CBEC Guidance Note on CGST Transitional Credit

CBEC Guidance Note on CGST Transitional Credit

Central Board of Excise & Customs  (CBEC) has issued a detailed guidance note to aid and assist the field offices in verification of transitional credit claimed in form TRAN-1.

As per the letter dated 14th March, 2018 issued by the CBEC to all Principal Chief Commissioners/ Chief Commissioners, the field formations have verified the transitional credit on a preliminary scrutiny basis. However, further steps are required to verify the correctness of the Transitional credit taken , in a more focused and concerted manner. To facilitate the same, the guidance note has been issued.

In the guidance note, various checks have been prescribed in relation to the various entries provided in various tables of TRAN-1 as under:

(i) Checks for Table 5(a)
(ii) Checks for Table 6(a)
(iii) Checks for Table 7(a), Entry 7A
(iv) Checks for Table 7(a), Entry 7B
(v) Checks for Table 7(b)
(vi) Checks for Table 8
(vii) Check for Table 11
(viii) General check

The verification in terms of the Guidance Note has to be conducted in respect of the list of top 50,000 GSTINs in the order of transitional credit availed. Five sets of data generated in this regard and uploaded on Antarang are as under:

1. Data 1:
This annexure contains the TRAN-1 data (GSTIN wise) in respect of top 50,000 taxpayers in the order of TRAN Credit availed and as populated in individual tables of form TRAN-1. It also contains the total CGST credit posted in the electronic credit ledger. A comparison of the table-wise entries with the total CGST credit posted in the credit ledger, for a given GSTIN, will give an idea of the mismatch between the credit claimed through various entries and the total credit entered in the ledger. This data will also help in conducting the table-wise checks prescribed in the guidance note.

2. Data 2:
This annexure contains the past data, pertaining to closing balance of CENVAT credit as per ER-1/ST-3 returns (as on 30.06.2017), for the same PAN as they appear in the 50,000 GSTINs in Data 1. This will facilitate the comparison between pre-GST closing balance of credit and the CENVAT credit transitioned using TRAN 1 post-GST.

3. Data 3:
This sheet contains PAN-wise summary of the closing balance of CENVAT credit, as per ER-1/ ST-3 returns (as on 30.06.2017 and 30.09.2016) vis-a-vis TRAN credit availed. It may be noted that many times one registration of pre-GST era can get converted into many registrations post-GST and vice-versa, therefore for a given PAN, there may not be one to one correlation between the TRAN Credit transferred by individual GSTIN and closing balance of CENVAT credit pertaining to registration number(s) in pre-GST period. This data will facilitate the comparison of overall credit growth PAN wise.

4. Data 4:
This list contains details of taxpayers who have availed transitional credit greater than Rs. 25 lakh and where the closing balance of CENVAT credit during the period of 1st of October, 2016 to 30th of June, 2017 has grown by 25%. This data shall be used to identify taxpayers who would be required to file a verification return, in the format provided in the Guidance Note.

5. Data 5:
This list contains the details of taxpayers who have taken registration between 1st October 2016 and 30th June 2017 and are entities other than limited companies (i.e. these taxpayers lie in the category of proprietors, LLPs, HUFs etc). This data can be used to verify frivolous and fraudulent TRAN Credit claimed by such taxpayers who might have taken registration in the last 2-3 quarters pre-GST just to avail the TRAN Credit benefits.

It has been directed that the tax payers who have been verified in terms of past instructions, further verification shall be conducted in terms of checks listed above in the Guidance Note and past checks already applied need not be duplicated.

Also, It has been reiterated that credit verification shall remain one of the focus areas in the year 2018-19. It would be desirable to plan the activity of verification for the entire year . Verification may be divided in four phases, as outlined in para 16.1 of the guidance note and completed no later than  the  time  lines  suggested. Record  of results obtained shall be maintained in the Commissionerate concerned and reported to the Board, on or before the 10th of the month following the quarter in which verification is completed, in the format prescribed in the Guidance Note. The Chief Commissioners has been authorised to divide the work between Executive and Audit Commissionerate to achieve the best possible results.

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