Transitional itc
This query is : Resolved
22 September 2017
A medicine dealer of odisha wants to take ITC on closing stock as on 1.7.17 .Is he apply it in 7d of tran1 form? The medicine is a mrp goods and tax is collected by the ist point dealer only.The subsequent dealers sell the medicine on mrp price.how the subsequent dealer claim ITC on stock? The ITC so claimed is to be c/f to sgst account.secondly how he claim cgst credit on his stock? Whether he claim only sgst credit or cgst credit be available to them.
23 September 2017
pl.resolve the issue.
02 August 2025
Great question! Here's how transitional Input Tax Credit (ITC) works for a medicine dealer under GST, especially in the context of **closing stock on 1.7.2017** and MRP-based goods:
---
### 1. Can the medicine dealer claim ITC on closing stock in TRAN-1 Form?
* **Yes**, the dealer can claim transitional ITC on eligible closing stock as on 01.07.2017 by filling **Table 7D (transitional credit on inputs held in stock)** of the **TRAN-1 form**.
* However, this is allowed **only if the dealer was registered under VAT and paid VAT on purchases** of these medicines.
* If the medicines are exempt or outside the scope under the previous regime, ITC is not available.
---
### 2. Since medicine is sold on MRP and tax is collected by the first point dealer only:
* The **first point dealer charges VAT and collects tax on MRP**.
* Subsequent dealers sell at MRP but **do not collect tax separately** (tax is considered included in MRP).
* **Subsequent dealers can still claim ITC on the stock purchased** (if registered and if tax is embedded in the price), but:
* They need to ensure they have valid tax invoices showing tax paid.
* The value of tax paid on stock must be estimated properly to claim ITC in TRAN-1.
---
### 3. How does the subsequent dealer claim ITC on stock?
* The dealer should report **closing stock of inputs and input services** in Table 7D of TRAN-1.
* The **tax credit claimed on stock will be credited to their electronic credit ledger**, which is bifurcated into **CGST and SGST** components **in the ratio of CGST\:SGST = 50:50** (since GST is a dual tax with equal CGST and SGST rates).
* Therefore, the credit is **split equally between CGST and SGST accounts**.
---
### 4. Can the dealer claim only SGST or also CGST credit on stock?
* The dealer is entitled to claim **both CGST and SGST credit** on the eligible stock in the **50:50 ratio**.
* They **cannot claim SGST credit alone**; the transitional credit gets equally apportioned in their ledger as CGST and SGST credits.
---
### Summary Table:
| Question | Answer |
| ------------------------------------------------------------------ | ------------------------------------------------------------------------------ |
| Can transitional ITC on stock be claimed in TRAN-1? | Yes, in Table 7D, subject to eligibility and tax having been paid earlier. |
| What about medicine sold on MRP with tax collected at first point? | Subsequent dealers can claim ITC if tax is embedded and supported by invoices. |
| How is the credit distributed? | Credit is credited in **CGST and SGST ledger equally (50:50 split).** |
| Can only SGST credit be claimed? | No, both CGST and SGST credits must be claimed proportionately. |
---
If you want, I can help you with sample TRAN-1 form entries or further clarify any step. Would you like that?
---
### 1. Can the medicine dealer claim ITC on closing stock in TRAN-1 Form?
* **Yes**, the dealer can claim transitional ITC on eligible closing stock as on 01.07.2017 by filling **Table 7D (transitional credit on inputs held in stock)** of the **TRAN-1 form**.
* However, this is allowed **only if the dealer was registered under VAT and paid VAT on purchases** of these medicines.
* If the medicines are exempt or outside the scope under the previous regime, ITC is not available.
---
### 2. Since medicine is sold on MRP and tax is collected by the first point dealer only:
* The **first point dealer charges VAT and collects tax on MRP**.
* Subsequent dealers sell at MRP but **do not collect tax separately** (tax is considered included in MRP).
* **Subsequent dealers can still claim ITC on the stock purchased** (if registered and if tax is embedded in the price), but:
* They need to ensure they have valid tax invoices showing tax paid.
* The value of tax paid on stock must be estimated properly to claim ITC in TRAN-1.
---
### 3. How does the subsequent dealer claim ITC on stock?
* The dealer should report **closing stock of inputs and input services** in Table 7D of TRAN-1.
* The **tax credit claimed on stock will be credited to their electronic credit ledger**, which is bifurcated into **CGST and SGST** components **in the ratio of CGST\:SGST = 50:50** (since GST is a dual tax with equal CGST and SGST rates).
* Therefore, the credit is **split equally between CGST and SGST accounts**.
---
### 4. Can the dealer claim only SGST or also CGST credit on stock?
* The dealer is entitled to claim **both CGST and SGST credit** on the eligible stock in the **50:50 ratio**.
* They **cannot claim SGST credit alone**; the transitional credit gets equally apportioned in their ledger as CGST and SGST credits.
---
### Summary Table:
| Question | Answer |
| ------------------------------------------------------------------ | ------------------------------------------------------------------------------ |
| Can transitional ITC on stock be claimed in TRAN-1? | Yes, in Table 7D, subject to eligibility and tax having been paid earlier. |
| What about medicine sold on MRP with tax collected at first point? | Subsequent dealers can claim ITC if tax is embedded and supported by invoices. |
| How is the credit distributed? | Credit is credited in **CGST and SGST ledger equally (50:50 split).** |
| Can only SGST credit be claimed? | No, both CGST and SGST credits must be claimed proportionately. |
---
If you want, I can help you with sample TRAN-1 form entries or further clarify any step. Would you like that?
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