GST – States – 23A of 2018 – Dated:- 1-9-2018 – Office of the Commissioner of State Tax (GST), Maharashtra State, 8th Floor, GST Bhavan, Mazgaon, Mumbai-400 010. INTERNAL CIRCULAR (RESTRICTED CIRCULAR FOR OFFICE USE ONLY) No. JC/HQ-I/GST/TRAN-1/01/2017-18/ADM-8 Mumbai, Date: 01/09/2018 Internal Circular No. 23A of 2018. To, ………………….. – Subject : Verification of Transitional Credit (TRAN-1) claimed under GST in Electronic Credit Ledger. Ref. : Internal Circular No. 1A of 2018 dated 1st January 2018 1. Background: 1.1. An Internal Circular cited at Ref. above was issued to explain briefly the methodology to be followed to verify the transitional credit under existing laws taken to GST Electronic Credit Ledger, as per the provisions of section 140 and 142 of the Maharashtra Goods and Services Tax Act, 2017 (hereinafter referred to as MGST Act ). The rule 117 and 118 of the Maharashtra Goods and Services Tax Rules, 2017 (hereinafter referre
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ning to the Central Excise Act or, as the case may be, the Service Tax Act. 1.4. As you all are aware that the date for submission or revision of FORM-GST-TRAN-1 at GSTN portal was finally extended to the 27th December 2017. Thus, the tax payers who have taken transitional credit into Electronic Credit Ledger that was pertaining to the MVAT Act or the Entry Tax Act, may have already filed the TRAN-1 and may have adjusted the said credit towards the output liability or may have claimed refund of the same on account of export of goods/services against the payment of Integrated Tax. Therefore, all the Nodal Officer shall forthwith undertake the analysis to identify such tax payers on the basis of the details furnished in FORM-GSTTRAN-1 and collate the same with the information of TRAN-1 credit provided by the Economic Intelligence Unit. 1.5. In case, the verification of TRAN-1 credit has remained incomplete, the same shall be completed on or before 25th September 2018. The report in this
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said tax payer has furnished all the returns for the period from January-2017 to June-2017 under existing laws i.e. VAT, Entry Tax, Sugarcane purchase Tax etc.; (c) that the units under PSI Scheme have not claimed the set-off or, as the case may be, refund under rule 79 of the Maharashtra Value Added Tax Rules, 2005. 3.2. The registered taxable person may take into Electronic Credit Ledger under GST, the amount of excess credit carried forward in the return filed for the period ending June-2017. The Input Tax Credit, taken to the Electronic Credit Ledger, under this contingency shall not exceed the amount of excess credit carried forward shown in the return filed for the period ending June-2017. 3.3. Further, the input tax credit as attributed to the inter-State sales, Branch Transfer/Consignment Transfer, or deemed export, sales to Special Economic Zone and where declarations or certificates i.e. Form-C, Form-F, Form-H, and Form-I as provided under the Central Sales Tax Act, 1956 has
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attributable to such declarations or certificates that have not been received. (3) In other words, the example given below, the combined effect would be that the tax payer would be entitled to take the credit of such excess set-off claimed in return for the period ending June2017 to the extent of ₹ 3,50,000/- and not at ₹ 10,00,000/- i.e. as credit disclosed in the said return would be reduced by ₹ 6,50,000/- on account of non-receipt of the declarations/certificates against which the transactions are subjected to reduced rate or the NIL rate of tax. (4) The details of value of transactions and Form-type and amount of ITC attributable to such sales is given in the TABLE-1 below: TABLE-1 Sr. No. Category of Sales where Forms are not received (Rs.) Form Type Amount of ITC attributable to such sales Amt. in Rs. (a) (b) (c) (d) 1. 10,00,000 Inter-State Sales -Form-C 1,00,000 2. 15,00,000 Branch Transfer/Consignment Transfer Form-F 1,50,000 3. 5,00,000 Penultimate export F
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r this category is claimed in the FORMTRAN-1 TABLE as shown below: 5(a)-Amount of credit carried forward to Electronic Credit Ledger as State tax (Section 140(1) and 140(4)(a)]; 5(b)-Details of statutory forms received for which credit is being carried forward. (It may be kept in mind that the information in respect of Statutory forms and declarations is to be given starting from 1st April 2015 and ending on 30th June 2017. 5(c)- Amount of credit carried forward to Electronic Credit Ledger as State tax. The details with regards to turn-over of sales/transfer etc. vis-à-vis form pending is given in this Table. This information is also required to be given starting from 1st April 2015 to 30th June 2017. 3.7. In case, after verification of the details as aforesaid or from the data communicated by EIU, the Nodal Officer has noticed that the tax payer has claimed excess credit in the Electronic Credit Ledger visà-vis amount in the return for period ending June-2017, then the N
