Taxpayers claim Rs65,000-cr of Rs95,000-cr GST paid as input tax credit

After the government claimed a Rs95,000-crore revenue collection by way of goods and services tax (GST) in July, the first month of its launch, taxpayers have now claimed as much as Rs65,000 crore as transitional credit, prompting the CBEC to order a scrutiny of all such claims above Rs1 crore.

Transitional credit is the closing balance of input tax credit carried forward from earlier indirect tax regime to GST. Under goods and services tax, tax credit is allowed on stock purchased during the previous tax regime for a period of six months from 1 July.

The Goods and Services Tax (GST) regime, rolled out on 1 July, allows tax credit on stock purchased during the previous tax regime. This facility is available only up to 6 months from the date of GST rollout.

The Central Board of Excise and Customs (CBEC), in a letter dated 11 September, has asked tax officials to verify GST transitional credit claims of over Rs1 crore made by 162 entities.

In the transitional credit form TRAN-1 filed by taxpayers along with their maiden returns for July, businesses have claimed a credit of over Rs65,000 crore for excise, service tax or VAT paid before the GST was implemented from 1 July.

CBEC member Mahender Singh in the letter to chief commissioners has asked them to make sure that the carry forward of transitional credit is permissible under the GST law.

"The possibility of claiming ineligible credit due to mistake or confusion cannot be ruled out... It is desired that the claims of ITC (input tax credit) of more than Rs1 crore may be verified in a time-bound manner," the CBEC said.

CBEC has asked the chief commissioners to send their reports on the claims made by these 162 companies by 20 September.

To ensure only eligible credit is carried forward in the GST regime, the CBEC has asked field offices to match the credit claimed with closing balance in returns filed under the earlier law.

They are also required to check if the credit is eligible under the GST laws.

Till last week, as many as 70 per cent of 5.96 million taxpayers had filed returns for July, amounting to maiden revenue of Rs95,000 crore under the GST regime.

However, out of this, the input tax credit (ITC) data for Central GST (CGST) claimed in TRAN-1 has shown that registered businesses have claimed over Rs65,000 crore as transitional credit.

The government, late last month, had come out with form TRAN-1 for businesses to claim credit for taxes paid on transition stock.

Traders and retailers had 90 days to file for a claim. Businesses have also been allowed to revise the form once till 31 October.

Under the transition rules, traders and retailers are allowed to claim a credit of 60 per cent of taxes paid earlier against the CGST or SGST dues where the tax rate exceeds 18 per cent.

In cases where the GST rate is below 18 per cent, only 40 per cent deemed credit will be available against CGST and SGST dues.

Further, the government would also refund 100 per cent excise duty on goods that cost above Rs25,000 and bear a brand name of the manufacturer and are serially numbered such as TV, fridge or car chassis.

To avail this, a manufacturer can issue a Credit Transfer Document (CTD) to the dealer as evidence of excise payment on goods cleared before the introduction of GST.

The dealer availing credit using CTD will also have to maintain copies of all invoices relating to buying and selling from the manufacturer, through intermediate dealers.