conducted by the jurisdictional tax officer who will pass an appropriate order regarding the veracity of the claim filed by the applicant, based on all the facts and the provisions of the law. In respect of TRAN-1/TRAN-2 filed/revised by the applicant under the administrative control of the central tax authorities, such verification and issuance of order shall be done by the jurisdictional officer of central tax, whereas in respect of TRAN-1/TRAN-2 filed/revised by the applicant under the administrative control of the state tax authorities, the same shall be done by the jurisdictional officer of state tax. The jurisdic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... below through his official email ID or physically. Similar action, as above, shall also be taken by the jurisdictional state tax officers in cases where the applicant is under the jurisdiction of state tax officer and where the transitional credit claimed has component of central tax also. 5.3.3 The jurisdictional tax officer shall, in parallel, continue the verification of the remaining portion of the transitional credit at his end. 5.3.4 The jurisdictional tax officer and the counterpart tax officer shall verify the transitional credit claimed under the CGST or the SGST head, as the case may be, by referring to the guidelines detailed in Annexure I to this circular for transitional credit pertaining to central tax and the guidelines detailed in Annexure-III to this circular for verification of transitional credit pertaining to the State Tax/Union territory Tax, as applicable. While conducting the verification, the officer must also check whether any adjudication or appeal proceedings in TRAN-1/TRAN-2 related matter are pending/ concluded against the applicant. In such cases, where any adjudication or appellate proceedings have been initiated against the applicant in respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isdictional tax officer may seek comments of the counterpart officer on the submissions made by the applicant in so far as the said submission relates to the central tax being administered by such counterpart officer. 5.3.8 After considering the facts of the case, including verification report received from the counterpart officer, submissions made by the applicant and the comments, if any, of the counterpart officer on the same, the jurisdictional tax officer shall proceed to pass a reasoned order, preferably within a period of fifteen days from the date of personal hearing, specifying the amount of transitional credit allowed to be transferred to the electronic credit ledger of the applicant and upload a pdf copy of the said order, on the common portal for crediting the amount of allowed transitional credit to the electronic credit ledger of the applicant. In any case, such order shall be passed within a period of 90 days from 01.12.2022 i.e. up to 28.02.2023. 5.3.9 It must be noted that this special procedure of filing TRAN-1/TRAN-2, verification thereof including issuing notices and passing orders is as per the directions issued by the Hon'ble Supreme Court vide order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... APPLICANT IN TRAN-1 / TRAN-2 1. Description of Entries in TRAN-1 Table In the Form TRAN 1 there are only six entries which decide all the CGST credit which is posted in the electronic credit ledger. These entries are briefly described below. It is advised that the full text of law be referred for better understanding of the issue. S. No. Table No. in TRAN-1 Provision in CGST Act Indicative list of nature of Credit 1. Col. 6 in table 5(a) 140(1), 140(4)(a) and 140(9) This table captures detail of the CENVAT credit carried forward in the return (ER-1/2/3 or ST-3) relating to the period ending with 30.06.2017, subject to conditions specified in section 140(1) of CGST Act, by the manufacturers/ service providers. 2. Column 11 of table 6(a) 140(2) This table captures details of unavailed credit of capital goods in the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... table pertains to Centrally Registered unit, the CENVAT credit carried forward in their last return is captured in table 5(a) and a part or full of such credit can be distributed through table 8. The credit distributed through column 9 gets credited in the electronic credit ledger of the receivers and a corresponding debit entry in made in the ledger of the Centrally registered unit. 6. Column (7) in Table 11 Section 142 (11)(c) read with Rule 118 of CGST Rules Transition of credit in respect of supplies which attracted both VAT and Service Tax in pre-GST era and where VAT and Service Tax both were paid, before 1st July 2017, on any supply but the supply is made after 1st July, 2017. The taxable person is entitled to take as CGST credit, the service tax paid under the existing law to the extent of supplies made after 1st July, 2017 as he would be liable to pay CGST in respect of such supplies. (VAT credit cannot be taken as Service tax credit and vice versa). 2. CHECKS FOR VERIFICATION OF ENTRIES IN TRAN-1 TABLE: As a matter of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or Service Tax. If no credit was availed earlier, credit of entire amount cannot be availed through this Table. In respect of invoices involving large credit , due verification as deemed fit may be done. Checks for Table 7(a), Entry 7A: 5.1 Check 5 : In cases where the credit is being shown by an assessee who was registered in Central Excise or Service on account of inputs relating to exempted goods, carefully check whether the assessee has followed the provisions of rule 6 of CENVAT Credit Rules in the period prior to GST. Case I: Only exempted goods/services were being manufactured or provided: Rule 6(2) of CENVAT Credit Rules did not allow any credit in the CENVAT register if only exempted goods were being manufactured. No credit can flow from return in relation to inputs in such cases. The entry in table 5(a) therefore should be NIL. The apportionment of credit on inputs and complete reversal thereof under rule 6 of CENVAT Credit Rules took place at the time of removal of goods. Therefore, in such cases only credit of inputs and inputs contained i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 and not through TRAN-1 . 6.2 Check 8 : Check that the assessee has not declared this stock in any other table or has not availed this credit from any other table, say table 5(a). Where the person availing credit through TRAN 2, for which stock is declared in this table, is a trader, no credit can exist in any other table which pertains to credit to taxpayers who were registered earlier [e.g. Table 5(a)]. Checks for Table 7(b): 8.1 Check 9: Check that the duty paying document exist and take confirmation from the taxpayer that the duty or the tax paying document were recorded in the books of account of such person as per the conditions prescribed in law. Where goods under movement are shown in exorbitant quantity, transport verification may be considered. It should also be checked that the conditions for availing ISD credit as prescribed in law are satisfied. Checks for Table 8: 9.1 Check 10 : Centralized registered units have distributed their credit through table 8. The units receiving the credit were not required to file TRAN1 to receive this credit . The r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (c) Notes: 1) Add additional rows if required 2) *Specify the serial number of the Table (of earlier filed TRAN-1/TRAN-2), the credit in respect of which has either been disallowed through an order or is proposed to be disallowed through an SCN 3) #Specify the amount which has been disallowed/proposed to be disallowed 4) @Specify the grounds for disallowance of the said credit 5) $Specify whether amount has been recovered, either in cash or debit to credit ledger 6) Attach copies of the relevant notice/ adjudication order 3. (a) Whether appeal has been filed against the adjudication order, if any, specified in serial number 2 above; if Yes , provide appeal number and date of filing appeal. (b) If appeal has been disposed of, then provide order number and date: (c) Details relating to Appellate Order: * Table of TRAN-1/TRAN-2 Findings of Appellate Authority $ Whethe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (f) 7(a)(7B) of TRAN- 1 (g) 7(b) of TRAN-1 (h) 7(c) of TRAN-1 (i) 8 of TRAN-1 (j) 10(a) of TRAN-1 (k) 10(b) of TRAN-1 (l) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oods carried forward to electronic credit ledger as State tax (section 140(2)) Para 4 of Internal Circular No. 23A of 2018 dt 1st Sep 2018 5. 6 (b) Amount of unavailed input tax credit carried forward to electronic credit ledger as State tax (section 140(2)) 6. 7 (a) Amount of taxes on inputs claimed as credit excluding the credit claimed under Table 5(a) (under sections 140(3), 140(4)(b) and 140(6)) Para 5 of Internal Circular No. 23A of 2018 dt 1st Sep 2018 7. 7 (b) Amount of eligible taxes/VAT/ET in respect of inputs or input services under section 140(5) Para 7 of Internal Circular No. 23A of 2018 dt 1st Sep 2018 8. 7 (c) Amount of VAT and Entry Tax paid on inputs supported by invoices/documents evidencing payment of tax carried forward to electronic credit ledger as SGST/UTGST under sections 140(3), 140(4) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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