About a year back, when India was getting ready to step into the GST era, the subject of input tax credit carried forward from the previous tax regime, was a major cause of concern for most businesses. Understandably, a sizeable amount of tax would have been paid while purchasing inputs, raw materials, semi-finished goods, finished goods or on procuring materials which were sent to the job worker. Also, it was a practical scenario that businesses would be holding some amount of opening stock on 1st July, 2017, and whether the tax credit on such stock will be available or not, was something businesses needed clarity on. In response to this, the government laid down the transition rules and formats, which stated that any business, having a closing stock – whether registered or not before GST, will be entitled to claim credit of the tax paid under the pre-GST regime. To help businesses transition smoothly into the GST era, and to carry forward their ITC, the government had released 2 transition forms, namely the TRAN 1 GST Form and the TRAN 2 GST Form.

In our previous blogs, we had discussed in detail about Form GST TRAN 1 , and had dealt with how to file it on the portal. We had also learnt that all businesses who were eligible to claim ITC on stocks held as on 30th June 2017, whether registered or unregistered in the previous regime, will be required to file TRAN 1 to claim the transitional credit.  However, those businesses who were not registered in the previous era and did not possess any document that acts as an evidence of payment of tax, (basically any taxable person who is not a manufacturer under the Central Excise Act or a service provider under the Service Tax Act) had to file an additional form i.e. the TRAN 2 GST Form. So far, there was no specified timeline given to file the TRAN 2 GST Form. However, on the 8th of March, the government and the GST Council announced, that for the period July to December 2017, TRAN 2 will need to be submitted by 31st March, 2018.

Thus, it is important for businesses to again revisit the concept of TRAN 2, so that the form can be filled and submitted, within the remaining days of March 2018.

What is the TRAN 2 GST Form?

Form TRAN 2 is a transitional form under GST, which must be filed by a dealer or trader who has registered for GST, but was unregistered under the old regime. There are quite a few businesses like this, who had to take registration under the GST era, primarily due to the low turnover limit set for GST registration. Understandably, such a dealer would not have a VAT or excise invoice for the stocks of inputs, semi-finished goods or finished goods held as on 30th June, 2017 and thus would need to use the TRAN 2 GST Form to claim input tax credit on the stock with them.

Who can file GST TRAN 2?

As per the GST transition rules, all taxable persons who are registered under GST, but unregistered under the old regime, need to fill this form. Also as explained earlier, this automatically covered dealers who did not have documents supporting tax paid, and thus naturally excluded manufacturers registered under Excise, and service providers registered under Service Tax.

When is GST TRAN 2 to be filed?

As per the GST transition rules, the GST TRAN 2 due date for all traders is the end of every month, by which he needs to report any sales of the stock in question, enabling him to claim input tax credit on the same. As per the first notification regarding the transitional forms, it was specified that TRAN 2 will need to be filled monthly for the months July to December 2017.

What are the conditions to be met for filing GST TRAN 2?

  • Such goods which are considered as closing stock on 30th June, 2017, are not unconditionally exempt fully from Excise / VAT or were not nil rated goods under Excise / VAT
  • Such stock must have been cleared by the end of December 2017, to claim the credit, as the transition provision was operative from 6 months of GST coming live
  • There should be some document which shows that such goods and stock has been procured
  • The stock of goods on which the credit is being claimed is stored in such a manner, that it can be easily identified

How to file TRAN 2

The following details are to be filled in Form GST TRAN 2, either on the portal or by using the TRAN 2 offline tool:

  1. GSTIN
  2. Name of Taxable Person
  3. Tax Period (mentioning the month and the year for which this form is being filled)
  4. Details of inputs held on stock on 1st July (for which the taxable person does not have any invoice / document evidencing payment of tax carried forward to electronic credit ledger)
  5. Credit on State Tax on the stock mentioned above

Under the last two fields, details of stock will need to be fed in under the following heads, as per the GST TRAN 2 format:

  • Column 1: HSN Code of the opening stock for the month
  • Column 2: Unit of Measurement of the opening stock for the month
  • Column 3: Quantity of opening stock for the month
  • Column 4: Quantity of goods sold in the month
  • Column 5: Taxable Value of goods sold for the month
  • Column 6: CGST amount, if sold intra-state
  • Column 7: IGST amount, if sold inter-state
  • Column 8: Credit of Central Tax (input credit of CGST) claimed, which shall be:
    • 60%, if the CGST paid is 9% or more, else 40%
    • 30%, if the IGST paid is 18% or more, else 20%
  • Column 9: Quantity of opening stock for the relevant tax period calculated by deducting value in Column 4 from the value in Column 3

Also, it is to be noted, that a taxpayer has to file Form TRAN 1 and GSTR 3B for the relevant month, before filing Form TRAN 2.

GST TRAN 2 – Latest Developments

As per the latest notifications, the government has notified a GST TRAN 2 last date of March 31st, for all businesses who have availed ITC based on the stock statement as on 1st July, for each of the 6 tax periods from October 2017 to March 2018. However, this step seems to be a little on the stringent side, as understandably there will be a multitude of year-end activities that businesses need to undertake, and thus the expectation from most businesses will be for an extension in the GST TRAN 2 due date.

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Pramit Pratim Ghosh

Author: Pramit Pratim Ghosh

Pramit, who has been with Tally since May 2012, is an integral part of the digital content team. As a member of Tally’s GST centre of excellence, he has written blogs on GST law, impact and opinions - for customer, tax practitioner and student audiences, as well as on generic themes such as - automation, accounting, inventory, business efficiency - for business owners.