The GST input tax credit (ITC) program was introduced by the Ministry of Finance (MoF) in the Transitional Provisions rules to give GST Input Tax Credit to unregistered persons. During the GST implementation, the plan will account for any unaccounted products or stock on hand.

For Central Excise, GST Input Tax Credit

GST Input Tax Credit Scheme

The GST input tax credit scheme for Central Excise, as described in the Transitional Provisions rules, is aimed at unregistered persons who do not have any existing registration, such as a central excise registration or proof of payment of central excise duty, and who have stock on the GST implementation date.

The Ministry authorizes such individuals to claim GST ITC on goods held in stock. Furthermore, following payment of the central tax, central excise or additional customs charges will apply on the day of GST implementation. The GST input tax credit framework allows for a 60% tax rate on items that are subject to a central tax rate of 9% or higher. For all other goods, the central excise tax rate will be 9% or less, with a 40% GST input tax credit available. When such items are subject to integrated tax, the amount of input tax credit will be applied at a rate of 30% and 20%, respectively. After the central tax, the system credits the GST input tax to the taxpayer’s computerized credit ledger.

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To Be Eligible For An ITC, You Must Meet The Following Criteria

To be eligible for the ITC under this scheme, the person must meet the following requirements:

  1. Goods that are free from the entire excise levy as out in the First Schedule of the Central Excise Tariff Act, 1985. Furthermore, in the aforementioned Schedule, the product’s rate is zero-rated.
  2. The registered person must obtain the necessary paperwork for the products and keep them on file.
  3. A declaration in FORM GST TRAN 2 must be submitted by the registered person who has taken advantage of this scheme and has provided the details of stock held by the taxpayers. The taxpayer must specify the stock at the end of each of the six tax periods, noting whether the plan applies to the supply of goods made during that time.
  4. The system will credit the amount of credit to the applicant’s electronic credit ledger, which is kept on the Common Portal in FORM GST PMT-2.
  5. The concerned individual must keep track of the stock of goods so that the registered person may easily recognize them.

From the date of GST implementation, the program for claiming GST input tax credit against central excise would be available for 6 months.

Input Tax Credit (GST)-Value Added Tax (VAT)

GST Input Tax Credit Scheme

Even if there is no document evidencing payment of value-added tax, any taxpayer with VAT registration and holding stock of goods on the GST implementation date for which VAT payment was at the first point of sale in the State and subsequent sales are not subject to tax in the State – would be allowed to claim GST input tax credit.

The Act offers a 60 percent GST input tax credit for such commodities that are subject to a state tax rate of 9% or more. The input tax credit will be provided at a rate of 40% for goods with a state tax rate of 9% or less. If such items are subject to integrated tax, the amount of credit will be 30 percent and 20 percent, respectively. After the State tax due on the supply has been paid, the GST input tax credit will be credited to the taxpayer’s electronic credit ledger.

Conditions for Getting a GST ITC

To claim the GST input tax credit under this system, the concerned individual must meet the following criteria:

  1. Only a portion of the products is free from taxation under the concerned state’s Value Added Tax Act.
  2. The registered person must obtain the necessary paperwork for such things and keep them on file.
  3. The registered person who takes advantage of this plan and has provided the details of the stock held by the individual must submit a statement in the form GST TRAN 2. At the end of each of the six tax periods, the taxpayer must submit the form. The file must include the information of all such goods supplies made during the tax period, as well as the scheme’s operation.
  4. The amount of credit authorized will be credited to the applicant’s electronic credit ledger on the Common Portal (FORM GST PMT-2).
  5. The products on which the credit is granted are stored in such a way that the registered person may easily identify them.

From the date of GST implementation, the program for claiming GST input tax credit against VAT will be available for 6 months.