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return filed for the period ending June-2017. In case it is noticed so then the refund application need to be rejected. It may be case that the refund is processed and disbursed to the said tax payer, then such tax payer shall be advised to reverse the TRAN-1 credit so claimed, in the return GSTR-3B for the subsequent period. 4. Sub-section (2) of section 140- Unavailed Input Tax Credit in respect of Capital Goods: 4.1. This sub-section provides that the tax payer may take into Electronic Credit Ledger the un-availed credit in respect of Capital Assets. You may recall that under the provisions of Central Excise Act the CENVAT credit relating to the capital goods was allowed in staggered manner. 4.2. However, these provisions are not applicable to MVAT Act as the full set-off/input tax credit in respect of Capital Goods was allowed to be claimed in the month in which such purchases are effected. 4.3. Therefore, under this sub-section the tax payer would not be entitled to take any MVAT
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nd 52B of the MVAT Rules, 2005) provided that no set-off in this situation is claimed by the tax payer albeit contrary to the provisions of aforesaid rules. 5.2. Entitlement of such credit to be taken into Electronic Credit Ledger is subject to the following conditions: (1) such inputs or goods are used or intended to be used for making taxable supplies under this Act; (2) the said registered person is eligible for input tax credit on such inputs under this Act; (3) the said registered person is in possession of invoice or other prescribed documents evidencing payment of tax under the existing law in respect of such inputs; and (4) such invoices or other prescribed documents were issued not earlier than twelve months immediately preceding the 1st July 2017 i.e. the tax Invoices relied upon this purpose pertains to period between the period July-16 and June-17. 5.3. The Input Tax Credit eligible to be taken to Electronic Credit Ledger is mentioned in the Table-7(a) and 7(c) of the FROM-
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ess credit of VAT then the tax payer may be advised to reverse the excess credit so claimed, in the return FORM-GSTR-3B filed for the subsequent month. 6. Sub-section (4) of section 140- Registered person engaged in the sale of taxable goods as well as exempted goods or tax free goods but these goods are liable to tax under the MGST Act shall be entitled to tax credit claimed in the Electronic Credit Ledger: 6.1. The sub-section (4) of section 140 is divided into 2 parts i.e. clause (a) and clause (b). (1) Clause (a): The tax payer is entitled to take the credit that is shown as excess credit carried forward in the return filed for the period ending June-2017. This aspect has already been explained in the preceding para s pertaining to credit claim under section 140(1) of the MGST Act. The Tax payer can claim said credit under Column 5(a) of the Table of FORM-GST-TRAN-1 (2) Clause (b): (a) The entitlement of credit under this clause is applicable to the tax payer who was engaged in the
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ld take place on or after 1st July 2017 and therefore, in respect of the aforesaid goods held in the stock, and there would be no reversal [as required under rule 53(8) of MVAT Rules] of the credit in the subsequent months as the supply of such goods would take place under GST era. (e) Under GST, in FORM-GST-TRAN-1, the tax payer can claim the credit of the said input tax, if any, in the Electronic Credit Ledger. (f) The Nodal Officer is required to verify as to whether the tax payer has taken the credit into Electronic Credit Ledger and ask the tax payer to submit the details in this respect. 6.2. On this backdrop, the tax payer shall be entitled to take credit of VAT and Entry Tax in respect of inputs held in the stock and inputs contained in semi-finished or finished goods held in the stock (not being immovable property) provided that it meet the necessary conditions given hereinabove as also the provisions of sub-section (3) of section 140 as discussed above. The details of such cr
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Officer need to verify the TRAN-1 details provided in Table 7(b) of FORM-TRAN-1 vis-à-vis invoices on the basis of which such credit is taken and the date of entry of such invoices into books of account. The Nodal officer need to ascertain as to whether the said goods are received within the time limit i.e. on or before 30th August 2017 or within such period as may be extended by the Commissioner of State Tax. 7.4. Any deviation or excess claim of credit which is taken in breach of aforesaid provisions need to be reversed. It may also be confirmed from the office of the concerned Joint Commissioner as to whether an extension is given. The details about such extension, if any, given by the Joint Commissioner, shall be kept on record. 7.5. In the event, the tax payer has claimed the said credit in breach of aforesaid provisions then the tax payer may be advised to reverse the said ITC through the return in FORM-GSTR-3B of the subsequent month for which the return is pending. 8. Th
