Allow Credit of unavailed CENVAT Credit in respect of Capital Goods under GST : ICAI Suggestions

Suggestions on GST Acts (July 2017) by Institute of Chartered Accountants of India

42. Credit of unavailed CENVAT Credit in respect of Capital Goods

Section 140(2) of CGST Act, 2017 provides that a registered person, other than a person opting to pay tax under section 10, shall be entitled to take, in his electronic credit ledger, credit of the unavailed CENVAT credit in respect of capital goods, not carried forward in a return, furnished under the existing law by him, for the period ending with the day immediately preceding the appointed day in such manner as may be prescribed:

Provided that the registered person shall not be allowed to take credit unless the said credit was admissible as CENVAT credit under the existing law and is also admissible as input tax credit under this Act.

Issue

The traders and manufacturers availing SSI exemption were not eligible for the CENVAT credit under the existing law as they were not paying excise duty on the final products. Such entities, now falling under the GST regime would not be eligible for the credit on capital goods purchased before the appointed date which might lead to credit loss for such assessees.

Further section 140(3) does not provide for carry forward of credit of capital goods.

Suggestion

It is suggested that a proviso be inserted under section 140(2) to allow credit on capital goods lying on the appointed date which was not availed earlier as the person was not required to register under the existing law.

Read ICAI Suggestions on GST Act to Govt : July 2017

Related Topic on GST