This post has been updated on 2o Aug, 2017.

Ever since the Form GSTR-3B format was released, the fundamental question which most of businesses have is ‘How can I capture the details of my Transitional ITC in Form GSTR-3B?’. With the extended dude date of 25th August, 2017, just a few days away, this questions seems to be one of the most concerned area for business in filing Form GSTR-3B. In this blog, we will be discussing on

  1. What is Transitional ITC?
  2. How can you claim Transitional ITC?
  3. Why is Transitional ITC a concern for businesses in filing GSTR-3B?
  4. What are the remedies for claiming Transitional ITC in Form GSTR-3B?

What is Transitional ITC all about?

Transitional input tax credit refers to carry forward of closing balance of tax credit from earlier indirect tax regime to GST. The GST Law allows you to carry forward the tax credit in 2 ways. First one being, the carry forward of closing balance of tax credit from the last return filed in earlier regime. Second being the tax credit on closing stock held on last day allowed in certain citation. However, to be eligible, there certain conditions which businesses need to meet. To know more in detailed, please read our blogs on Moving to GST: For Registered Businesses  and Moving to GST: Can I Avail Input Credit on Closing Stock?

The Cenvat Credit will be carried forward as CGST Credit and VAT as SGST credit. Businesses are allowed to use this tax credit to set off the GST liability.

How can I claim Transitional ITC?

In order to claim the transitional ITC, businesses are required to file Form Tran-1 within 90 days from 1st July, 2017. On the basis of filing of Form Tran-1 in GST portal, the eligible transitional input tax credit amount will be credited to your e-credit ledger which is then be used to pay the liability by way of ITC adjustment at the time of filing returns. The facility to file Form Tran-1 is currently not available in the GST portal and shortly the portal would open for accepting the Form Tran-1.

To know more on claiming transitional credit, and the taxes that are eligible to carry forward, Please read our blogs on How to Carry Forward Closing Balance of ITC from Earlier Regime to GST? And Taxes Eligible for ITC on Opening Stock of 1st July. Also to know how the different electronic ledgers are maintained in the portal, please read the blog How to Pay GST?

Why is it a concern for businesses in filing GSTR-3B?

The deadline to file GSTR-3B is 20th August, 2017 (extended to 25th August, 2017), and yet there are was no signs of portal opening up for filing Tran-1. The apprehension for businesses is that though they have a huge sum of transitional ITC, they will not be able utilise the same in discharging the tax liabilities while filing GSTR-3B. This impacts the cash outflow of the business.

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You may think, can I not claim transitional ITC in Form GSTR-3B. Understanding the plight of businesses, this may sound to be a fair question. But legal provision does not allow a taxable person to claim the transitional tax credit through GSTR-3B and it needs to be claimed only by submitting Tran-1.

What are the remedies for claiming Transitional input tax in Form GSTR-3B?

By now we have understood the concerns but what is the way forward? Are there any remedies? Yes, after listening to the concerns raised on this subject, as a make-shift arrangement, the council has decided to given an opportunity for those business who would like to utilise the transitional input tax in paying the July month’s tax liability. As per this arrangement, the businesses that want to avail the transitional input tax credit should calculate their tax liability after considering the amount of transitional credit as per Form Tran-1.

You can use the following formula to arrive you tax liability of July.

Tax payable = (Output tax liability + Tax payable under reverse charge) – (Transitional credit + input tax credit availed in the month of July, 2017)

The arrived tax liability after adjusting the transitional ITC needs to be paid before 25th August, 2017, however, for filing Form GSTR-3B, you will get an additional 8 days, that is, on or before 28th August, 2017. In case of a shortfall, that is, any difference of the amount already paid vis-à-vis the amount payable on submission of Form 3B, have to be paid with interest @ 18% from 26th August, 2017, till such differential amount is paid.

The businesses need to ensure that the Form TRAN-1 is submitted in the GST portal by 28th August, 2017, and the facility to upload Form Tran-1 will be available from 21st August, 2017.

The due date for filing of GSTR-3B is applicable only for businesses who wish to utilise the transition credit. For others, who do not want to claim transitional ITC in Form GSTR-3B, the due date is 25th August, 2017.

To know more on the due date of GSTR-3B, please read ‘GSTR-3B Due Date – 25th or 28th August?

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