Transitional arrangements for input tax credit (ITC) were introduced during the implementation of Goods and Services Tax (GST) in India. These provisions aimed to ensure a smooth transition for businesses by allowing them to claim credit for taxes paid under the previous tax regime (like VAT, excise duty) against their GST liability.

Here’s a breakdown of key points about transitional ITC arrangements:

• Purpose: To avoid double taxation and ensure businesses weren’t disadvantaged due to unutilized tax credits accumulated under the pre-GST system.
• Eligibility: Businesses registered under GST who had paid VAT or other eligible taxes before GST implementation could claim credit for that amount.
• Process: A specific form (GST TRAN-1) was used to declare the amount of pre-GST tax paid and the eligible ITC claimed.
• Deadline: The initial deadline for filing the declaration was typically within 90 days of the GST rollout date. However, extensions might have been granted. It’s advisable to consult a tax professional or refer to the latest GST updates for the current status.
• Limitations: There might be limitations on the type of taxes or the time period for which credit could be claimed.

Benefits of Transitional ITC Arrangements:

• Helped businesses utilize their accumulated tax credits from the pre-GST era.
• Reduced the initial financial burden of complying with the new GST system.
• Ensured a smoother cash flow for businesses during the transition period.

Resources for further information:

• Maha GST – Transitional arrangements for input tax credit: Central Board of Indirect Taxes and Customs (CBIC) – Transition Provisions under GST: 

Examples

The Goods and Services Tax (GST) introduced a new tax regime, and to ensure a smooth transition, various provisions were made for businesses to claim credit for taxes paid under previous regimes. Here are some examples of transitional arrangements for ITC:

• Carrying Forward Pre-GST Credit: Businesses registered under GST were allowed to carry forward the unutilized credit of Value Added Tax (VAT) and other taxes paid on eligible purchases made before the implementation of GST. This credit was claimed by filing Form GST TRAN-1. (Note: Revision of this form is not yet available)
• Credit for Goods in Transit: If a business had purchased goods before GST but received them after the rollout, they could claim credit for the tax paid under the previous regime on those goods, subject to certain conditions.
• Credit on Capital Goods: Businesses were allowed to claim credit for the proportionate amount of tax paid on capital goods purchased before GST, even under the new regime. The specific method for claiming this credit depended on the depreciation schedule of the capital good.

Here’s a table summarizing these examples:

Remember: These are just a few examples, and the specific rules for claiming transitional ITC can vary depending on the nature of the purchase and the tax regime applicable before GST. It’s advisable to consult a tax professional for guidance on your specific situation

Case laws

1. Official Government Websites:
   • Central Board of Indirect Taxes and Customs (CBIC):Search for case laws or legal judgements related to GST transitions on the CBIC website. They might reference specific court cases.
   • Department of Revenue, Ministry of Finance: Similar to CBIC, the Department of Revenue website might have resources on past legal judgements concerning GST transitions.
2. Legal Databases:
   • Free Online Legal Databases: Websites like Indian Kanoon:  or Vakil No 1:  might provide access to relevant case summaries or judgements. Look for keywords like “GST,” “Transitional Credit,” or “Input Tax Credit.”
3. Tax Professional Guidance:
   • Consulting a Chartered Accountant or tax advisor specializing in GST can be very helpful. They can access legal databases and have knowledge of relevant case law related to ITC transitions.

Important Note:

While searching for case law, keep in mind that judgements from High Courts or the Supreme Court hold more weight than judgements from lower courts. Look for recent cases (ideally within the last 3-5 years) for the most up-to-date legal interpretations.

Faq question

What are transitional arrangements for ITC?

These arrangements allowed businesses to carry forward and utilize the credit they had accumulated on taxes paid under pre-GST regimes (like excise duty, VAT, service tax) into the GST system. This helped smoothen the transition and avoid double taxation.

Who was eligible for transitional credit?

Businesses registered under GST who had paid taxes under the previous regimes on:

• Inputs held in stock on the date of GST implementation.
• Capital goods acquired before GST.

What were the conditions for availing transitional credit?

There were specific conditions for claiming credit, such as:

• Filing GST TRAN Forms: Businesses had to file Forms GST TRAN-1 (for credit on stock) and TRAN-2 (for credit on capital goods) within the stipulated timeframe (usually 90 days from GST rollout).
• Maintaining proper records: Businesses needed to possess valid tax payment documents (invoices, challans) for the pre-GST period to claim credit.
• Eligibility of supplies: The credit could only be availed on inputs used or intended for use in making taxable supplies under GST.

Is it still possible to claim transitional credit?

The initial deadline for filing Forms TRAN-1 and TRAN-2 has passed. However, there have been instances where the government provided special windows for late filing with certain conditions. It’s advisable to consult a tax advisor or refer to the official GST portal for the latest updates on claiming transitional credit.