Provision for tax free opening stock as on 1st July 2017 under GST.

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Nishant Jain (Querist)
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07 June 2017 Product on which tax was not chargeable in the previous act but chargeable under GST Act like Fabric. Then the tax free stock which will be existed on 1st July, then is it compulsory to pay first tax on that opening stock and after that take credit at the time of sale? If not then what is provision for the existing stock.

Suresh Mittal

Suresh Mittal (Expert)
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07 June 2017 Credit is allowed only if tax/duty is paid at any stage to the Govt. So no credit on unconditionally exempt items. For credit on fabric, you can contact us.

Nishant Jain

Nishant Jain (Querist)
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08 June 2017 Then, there is no provision to pay GST on tax free opening stock. And it is required to pay GST at the time of Sale.

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Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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10 August 2024 Under the Goods and Services Tax (GST) regime in India, the treatment of tax-free opening stock that was exempt under the previous tax regime (such as VAT) but is taxable under GST involves specific provisions. Here’s a detailed breakdown:

### **1. Treatment of Tax-Free Opening Stock Under GST**

#### **A. Tax-Free Opening Stock on 1st July 2017:**

1. **No Tax Payment on Opening Stock:**
- **Provision:** Under GST, there is no requirement to pay GST on the tax-free opening stock as of 1st July 2017. Instead, the GST Act allows for a one-time benefit by allowing the credit of taxes paid on inputs held in stock as on 1st July 2017.
- **Input Tax Credit (ITC):** You can claim Input Tax Credit (ITC) for the tax paid on the stock of goods that are taxable under GST. However, this is applicable only if the goods are purchased from a registered dealer and GST was paid on the inputs.

2. **Documentation and Compliance:**
- **Stock Statement:** Maintain proper records and documentation to show the opening stock as on 1st July 2017. Ensure that you have details of the previous tax regime's exemption status.
- **ITC Declaration:** When GST becomes applicable on the sale of this stock, you should claim ITC for any GST paid on these goods, provided the stock was purchased from a registered dealer and the credit is available.

#### **B. GST Liability at the Time of Sale:**

1. **Taxable Supply:** When you sell the stock that was previously exempt but is now taxable under GST, you are required to charge GST on the sale of these goods as per the applicable GST rate.

2. **No Retroactive Tax:** You are not required to pay GST retrospectively on the stock held as of 1st July 2017. The tax liability arises at the point of sale under the GST regime.

### **Key Provisions and Notifications:**

1. **GST Transition Rules:**
- **Rule 117 of the CGST Rules, 2017**: Provides for the transitional credit and lays down provisions related to the transition of credits from the old regime to GST.
- **Section 140 of the CGST Act, 2017**: Deals with the credit of taxes paid under the previous regime.

2. **Relevant Notifications:**
- **Notification No. 35/2017-Central Tax (Rate)**: Provides details regarding the treatment of input tax credit and stock held on 1st July 2017.
- **Notification No. 38/2017-Central Tax**: Related to transitional provisions for stock.

### **Summary:**

- **No GST on Opening Stock:** You do not need to pay GST on tax-free opening stock as on 1st July 2017.
- **Claim ITC:** You can claim Input Tax Credit on the taxes paid on goods held in stock, provided they were purchased from a registered supplier and GST was applicable at the time of purchase.
- **GST at Sale:** GST must be charged on sales of such goods in accordance with the applicable GST rates at the time of sale.

By maintaining accurate records and ensuring compliance with GST provisions, you can effectively manage the transition from the previous tax regime to GST.