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0 of MGST Act); (3) the said registered person is in possession of invoice or other prescribed documents evidencing payment of tax under the existing law in respect of such inputs; and (4) such invoices or other prescribed documents were issued not earlier than twelve months immediately preceding the 1st July 2017 i.e. the tax Invoices relied upon this purpose pertains to period between the period July-16 and June-17. 8.3. The tax payer is required to state the details regarding the inputs held in stock and VAT thereon in Column 7(c) of the Table of FORM GST-TRAN-1 indicating therein the value of the goods, VAT/Entry Tax paid, total input tax claimed under earlier law. 8.4. It may be noted that the builders who have opted for composition scheme for payment of VAT under the existing law i.e. either under section 42(3A) of MVAT Act, in such case, was not entitled to take input tax credit including the input tax credit relating to capital goods. Therefore, the builder paying tax under com
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ded in the MGST Act. (2) In other words, under the circumstances given in Para-(1) above, excess VAT credit shown as per the last VAT return i.e. for period ending June-2017 would be allowed to be taken into Electronic Credit Ledger as per the provisions of section 140(1) of the MGST Act. 8.6. Claim of Credit under section 140(6) of MGTS Act: (a) In case a builder was not paying the taxes as per rule 58 and instead had opted to pay fixed amount in lieu of VAT i.e. under Composition Scheme [Section 42(3A)] then, such builder would be entitled to take credit of VAT into Electronic Credit Ledger, in respect of inputs held in stock. (b) In order to determine the credit of VAT availability to the said Builder and Developer in respect of the inputs contained in semi-finished goods i.e. contained in work in progress; and inputs contained in finished goods, it is necessary to examine the provisions relating to the Inputs , Goods and section 140(6) of the MVAT Act. (c) Thus, the provisions of s
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nted day (d) From the above provisions it is clear that the Builder and Developer is entitled to take the credit of VAT into Electronic Credit Ledger in respect of the inputs held in the stock. However, to ascertain the availability of VAT credit in respect of inputs contained in semi-finished or finished goods one has to examine the definitions of the inputs and goods . 8.7. For better understanding these terminologies are examined below: 8.7.1. The section 2(59) of the MGST Act defines the term inputs meaning thereby any goods other than capital goods used or intended to be used by a supplier in course or furtherance of business. 8.7.2. The section 2(52) of the MGST Act defines the term Goods to mean every kind of movable property other than money and securities but includes actionable claim, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply. 8.7.3. The section 140(6) of the MGST Act refe
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nces, rights to ways, lights, ferries, fisheries or any other benefit to arise out of land, and things attached to the earth or permanently fastened to anything which is attached to the earth, but not standing timber, growing crops nor grass. 8.7.6. Thus from the above definition the things permanently attached to earth shall mean the immoveable property and hence Building or the work in progress i.e. the inputs contained in semi-finished or finished goods, will not get covered under the term goods as defined under the MGST Act and therefore, inputs that are in the nature of work-in progress i.e. contained in semi-finished and finished goods are not goods within the meaning and scope of the MGST Act. Due to the aforesaid reasons the tax payer shall not be entitled to claim the VAT credit in that respect. 8.7.7. To explain this, the provisions contained in SCHEDULE-II Paragragh-5(b) are reproduced below. It reads as under: 5. Supply of services The following shall be treated as supply o
