Following apex court order, Central Board of Indirect Taxes & Custom (CBIC) has come out with a circular on filing claim for transitional credit (TRAN CREDIT). Though all assesses can make claim, but CBIC says this mechanism won’t be appropriate for assessees whose claim has been rejected fully or partially. Same is true for assessees whose appeal is pending.

“The facility for filing TRAN-1/ TRAN-2 or revising the earlier filed TRAN-1/TRAN-2 on the common portal by an aggrieved registered assessee will be made available by GSTN (GST Network) during the period from October 01 to November 30, 2022,” CBIC said.  Trans credit refers to use of tax credit accumulated up to June 30, 2017, that is, the last day of erstwhile central excise and service tax regime. Post-introduction of Goods & Services Tax (GST), special provision was made for credit accumulated under VAT, excise duty, or service tax to be transited to GST. However, there were some conditions, such as the credit will be available only if returns for the last six months were filed in the previous regime (VAT, excise, and service tax returns had been filed).

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TRAN-1 Form needs to be filed by registered persons under GST, may be registered or unregistered under the old regime. TRAN-2 Form needs to be filed by a registered persons under GST but unregistered or under old regime or a dealer or trader who does not have documents of duty paid.

Transitional forms filing

The circular said that taxpayer can file fresh transitional forms or revised earlier transitional forms on common portal. Taxpayers will be allowed to download a previous copy of transitional forms. A new declaration also needs to be filed with transitional forms. Taxpayer is required to submit self-certified copy of transitional forms with jurisdictional office within 7 days of filing the same on common portal. No revision is allowed post filing of transitional forms.

The tax officer will verify the claim filed in TRAN-1/TRAN-2. He will pass a proper order after which credit will be transitioned to Electronic Credit Ledger. This is departure from erstwhile procedure where credit used to first transition to Electronic Credit Ledger on self-assessment basis and post audit was undertaken. According to the circular, where credit was disallowed in the past in transitional form audit, then such taxpayer need not file fresh transitional forms as per SC judgment. They should prefer an appeal against such order.

“It is pertinent to mention that the option of filing or revising TRAN-1/TRAN-2 on the common portal during the period from October 01 to November 30, 2022 is a one-time opportunity for the applicant to either file the said forms, if not filed earlier, or to revise the forms earlier filed,” the circular said while advising that the applicant is required to take utmost care and precaution while filing or revising forms and thoroughly check the details before filing his claim on the common portal.

Saurabh Agarwal, Tax Partner with EY India says it has been clarified that if any credit amount has been disputed by the Department (including adjusted against pending adjudication/ appeals under erstwhile indirect tax laws) then the same would be concluded as per the hierarchy of judicial fora. “Given that the guidelines clarify that it is the last opportunity to avail transitional credit industry should be very cautious while filing and submitting the said form. Important to note that the transitional credit will only be allowed post verification of claim by the department,” he said.