Input tax on stock
This query is : Resolved
19 June 2017
Dear All
I have a client who is registered in Delhi VAT as Normal Dealer but want to transfer in GST as Composition Dealer.
What is his position for Input Tax on Closing Stock held on 30.06.2017?
Regards
Rajeev
I have a client who is registered in Delhi VAT as Normal Dealer but want to transfer in GST as Composition Dealer.
What is his position for Input Tax on Closing Stock held on 30.06.2017?
Regards
Rajeev
19 June 2017
No credit of input tax is available for composite dealer, input credit available on 30.06.2017 will be lapse
19 June 2017
No credit of input tax is available for composite dealer, input credit available on 30.06.2017 will be lapse
19 June 2017
Sir,
But then what is the meaning of this line :-
When a taxpayer is shifting from a normal scheme to composition scheme, the taxpayer has to pay an amount which shall be equal to the credit of input tax in respect to those inputs which are held as stock on the immediately preceding date from the date of such switch over.
Thanks
Rajeev
But then what is the meaning of this line :-
When a taxpayer is shifting from a normal scheme to composition scheme, the taxpayer has to pay an amount which shall be equal to the credit of input tax in respect to those inputs which are held as stock on the immediately preceding date from the date of such switch over.
Thanks
Rajeev
19 June 2017
It means u were eligible for input because of payment of tax on outward sale.......................if now in composition scheme u r paying tax at lower rate .........hence government wants to collect the tax on stock held before composition scheme, because it they not collect such amount then it is loss to government because u already taken input tax credit on stock and now by converting the scheme u r not paying tax which should be paid.
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19 June 2017
Sir,
This means we have to pay Input Tax on Closing stock held on 30.06.2017 upfront and there after transfer to composition scheme and pay GST Composition rate on same stock again.
Am I Right?
Thanks
Rajeev
This means we have to pay Input Tax on Closing stock held on 30.06.2017 upfront and there after transfer to composition scheme and pay GST Composition rate on same stock again.
Am I Right?
Thanks
Rajeev
01 August 2024
When a taxpayer shifts from the regular VAT scheme to the GST composition scheme, the treatment of input tax credit (ITC) on closing stock is indeed subject to specific rules under GST.
Here’s a detailed explanation of the procedure:
### **1. **Position of Input Tax Credit on Closing Stock:**
- **Pre-GST Credit:** Under the VAT regime, a taxpayer could have accumulated input tax credit on the closing stock as of 30.06.2017. This ITC would be related to goods purchased and held as stock.
- **Switching to Composition Scheme:** Upon switching to the GST composition scheme, the taxpayer must adhere to the provisions regarding the transition of input tax credit.
### **2. **Requirements for Transitioning to Composition Scheme:**
- **Payment of ITC:** When transitioning from the regular scheme to the composition scheme, the taxpayer needs to pay an amount equivalent to the credit of input tax in respect of the closing stock held on 30.06.2017. This payment is made to account for the credit that was available before the switch.
- **Filing Requirements:** This adjustment should be reported in the GST returns or through a specific form provided under the GST rules.
### **3. **GST on Closing Stock:**
- **No Dual Taxation:** After paying the ITC amount on the closing stock, the taxpayer does not need to pay GST on the same stock again. The composition scheme allows taxpayers to pay tax at a fixed percentage on their turnover and does not permit the claim of input tax credit.
### **4. **Process to Follow:**
1. **Calculate ITC:** Determine the amount of ITC on closing stock as of 30.06.2017.
2. **Pay ITC Amount:** Make the payment equivalent to the ITC amount. This amount is paid to the tax authorities to cover the ITC on the stock you are holding before switching to the composition scheme.
3. **Switch to Composition Scheme:** Once the ITC payment is made, formally switch to the composition scheme and follow the applicable GST composition rules for your future transactions.
4. **Compliance and Reporting:** Ensure that the transition and payment are correctly reported in your GST filings to avoid any compliance issues.
### **Summary:**
- **Yes, you need to pay an amount equal to the ITC on closing stock as of 30.06.2017 when shifting from the normal scheme to the composition scheme.**
- **However, you do not need to pay GST on the same stock again after paying the ITC amount.**
- **Ensure compliance with GST reporting and payment requirements to avoid any issues.**
Consulting a tax professional or GST consultant is advisable to ensure proper handling of the transition and compliance with all applicable rules.
Here’s a detailed explanation of the procedure:
### **1. **Position of Input Tax Credit on Closing Stock:**
- **Pre-GST Credit:** Under the VAT regime, a taxpayer could have accumulated input tax credit on the closing stock as of 30.06.2017. This ITC would be related to goods purchased and held as stock.
- **Switching to Composition Scheme:** Upon switching to the GST composition scheme, the taxpayer must adhere to the provisions regarding the transition of input tax credit.
### **2. **Requirements for Transitioning to Composition Scheme:**
- **Payment of ITC:** When transitioning from the regular scheme to the composition scheme, the taxpayer needs to pay an amount equivalent to the credit of input tax in respect of the closing stock held on 30.06.2017. This payment is made to account for the credit that was available before the switch.
- **Filing Requirements:** This adjustment should be reported in the GST returns or through a specific form provided under the GST rules.
### **3. **GST on Closing Stock:**
- **No Dual Taxation:** After paying the ITC amount on the closing stock, the taxpayer does not need to pay GST on the same stock again. The composition scheme allows taxpayers to pay tax at a fixed percentage on their turnover and does not permit the claim of input tax credit.
### **4. **Process to Follow:**
1. **Calculate ITC:** Determine the amount of ITC on closing stock as of 30.06.2017.
2. **Pay ITC Amount:** Make the payment equivalent to the ITC amount. This amount is paid to the tax authorities to cover the ITC on the stock you are holding before switching to the composition scheme.
3. **Switch to Composition Scheme:** Once the ITC payment is made, formally switch to the composition scheme and follow the applicable GST composition rules for your future transactions.
4. **Compliance and Reporting:** Ensure that the transition and payment are correctly reported in your GST filings to avoid any compliance issues.
### **Summary:**
- **Yes, you need to pay an amount equal to the ITC on closing stock as of 30.06.2017 when shifting from the normal scheme to the composition scheme.**
- **However, you do not need to pay GST on the same stock again after paying the ITC amount.**
- **Ensure compliance with GST reporting and payment requirements to avoid any issues.**
Consulting a tax professional or GST consultant is advisable to ensure proper handling of the transition and compliance with all applicable rules.
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