Transitional credit and anti profiteering
This query is : Resolved
14 August 2022
respected sir ,
whether transitional credit relates to central excise or cen-vat claimed and received on the stock of goods held on 01-07-2017. is to pass on to the costumers or not. if yes what is the benefit for taxable person.
thanking you
whether transitional credit relates to central excise or cen-vat claimed and received on the stock of goods held on 01-07-2017. is to pass on to the costumers or not. if yes what is the benefit for taxable person.
thanking you
15 August 2022
There is no question of the credit passing off to anyone. The same was paid while purchase of goods, & the ITC is available to be set off against GST output. Yes, your overall cost gets reduced to that effect.
16 August 2022
thank you sir. i keep this query open. i invite eminents to respond.
thanking you
thanking you
02 August 2025
Hello!
Your question touches upon two important GST concepts: **Transitional Credit** and **Anti-Profiteering**.
### 1. Does Transitional Credit (Central Excise or CENVAT on stock as on 01-07-2017) have to be passed on to customers?
Yes, **any benefit arising from transitional credit must be passed on to customers** as per the provisions of the GST law, specifically under the **Anti-Profiteering Rules (Rule 128 of CGST Rules)**.
* The government mandates that any reduction in tax liability or benefit of input tax credit, including transitional credits on stock, should lead to a corresponding reduction in prices charged to customers.
* This prevents businesses from earning undue profits by retaining benefits from transitional credits without reducing prices.
### 2. What is the benefit for the taxable person?
* The **taxable person gets the benefit of carrying forward the input tax credit** (like central excise or CENVAT credit on stock).
* This credit can be used to set off output GST liability, improving cash flow.
* However, **the benefit of this credit cannot be retained by simply increasing margins**; it must reflect in the pricing to customers to avoid violation of anti-profiteering rules.
---
### Summary:
| Aspect | Explanation |
| ---------------------------- | ---------------------------------------------------------------------------------------------------------------------- |
| Transitional Credit on Stock | Credit on stock held as on 01-07-2017 under old law (Central Excise/CENVAT) carried forward into GST regime. |
| Passing on to customers | Yes, price reductions or benefits must be passed on as per Anti-profiteering rules. |
| Benefit to taxable person | Use of transitional credit to offset GST liability and improve working capital, but price reduction must be passed on. |
---
If you want, I can also help you with practical ways to comply with anti-profiteering or preparing documentation for the same.
Would you like that?
Your question touches upon two important GST concepts: **Transitional Credit** and **Anti-Profiteering**.
### 1. Does Transitional Credit (Central Excise or CENVAT on stock as on 01-07-2017) have to be passed on to customers?
Yes, **any benefit arising from transitional credit must be passed on to customers** as per the provisions of the GST law, specifically under the **Anti-Profiteering Rules (Rule 128 of CGST Rules)**.
* The government mandates that any reduction in tax liability or benefit of input tax credit, including transitional credits on stock, should lead to a corresponding reduction in prices charged to customers.
* This prevents businesses from earning undue profits by retaining benefits from transitional credits without reducing prices.
### 2. What is the benefit for the taxable person?
* The **taxable person gets the benefit of carrying forward the input tax credit** (like central excise or CENVAT credit on stock).
* This credit can be used to set off output GST liability, improving cash flow.
* However, **the benefit of this credit cannot be retained by simply increasing margins**; it must reflect in the pricing to customers to avoid violation of anti-profiteering rules.
---
### Summary:
| Aspect | Explanation |
| ---------------------------- | ---------------------------------------------------------------------------------------------------------------------- |
| Transitional Credit on Stock | Credit on stock held as on 01-07-2017 under old law (Central Excise/CENVAT) carried forward into GST regime. |
| Passing on to customers | Yes, price reductions or benefits must be passed on as per Anti-profiteering rules. |
| Benefit to taxable person | Use of transitional credit to offset GST liability and improve working capital, but price reduction must be passed on. |
---
If you want, I can also help you with practical ways to comply with anti-profiteering or preparing documentation for the same.
Would you like that?
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