Excise credit on goods from sez unit.

This query is : Resolved

PRANAY JAIN (Querist)
Follow

30 April 2017 I am an automobile dealer (First Stage Dealer)Registered in VAT but not registered in excise. 70% of our goods are received from manufacturer plant in SEZ (Enjoying excise tax holiday, that I suppose is going to end with GST).I have Excise Invoice for remaining 30% of my stock (not from SEZ) and 0% Excise duty Invoice for 70% stock(from SEZ). I am eligible for full excise credit for 30% of the Excise Invoice stock. Now my question is whether i would be eligible for deemed credit of @40% for closing stock from SEZ plant in GST.

Guest

Guest (Expert)

03 May 2017 No,you are not eligible of 40% deemed credit on closing stock from SEZ plant in GST.

PRANAY JAIN

PRANAY JAIN (Querist)
Follow

03 May 2017 Sir,
Is it specifically written in GST transitional Law that deemed credit would not be available on SEZ goods. And secondly second stage dealer would have no information whether the goods are from SEZ or normal manufacturing plant, so how would he take deemed excise credit.

Upgrade to CAclubindia Pro. Subscribe Now!

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
Follow

21 July 2024 Under GST transitional provisions, the availability of deemed credit (commonly referred to as input tax credit on closing stock) for goods purchased from SEZ units is indeed restricted. Here’s a detailed explanation based on the current GST transitional laws and guidelines:

1. **Deemed Credit on Closing Stock:**
- As per GST transitional provisions (GST TRAN-1 form), registered dealers are allowed to claim input tax credit (ITC) on their closing stock of goods held as on the appointed day (the day immediately preceding the GST rollout).
- However, there are specific exclusions mentioned where such deemed credit is not allowed, and one of these exclusions is goods received from a Special Economic Zone (SEZ) unit.

2. **SEZ Units and Deemed Credit:**
- Goods received from SEZ units do not qualify for deemed credit under GST transitional provisions.
- Therefore, for the 70% of your stock that is received from SEZ units and for which you have 0% excise duty invoices, you will not be eligible to claim deemed credit under GST.

3. **Documentation and Compliance:**
- It is essential for dealers like you to maintain proper documentation distinguishing between goods received from SEZ units and goods received from regular manufacturing units.
- This distinction is crucial because it will affect your ability to claim input tax credit under GST.

4. **Impact on Second Stage Dealers:**
- Second stage dealers (or subsequent purchasers) who acquire goods from you need to exercise caution and verify the nature of the goods received.
- Since SEZ goods are not eligible for deemed credit, second stage dealers cannot claim input tax credit for GST paid on such goods.

5. **Legal Provisions:**
- The restriction on claiming deemed credit for SEZ goods is part of the GST transitional provisions as per the GST law and rules. It is specified to prevent double taxation benefits and to maintain parity with the pre-GST tax structure.

6. **Consultation and Compliance:**
- It is recommended to consult with a GST practitioner or tax advisor who can provide specific guidance based on your business operations and ensure compliance with GST transitional rules.
- Additionally, staying updated with any changes or clarifications issued by the GST authorities regarding transitional provisions is important for accurate compliance.

In conclusion, while you can claim full excise credit for the 30% of your stock not from SEZ units, the 70% stock from SEZ units will not qualify for deemed credit under GST transitional provisions. Proper documentation and awareness of these provisions are crucial to avoid any compliance issues under GST.