REGARDING CARRY FORWARD STOCK AS ON 30.6.2017

Hi Jitender,

This is a common and important issue during the transition from VAT to GST.

Key Points on Carry Forward Stock and VAT after GST rollout:

1. Stock as on 30.06.2017 and ITC under GST:

• Taxpayers who filed TRAN-1 and claimed input tax credit (ITC) on their opening stock as on 30 June 2017 under GST have rightly taken credit on that stock value.

• This ITC is available only once, and such taxpayers will not be taxed again on the same stock under VAT.

2. Taxpayers who did NOT file TRAN-1 or did not avail ITC on stock:

• They have not claimed ITC on their stock as of 30.06.2017, and the stock is considered as goods held on hand on the day GST was implemented.

• Since VAT law was still in force till 30 June 2017, some States allow taxing the closing stock under VAT if no ITC was claimed under GST.

3. Is VAT on closing stock post GST transition double taxation?

• No, it is not double taxation because:

  • For those who took ITC under GST, no VAT is levied on closing stock, as they have already benefited from credit.

  • For those who did not take ITC under GST (did not file TRAN-1), VAT on closing stock is seen as tax on goods in hand and is not double taxation, as they did not benefit from credit under GST.

4. Legal stance and State practice:

• Different States have varied in their approach; some levy VAT on such closing stock, some provide exemptions.

• Tax authorities generally argue that stock held as of 30 June 2017, without credit under GST, remains subject to VAT.

5. Recommendation:

• Taxpayers who missed filing TRAN-1 should consult the specific State VAT law and circulars.

• Some States have issued clarifications or amnesty schemes for delayed filing.

• Ideally, claim ITC under GST via TRAN-1 where possible to avoid VAT on stock.

Summary:

• VAT can be imposed on carry-forward stock if ITC was not availed under GST (TRAN-1).

• Taxpayers who claimed ITC under GST are not liable to VAT again on that stock.

• This is viewed as preventing loss of revenue rather than double taxation.