Query on section 140(5) of GST
This query is : Resolved
14 June 2017
pls clarify that in case of service received before 1st July but invoice received after 1st July but bill is dated 30th June, can we pass the entry u/s140(5) in the books in July month and also take credit under gst.
one more query I have what will be the situation of the same case as above but service tax liability is under RCM
15 June 2017
pls clarify that in case of service received before 1st July but invoice received after 1st July but bill is dated 30th June, can we pass the entry u/s140(5) in the books in July month and also take credit under gst.
one more query I have what will be the situation of the same case as above but service tax liability is under RCM
10 August 2024
Under GST, Section 140(5) deals with the transition of credit from the pre-GST regime (i.e., the VAT, Service Tax, and Excise duty regime) to the GST regime. Let's break down your queries regarding how to handle input tax credits and the specific situation where services were received before the GST rollout but invoiced after the rollout.
### **Understanding Section 140(5) of GST:**
**Section 140(5)** of the Central Goods and Services Tax (CGST) Act, 2017, provides for the transition of credit from the earlier tax regime to GST. It specifically allows taxpayers to carry forward the input tax credit (ITC) of VAT, service tax, or excise duty that was lying unutilized in the pre-GST regime.
### **Scenario 1: Service Received Before 1st July but Invoice Received After 1st July**
#### **1. Passing the Entry and Claiming Credit:**
- **GST Transition Credit:**
- Under GST law, for services received before 1st July but invoiced after 1st July, you are generally allowed to claim the input tax credit (ITC) as long as the service was received and used in the course of your business and the invoice is issued within the specified time frame.
- You should pass the entry in your books in July (the month when you received the invoice), and you can claim the credit in the GST returns for that month, provided you meet the following conditions:
- The invoice is dated before or up to the end of the transitional period.
- The service is received before the GST rollout.
- The credit should be claimed in the first GST return for the period in which you receive the invoice.
- **Section 140(5) Implication:**
- Section 140(5) allows the credit to be carried forward. In your case, if the service was received before GST but invoiced after the rollout, the credit could be claimed under the transitional provisions provided you have complied with the procedural requirements.
#### **2. Service Tax Liability Under RCM:**
- **Handling Under GST:**
- If the service was received before GST but invoiced after, and the service tax liability was under reverse charge mechanism (RCM), the credit of the service tax paid under RCM in the pre-GST period can be carried forward and claimed under GST as transitional credit.
- Ensure that the service tax was properly accounted for in the pre-GST regime and the appropriate records are maintained for claiming the credit.
### **Practical Steps:**
1. **Verification and Documentation:**
- Ensure that the invoice clearly states the date of service as prior to 1st July, and the invoice is received after 1st July.
- Maintain proper documentation and records of the service received, including the date of receipt, invoice, and payment details.
2. **GST Return Filing:**
- Claim the credit in your GST return for the month in which the invoice is received, following the guidelines for transitional credit.
3. **RCM and Transitional Credit:**
- For RCM scenarios, ensure that the service tax liability was correctly accounted for in the pre-GST regime and properly reflected in your GST credit claims.
### **Summary:**
- **For services received before 1st July and invoiced after,** you can pass the entry in July and claim the credit under GST as per Section 140(5) provisions, provided you meet the requirements for transitional credit.
- **For services with service tax under RCM,** ensure that the pre-GST service tax was properly accounted for and carry forward the credit as allowed under GST.
Always consult with a GST expert or tax advisor to ensure compliance with the latest regulations and to address specific nuances related to your business transactions.
### **Understanding Section 140(5) of GST:**
**Section 140(5)** of the Central Goods and Services Tax (CGST) Act, 2017, provides for the transition of credit from the earlier tax regime to GST. It specifically allows taxpayers to carry forward the input tax credit (ITC) of VAT, service tax, or excise duty that was lying unutilized in the pre-GST regime.
### **Scenario 1: Service Received Before 1st July but Invoice Received After 1st July**
#### **1. Passing the Entry and Claiming Credit:**
- **GST Transition Credit:**
- Under GST law, for services received before 1st July but invoiced after 1st July, you are generally allowed to claim the input tax credit (ITC) as long as the service was received and used in the course of your business and the invoice is issued within the specified time frame.
- You should pass the entry in your books in July (the month when you received the invoice), and you can claim the credit in the GST returns for that month, provided you meet the following conditions:
- The invoice is dated before or up to the end of the transitional period.
- The service is received before the GST rollout.
- The credit should be claimed in the first GST return for the period in which you receive the invoice.
- **Section 140(5) Implication:**
- Section 140(5) allows the credit to be carried forward. In your case, if the service was received before GST but invoiced after the rollout, the credit could be claimed under the transitional provisions provided you have complied with the procedural requirements.
#### **2. Service Tax Liability Under RCM:**
- **Handling Under GST:**
- If the service was received before GST but invoiced after, and the service tax liability was under reverse charge mechanism (RCM), the credit of the service tax paid under RCM in the pre-GST period can be carried forward and claimed under GST as transitional credit.
- Ensure that the service tax was properly accounted for in the pre-GST regime and the appropriate records are maintained for claiming the credit.
### **Practical Steps:**
1. **Verification and Documentation:**
- Ensure that the invoice clearly states the date of service as prior to 1st July, and the invoice is received after 1st July.
- Maintain proper documentation and records of the service received, including the date of receipt, invoice, and payment details.
2. **GST Return Filing:**
- Claim the credit in your GST return for the month in which the invoice is received, following the guidelines for transitional credit.
3. **RCM and Transitional Credit:**
- For RCM scenarios, ensure that the service tax liability was correctly accounted for in the pre-GST regime and properly reflected in your GST credit claims.
### **Summary:**
- **For services received before 1st July and invoiced after,** you can pass the entry in July and claim the credit under GST as per Section 140(5) provisions, provided you meet the requirements for transitional credit.
- **For services with service tax under RCM,** ensure that the pre-GST service tax was properly accounted for and carry forward the credit as allowed under GST.
Always consult with a GST expert or tax advisor to ensure compliance with the latest regulations and to address specific nuances related to your business transactions.
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