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d in WIP as on 30.06.2017 is not admissible under the GST. Example: – (A) Credit entitlement in respect of inputs held in stock (1) Say builder ABC has undertaken construction of a residential complex comprising of 50 flats (Costing at about ₹ 50 Cr.), out of which 10 flats are sold to the prospective buyers and as on 1st July 2017 and the balance 40 flats have remained unsold. (2) The said builder has received the amount of ₹ 12.5 Cr. towards the sale of 10 flats. The bill in respect of an amount of ₹ 12.5 Cr. has also been issued prior to GST i.e. on or before the 30th June 2017. The amount of ₹ 12.5 Cr. received prior to the commencement of GST is liable to VAT. Thus, the Builder has also paid appropriate taxes under MVAT Act @ 1% under the Composition Scheme. (3) For better understanding, extent of the credit pertaining VAT available or not available in respect of inputs held in stock and inputs contained in semi-finished goods or finished goods, that may be
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ck (1) As explained in the Para-A above, in order to take the credit of VAT pertaining to inputs contained in semi-finished or finished goods held in stock as on 1st July 2017, into Electronic Credit Ledger, it shall be necessary that said credit of VAT pertains to the goods and as such the inputs contained in semi-finished or finished goods are work in progress and therefore are immoveable property. (2) It is necessary to determine the value that is attributable to inputs contained in semi-finished or finished goods where the VAT credit is not available for taking into Electronic Credit Ledger including the purchases of goods that is contained in work in progress, and the said goods are purchased within one year from the 1st July 2017 i.e. on or after 30th June 2016. (3) For the reasons stated in preceding Para s the Builder and Developer shall not be entitled to claim the credit of VAT pertaining the semi-finished and finished buildings treated as Work-in-progress. (4) Aforesaid aspe
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ment lying in stock as on 30.06.2017 @ ₹ 300 per Bag. 3000 9,00,000 1,21,500 (4) Proportionate value of cement contained in Work in Progress for 40 flats. 5000*40/50=4000. Cement pertaining to within one year and beyond one year. 4000 12,00,000 1,62,000 (5) Cement contained in semi-finished goods or finished goods in the under construction of 40 flats [2-3] (Where invoice date is within one year period i.e. after 1st June 2016) 2000 6,00,000 81,500 (6) Cement lying in stock as on 30.06.2017 @ ₹ 300 per Bag. 3000 9,00,000 1,21,500 (5) It is seen from the above Table that the transitional credit in respect of the opening stock of cement i.e. 2000 Bags held as on 01.07.2016 and which is contained in work in progress i.e. contained in the semi-finished goods or finished goods, shall not be available, as the invoices for the same would have been more than one-year-old. [Please see condition of section 140(6)(v)]. In other words, the transitional credit as shown in above Table fr
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e continued on or after 1st July 2017: 8.8.1. Meaning and scope of term Works contract under MGST Act: (1) Before touching the subject of the credit entitlement under section 142(11)(c) of the MGST Act, it would be useful to examine the definition of term works contract as defined under section 2(119) of the MGST Act. For better understanding the said definition is reproduced below: 2(119) works contract means a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract (2) It is clear from the aforesaid definition that unlike the MVAT law the works contract relates to only the contracts relating to the immoveable property and therefore will not cover the contract for undertaking works in relation to moveable pr
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nput tax credit. 8.8.2. Credit entitlement as per the provisions of section 142(11)(c) of the MGST Act: (1) It would be worth to examine the provisions of section 142(11)(c) of the MGST Act vis-à-vis liability to pay tax and credit entitlement under GST in respect of construction contracts that are continued on or after 1st July 2017. (2) The section 142(11)(c) reads as under:- where tax was paid on any supply, both under the Maharashtra Value Added Tax Act, 2002 and under Chapter V of the Finance Act, 1994, tax shall be leviable under this Act and the taxable person shall be entitled to take credit of value added tax or service tax paid under the existing law to the extent of supplies made after the appointed day and such credit shall be calculated in such manner as may be prescribed . (3) Thus aforesaid section provides that where the tax was paid on any supply both under the MVAT Act and under Chapter V if the Finance Act, 1994 then the tax is leviable under MGST Act, in resp
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registered or not. (6) For more clarity, you are requested to go through Notification No. Finance Department Notification No. VAT-1517/C.R.-57/Taxation-1 dated 26th May 2017 and the Trade Circular No. 18T of 2017 dated 31st May 2017. The Gist of the aforesaid notification and Trade Circular is given below: (a) the developer was required to compute the 1% composition amount in case of agreement for sale has not been registered till 31st May 2017 but the developer has received the advance. In such scenario the developer was given an option to pay the 1% of the Advance amount received on or before 31st May 2017. This payment was required to be made on or before 30th June 2017. (b) with effect from 1st June 2017 to 30th June 2017, the developer was required to pay 1% of the Advance Amount received irrespective whether the agreement is registered or not on or after 1st June 2017. This amount was required to be paid on or before 21st July 2017. (7) The section 42(3B) of MVAT Act was also am
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ay, on such supplies to which this provision is applicable and the amount of Tax Credit admissible thereon, which is to be carried forward. Explanation- The amount of tax credit admissible shall be the amount calculated under sub-clause (ii) of clause (b) of sub-section (3B) of section 42 of the Maharashtra Value Added Tax Act, 2002. . 8.8.3. In the light of the discussion aforesaid, in case of a developer where the contracts are continued on or after the 1st July 2017 and such developer desires to take the transitional credit in that respect, the developer was required to file FORM-GST-TRAN-1 on or before the due date i.e. 27th December 2017 and give the details in the column 7(c) of the TRAN-1. 8.8.4. Verification of the TRAN-1 Credit taken into Electronic Credit Ledger by the Developer: (1) For verification of the TRAN-1 credit that pertains to scenario where the construction activity is continued after the GST and the payment of tax under Composition Scheme of 1% is paid, it is nec
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Balance GST payable 8,00,000 9. Credit that may be taken into Electronic Credit Ledger (33% of 3 Lakh i.e. the supply taking place under GST) 99,000 10. GST payable 7,01,000 Transactions on or after 1st June 2017 and where the agreement for sale is not registered or not. Table-5 Sr. No. Particulars Amount in Rs. (1) Value of the flat (whether registered or not) 1,00,00,000 (2) Amount received to Developer 50,00,000 (3) Bill issued by the Developer 60,00,000 (4) VAT paid 1% on the advances received till 30th June 2017. 50,000 (5) Value of supply of construction service made on or after 1st July 2017 40,00,000 (6) Liability to pay GST 40,00,000*12% 4,80,000 (7) Less: Input tax credit available in respect of inward supplies received on or after the 1st July 2017 1,00,000 (8) Less: Credit of VAT in respect of inputs held in stock. 1,00,000 (9) Balance GST payable 2,80,000 (10) Credit that may be taken into Electronic Credit Ledger 0 (11) GST payable 2,80,000 9. Statutory actions to be ini
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said mis-match. (Where the credit is taken based on the excess credit claimed in return filed for period ending June-2017). (3) The Nodal Officer shall verify as to whether the tax payer has revised the return and increased the VAT credit amount carried forward. In such cases, the tax payer is entitled to claim the VAT credit that is carried forward in the Original return, In case such credit is as per the revised return then then the excess credit so taken under GST need to be reversed. The Nodal Officer for this purpose may issue notice in FOMR-603 under MVAT Act and ascertain the aforesaid factual aspects. (4) On the basis of the data provided by the EIU and that is available on the SAP portal under BI Launch pad under various reports, the Nodal officer shall take into account the available information and in case there is a mis-match then issue the notice in FORM-603 and call for the information in this respect. On receipt of the information, in case the excess credit is noticed th
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f the excess VAT Credit taken to the Electronic Credit Ledger the recovery action shall be initiated. 10. The Economic Intelligence Unit has already forwarded the data pertaining to the Transitional Credit claimed by the tax payer in TRAN-1. On aforesaid background, the Nodal Officer, shall undertake the verification of TRAN-1 credit claimed by the tax payer. For verification of the TRAN-1 credit, instruction given in Internal Circular 1A of 2018 dated 1st January 2018, more specifically in Para-2.4.3, need to be followed. 11. All the Additional Commissioner of State Tax and concerned Joint Commissioner of State Tax shall ensure that the verification of TRAN-1 credit is monitored effectively. It shall also be ensured that the assigned cases for verification of TRAN-I credit shall in no case remain un-attended. Additional CST shall take weekly review of the said exercise. 12. Difficulty, if any, in the implementation of this Internal Circular may please be brought to the notice of the o
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