Input of closing stock and re-sell in gst

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

08 June 2017 Dear Sir,

We are registered resaler of finished goods in VAT regime, my doubt is that how to avail input tax credit on closing stock on 30 June'2017 stock in hand available as VAT-able goods. What is the process of vat-able goods to migrate in GST stock.

On 1st July can we sale vat-able goods in GST regime by charging GST @28% (Hair-Cream,Shampoo,Dyes, Batteries, Cartridge,toner etc) while VAT charged @14.5% (12.5+2%) around 13.5% excess tax will charged on MRP.

Sir MRP was marked on vat criteria, can we sale goods on over MRP price.

Please Help me out I am very confused.

Querist : Anonymous

Querist : Anonymous (Querist)

09 June 2017 please reply..................

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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01 August 2024 When transitioning from the VAT regime to the GST regime, businesses need to account for the input tax credit (ITC) on their closing stock as of June 30, 2017. Here is a detailed explanation of the process and how to handle the sale of such stock under GST.

### 1. Claiming ITC on Closing Stock:

To claim ITC on the closing stock of VAT-able goods as of June 30, 2017, you need to follow the provisions laid out in the GST transition rules. Here are the steps:

#### **A. Conditions to Claim ITC:**
1. **Registered under VAT:** You must have been registered under the VAT regime.
2. **Eligible for ITC:** The goods should be intended for sale under GST, and you should have the relevant invoices or other prescribed documents showing the payment of VAT.

#### **B. Process:**
1. **File Form TRAN-1:**
- You need to file Form TRAN-1 within the prescribed time limit (typically 90 days from the appointed date of GST implementation, with possible extensions as notified by the government).
- In this form, you need to declare the amount of ITC on closing stock.

2. **Supporting Documents:**
- Maintain all the invoices and documents related to the purchase of these goods to substantiate your claim for ITC.

3. **Verification by Authorities:**
- The GST authorities may verify your claim based on the information provided in Form TRAN-1.

### 2. Selling VAT-able Goods under GST:

After July 1, 2017, all sales are subject to GST. Here's how to handle the sale of your pre-GST stock:

#### **A. Charging GST:**
1. **GST Rate:** You must charge GST at the applicable rate for the goods sold, even if they were purchased under the VAT regime. For example, if the GST rate for hair cream, shampoo, dyes, batteries, cartridges, toners, etc., is 28%, you must charge 28% GST on these items.

#### **B. MRP Considerations:**
1. **Sale Price and MRP:**
- You cannot sell goods above the MRP marked on the packaging.
- If the MRP was decided based on VAT, you must ensure that the final selling price inclusive of GST does not exceed the MRP. The increase in tax rate should ideally be absorbed or reflected correctly in the MRP re-stickered post-GST implementation.

2. **Re-Stickered MRP:**
- If you need to adjust the MRP to include the higher GST rate, you must re-sticker the products with the revised MRP that includes the GST. This should comply with the Legal Metrology Act, which governs the labeling and pricing of pre-packaged commodities.

### 3. Practical Example:

#### **A. Example Stock Transition:**
- **Closing Stock as of June 30, 2017:** Hair cream with an MRP of ₹100 and VAT @14.5%.
- **Input VAT Paid:** Suppose the VAT paid on purchase was ₹12.50.
- **Recording in TRAN-1:** Declare the VAT ITC of ₹12.50 in Form TRAN-1.

#### **B. Selling under GST:**
- **GST Rate:** 28%.
- **MRP Issue:** If MRP was ₹100 inclusive of 14.5% VAT, re-sticker the MRP to ensure it reflects the GST-inclusive price without exceeding the pre-GST MRP.
- **Revised Calculation:** If the product was sold at ₹100, it included ₹12.50 VAT. Under GST, ensure the selling price plus GST does not exceed ₹100. Adjustments may need to be made.

### Conclusion:

By following the steps outlined above and ensuring compliance with GST regulations, you can smoothly transition your closing stock from the VAT regime to the GST regime and manage the sale of such stock under the new tax structure.

For precise guidance and compliance, consider consulting with a tax professional or GST consultant who can provide tailored advice based on your specific business circumstances.

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