GST – Credit Transfer Document

With the implementation of Goods and Service Tax from 7th July 2017 on of the major concern of dealers is about the transition from old laws to GST. One of the major points of worry is about the transition of the tax credit of taxes paid on inward supplies. And what will be the procedure to be followed if the manufacturer of goods was registered under Central Excise Act, 1944 and dealer were not registered under the same under old laws. However, after the implementation of GST, the same dealer is covered under the ambit of GST.

To facilitate the transition of CENVAT Credit in such a situation, the government has notified Draft Rule for the issue of Credit Transfer Document on 4th June 2017. These rules are to be inserted in the CENVAT Credit Rules, 2004 for the transfer of credit in case of specified goods available with the trader as on appointed date. As per these rules, the manufacturer is required to issue Credit Transfer Document (CTD) to the dealer for goods manufactured and cleared before 1st July 2017, evidencing the payment of Excise Duty by him. And the dealer can claim credit for the same on the basis of CDT.

Contents of CDT

Following details are to be filled in the Credit Transfer Document:

  • Central Excise registration number.
  • Address of the concerned Central Excise Division.
  • Name, address and GSTIN number of the dealer to whom it is issued.
  • Description of the goods.
  • Classification of goods.
  • Invoice number with date of removal.
  • Mode of transport and vehicle registration number.
  • The rate of duty, quantity, value and duty paid.

Preconditions and Limitations

This Credit Transfer Document provision stated in this rule is a huge relief to the dealers, but it is subjected to certain preconditions and limitations. List of such conditions is stated below:

General Conditions

  • The value of such goods is more than Rs. 25000/-
  • It bears the brand name of the manufacturer.
  • These goods are distinctly identifiable as a distinct number such as chassis/engine no. of a car.

Conditions relating to Manufacturer

  • Manufacturer issuing such CTD must be registered be under Central Excise Act, 1944
  • The manufacturer maintains documents relating to goods cleared by him, and the duty paid on them. These records should be made available for verification on demand by a Central Excise Officer.
  • The manufacturer must be satisfied that the dealer to whom he issued this Credit Transfer Document is in possession of such manufactured goods in the form in which it was cleared by him.
  • CTD shall not be issued in favor of a dealer to whom invoice was issued for the same goods before the appointed date.

Conditions relating to Dealer

  • The dealer shall maintain copies of all invoices relating to buying and selling from manufacturer to the dealer, through intermediate dealers.
  • Any dealer who is availing credit using Credit Transfer Document will not be eligible to avail credit under the provision of Rule 1(4) of Transition Rules made under CGST Act, 2017 on identical goods manufactured by the same manufacturer available in the stock of the dealer.
  • Any dealer availing credit on the basis of Credit Transfer Document will be required to mention the corresponding Credit Transfer Document number in the invoice issued by him, at the time of making the supply of such goods.

Timeline for issue of CTD

This Credit Transfer Documents shall be issued within 30 days from the implementation of CGST Act, 2017 i.e. 1st July 2017. And this document must be accompanied with corresponding invoices relating to such goods.

 

Documents required to be filed

  • Manufacturer issuing CTD will be required to submit details thereof in Table 1 of TRANS 3 on the common portal.
  • Dealer availing credit based on such CTD will be required to submit details thereof in Table 2 of TRANS 3 on the common portal.
  • Time limit for making these submissions is 60 days from the appointed date, i.e. 1st July 2017.

Documents required to be maintained

  • Any manufacturer issuing CTD will be required to maintain records in the Form TRANS 3A and these records are to be made available to Central Excise officer for verification on demand.
  • Any manufacturer availing credit based on these CTD will be required to maintain records in the Form TRANS 3B and these records are to be made available to Central Excise officer for verification on demand.

Impact of dual availing of CENVAT credit

Lastly, we will discuss a situation if CENVAT credit is availed twice i.e. if the manufacturer has issued a credit transfer document in such a way that tax credit is availed twice for the same goods under GST laws. In this situation manufacturer as well as the dealer will be held equally and severally responsible for such excess credit amount paid along with any interest and penalty to be paid on the same.