Input tax credit of stock held on appointed day

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Vijay Chaudhary

24 Points Posted on 05 May 2017

Respected Sir, My friend purchases Yarn which is taxable and he manufactures & sales Grey. As per present law (The Gujarat Value Added Tax Act 2003) every dealer whose total turnover during the year immediately preceding the appointed day exceeded Rs.5 lakh in a year are liable to be registered under the Act. And "Total turnover" means aggregate of the following transactions effected by a dealer: (a) turnover of sales or purchases of goods within the State whether such sales or purchases of goods are taxable or exempt under this Act; (b) turnover of sales of goods in the course of inter-State trade or commerce; (c) turnover of sales of goods in the course of export of goods out of the territory of India; (d) turnover of sales by a dealer on his own account and also on behalf of his principal. Thus, my friend is liable to get registration, however he has not taken registration. Now suppose tax is leviable under GST on supply of Grey. Whether he (who have not taken registration although he is liable under present law) will be eligible for Input Tax Credit of stock held on appointed day? Please guide us.

Replies (5)

CA Suresh Jain

Practice

80 Points Posted on 05 May 2017

yes if his stock is not more. than 12 months old and he has Invoice available with him. read section 140

Vinod Araveti

Practicing CA

880 Points Posted on 06 May 2017

As per section 140(3) of CGST act 2017, person who was not liable to be registered under the existing law can take the credit on input stock held in hand on the appointed day.

So because your freind is already liable to register under the existing law but not registered, he can't take the credit on that stock.

CA Suresh Jain

Practice

80 Points Posted on 06 May 2017

yes vinod is right. to claim itc he has to be registered under GST.
thanks vinod for clarifying

Vijay Chaudhary

24 Points Posted on 07 May 2017

Thanks for your clarification.

I want to clear my query. Yarn is taxable, however sale of Grey is exempted under Gujarat VAT.

Thus, my friend is engaged in the manufacturer of exempted goods (i.e. Grey). Can he claim Input Tax Credit on stock on the basis of plea that he is engaged in the manufacturer of exempted goods. Although he was liable to get registration because his taxable purchase (i.e. Yarn) is exceeding Rs.5 Lakh.

I read section 140(3) which is as follows:-

A registered person, who was not liable to be registered under the existing law, or who was engaged in the manufacture of exempted goods or provision of exempted services, or who was providing works contract service and was availing of the benefit of notification No. 26/2012—Service Tax, dated the 20th June, 2012 or a first stage dealer or a second stage dealer or a registered importer or a depot of a manufacturer, shall be entitled to take, in his electronic credit ledger, credit of eligible duties in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock ....