Ministry of Finance on 02-01-2019 issued a Circular No. 87/06/2019-GST

providing clarification regarding section 140(1) of the CGST Act, 2017 as per
Central Goods and Services Tax (Amendment) Act, 2018

As per section 28 of the CGST (Amendment) Act, 2018 (No. 31 of 2018) section
140(1) of the CGST Act, 2017 was amended with retrospective effect to allow
transition of CENVAT credit under the existing law viz. Central Excise and
Service Tax law, only in respect of “eligible duties”.

Relavant extract of our previous article on section wise analysis of CGST

(Amendment) Act, 2018 is as follows:

Retrospective Amendment of section 140. (Transitional arrangements for input

tax credit.)

In section 140 of the principal Act, with effect from the 1st day of July, 2017,––

Provisions as per Amendment New Provisions Analysis

CGST Act’2017
(1) A registered (a) in sub-section (1) A registered Clarification that
person, other than a (1), after the letters person, other than a transition of only
person opting to pay and word “CENVAT person opting to pay eligible duties shall
tax under section credit”, the words “of tax under section be allowed.
10, shall be entitled eligible duties” shall 10, shall be entitled
to take, in his be inserted and shall to take, in his (In our view this
electronic credit always be deemed to electronic credit credit can’t be
ledger, the amount have been inserted; ledger, the amount restricted now)
of CENVAT credit of CENVAT credit of
carried eligible duties
forward in the carried forward in
return relating to the return relating to
the period ending the period ending
with the day with the day
immediately immediately
preceding the preceding the
appointed day, appointed day,
furnished by him furnished by him
under the existing under the existing
law in such manner law in such manner
as may be as may be prescribed
prescribed
Explanation 1.—For (b) in the Explanation 1.—For Consequential
the purposes of sub- Explanation 1— the purposes of sub- changes as above.
sections (3), (4) and sections (1), (3), (4)
(6), the expression (i) for the word, and (6), the No transitional credit
“eligible duties” brackets and figures expression “eligible of the additional duty
means–– “sub-sections (3), duties” means–– of excise leviable
(4)”, the word, under section 3 of
(i) the additional brackets and figures (i) the additional the Additional Duties
duty of excise “sub-sections (1), (3), duty of excise of Excise (Textile and

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leviable under (4)” shall be leviable under Textile Articles) Act,
section 3 of the substituted and section 3 of the 1978.
Additional Duties of shall always be Additional Duties of
Excise (Goods of deemed to have been Excise (Goods of (In or view this
Special Importance) substituted; Special Importance) credit can’t be
Act, 1957; Act, 1957; restricted now)
(ii) clause (iv) shall
(ii) the additional be omitted and shall (ii) the additional
duty leviable under always be deemed to duty leviable under
sub-section (1) of have been sub-section (1) of
section 3 of the omitted; section 3 of the
Customs Tariff Act, Customs Tariff Act,
1975; 1975;

(iii) the additional (iii) the additional

duty leviable under duty leviable under
sub-section (5) of sub-section (5) of
section 3 of the section 3 of the
Customs Tariff Act, Customs Tariff Act,
1975; 1975;

(iv) the additional (iv) the additional

duty of excise duty of excise
leviable under leviable under
section 3 of the section 3 of the
Additional Duties of Additional Duties of
Excise (Textile and Excise (Textile and
Textile Articles) Act, Textile Articles) Act,
1978; 1978;

(v) the duty of excise (v) the duty of excise

specified in the First specified in the First
Schedule to the Schedule to the
Central Excise Tariff Central Excise Tariff
Act, 1985; Act, 1985;

(vi) the duty of (vi) the duty of excise

excise specified in specified in the
the Second Second Schedule to
Schedule to the the Central Excise
Central Excise Tariff Tariff Act, 1985; and
Act, 1985; and
(vii) the National
(vii) the National Calamity Contingent
Calamity Contingent Duty leviable under
Duty leviable under section 136 of the
section 136 of the Finance Act, 2001,
Finance Act, 2001,
in respect of inputs
in respect of inputs held in stock and
held in stock and inputs contained in
inputs contained in semi-finished or

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semi-finished or finished goods held
finished goods held in stock on the
in stock on the appointed day.
appointed day.
Explanation 2.—For (c) in the Explanation Explanation 2.—For Consequential
the purposes of sub- 2— the purposes of sub- changes as above.
section (5), the sections (1) and (5),
expression “eligible (i) for the word, the expression No transitional credit
duties and taxes” brackets and figure “eligible duties and of the additional duty
means–– “sub-section (5)”, the taxes” means–– of excise leviable
words, brackets and under section 3 of
(i) the additional figures “sub-sections (i) the additional the Additional Duties
duty of excise (1) and (5)” shall be duty of excise of Excise (Textile and
leviable under substituted and leviable under Textile Articles) Act,
section 3 of the shall always be section 3 of the 1978.
Additional Duties of deemed to have been Additional Duties of
Excise (Goods of substituted; Excise (Goods of (In our view this
Special Importance) Special Importance) credit can’t be
Act, 1957; (ii) clause (iv) shall Act, 1957; restricted now)
be omitted and shall
(ii) the additional always be deemed to (ii) the additional
duty leviable under have been duty leviable under
sub-section (1) of omitted; sub-section (1) of
section 3 of the section 3 of the
Customs Tariff Act, Customs Tariff Act,
1975; 1975;

(iii) the additional (iii) the additional

duty leviable under duty leviable under
sub-section (5) of sub-section (5) of
section 3 of the section 3 of the
Customs Tariff Act, Customs Tariff Act,
1975; 1975;

(iv) the additional (iv) the additional

duty of excise duty of excise
leviable under leviable under
section 3 of the section 3 of the
Additional Duties of Additional Duties
Excise (Textile and of Excise (Textile
Textile Articles) Act, and Textile
1978; Articles) Act, 1978;

(v) the duty of excise (v) the duty of excise

specified in the First specified in the First
Schedule to the Schedule to the
Central Excise Tariff Central Excise Tariff
Act, 1985; Act, 1985;

(vi) the duty of (vi) the duty of excise

excise specified in specified in the
the Second Second Schedule to

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Schedule to the the Central Excise
Central Excise Tariff Tariff Act, 1985;
Act, 1985;
(vii) the National
(vii) the National Calamity Contingent
Calamity Contingent Duty leviable under
Duty leviable under section 136 of the
section 136 of the Finance Act, 2001;
Finance Act, 2001; and
and
(viii) the service tax
(viii) the service tax leviable under
leviable under section 66B of the
section 66B of the Finance Act, 1994,
Finance Act, 1994,
in respect of inputs
in respect of inputs and input services
and input services received on or after
received on or after the appointed day.
the appointed day.
(d) after Explanation Explanation 3.— No Transitional credit
2 as so amended, For removal of of Education Cess,
the following doubts, it is hereby Secondary & Higher
Explanation shall be clarified that the Education Cess,
inserted and shall expression “eligible Krishi Kalyan Cess
always be deemed to duties and taxes” etc.
have been inserted, excludes any cess
namely:— which has not been
‘Explanation 3.—For specified in
removal of doubts, it Explanation 1 or
is hereby clarified Explanation 2 and
that the expression any cess which is
“eligible duties and collected as
taxes” excludes any additional duty of
cess which has not customs under sub-
been specified in section (1) of
Explanation 1 or section 3 of the
Explanation 2 and Customs Tariff Act,
any cess which is 1975.
collected as
additional duty of
customs under sub-
section (1) of section
3 of the Customs
Tariff Act, 1975.’.

Our view has now been clarified through this circular that the CENVAT credit of
service tax paid under section 66B of the Finance Act, 1994 was available as
transitional credit under section 140(1) of the CGST Act and that legal position
has not changed due to amendment of section 140(1) on account of following
reasons:

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i) The amendment in provisions of section 140(1) and the explanations to

section 140 need to be read harmoniously such that neither any provision of the
amendment becomes otiose nor does the legislative intent of the amendment
get defeated.

ii) The intention behind the amendment of section 140(1) to include the
expression "eligible duties” has been indicated in the “Rationale / Remarks”
column (at Sl. No. 37) of the draft proposals for amending the GST law which
was uploaded in the public domain for comments. It is clear that the
transition of credit of taxes paid under section 66B of the Finance Act,
1994 was never intended to be disallowed under section 140(1) and
therefore no such remark was present in the document.

iii) Under tax statutes, the word “duties" is used interchangeably with the word
“taxes” and in the present context, the two words should not be read in a
disharmonious manner.

Thus, expression "eligible duties” in section 140(1) which are allowed to be

transitioned would cover within its fold the duties which are listed as "eligible
duties” at sl. no. (i) to (vii) of explanation 1, and “eligible duties and taxes” at
sl. no. (i) to (viii) of explanation 2 to section 140, since the expression “eligible
duties and taxes” has not been used elsewhere in the Act.

The expression “eligible duties” under section 140(1) does not in any way refer
to the condition regarding goods in stock as referred to in Explanation 1 to
section 140 or to the condition regarding inputs and input services in transit, as
referred to in Explanation 2 to section 140.

Further, it has been decided not to notify the clause (i) of sub-section
(b) of section 28 and clause (i) of sub-section (c) of section 28 of CGST
(Amendment) Act, 2018 which link Explanation 1 and Explanation 2 of
section 140 to section 140(1). This would ensure that the credit allowed to
be transitioned under section 140(1) is not linked to credit of goods in stock, as
provided under Explanation 1, and credit of goods and services in transit, as
provided under Explanation 2.

No transition of credit of cesses, including cess which is collected as additional

duty of customs under sub-section (1) of section 3 of the Customs Tariff Act,
1975, would be allowed in terms of Explanation 3 to section 140, inserted vide
sub-section (d) of section 28 of CGST Amendment Act, 2018 which shall
become effective from the date the same is notified giving it retrospective
effect.

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Circular No. 87/06/2019-GST

F. No. 267/80/2018-CX.8
Government of India
Ministry of Finance
Department of Revenue
Central Board of Indirect Taxes and Customs
New Delhi, the 2nd Jan, 2019

To
The Principal Chief Commissioners/ Chief Commissioners/ Principal
Commissioners/ Commissioner of Central Tax (All)
The Principal Director Generals/ Director Generals (All)

Madam/ Sir,

Sub: Central Goods and Services Tax (Amendment) Act, 2018-

Clarification regarding section 140(1) of the CGST Act, 2017-reg.

Attention is invited to sub-section (a) of section 28 of the CGST (Amendment)

Act, 2018 (No. 31 of 2018) which provides that section 140(1) of the CGST Act,
2017 be amended with retrospective effect to allow transition of CENVAT credit
under the existing law viz. Central Excise and Service Tax law, only in respect of
“eligible duties”. In this regard, doubts have been expressed as to whether the
expression “eligible duties” would include CENVAT credit of Service Tax within
its scope or not.
2. Therefore, in exercise of powers conferred under section 168 of the Central
Goods and Services Act (hereinafter referred to as “Act”), for the purposes of
uniformity in the implementation of the Act, the Central Board of Indirect Taxes
and Customs hereby directs the following:
3.1 The CENVAT credit of service tax paid under section 66B of the Finance Act,
1994 was available as transitional credit under section 140(1) of the CGST Act
and that legal position has not changed due to amendment of section 140(1) on
account of following reasons:

i) The amendment in provisions of section 140(1) and the explanations to

section 140 need to be read harmoniously such that neither any provision of the
amendment becomes otiose nor does the legislative intent of the amendment
get defeated.

ii) The intention behind the amendment of section 140(1) to include the
expression "eligible duties” has been indicated in the “Rationale/ Remarks”
column (at Sl. No. 37) of the draft proposals for amending the GST law which
was uploaded in the public domain for comments. It is clear that the transition

CA. Mithun Khatry 9810100520 
  
of credit of taxes paid under section 66B of the Finance Act, 1994 was never
intended to be disallowed under section 140(1) and therefore no such remark
was present in the document.

iii) Under tax statutes, the word “duties" is used interchangeably with the word
“taxes” and in the present context, the two words should not be read in a
disharmonious manner.

3.2 Thus, expression "eligible duties” in section 140(1) which are allowed to be
transitioned would cover within its fold the duties which are listed as "eligible
duties” at sl. no. (i) to (vii) of explanation 1, and “eligible duties and taxes” at
sl. no. (i) to (viii) of explanation 2 to section 140, since the expression “eligible
duties and taxes” has not been used elsewhere in the Act.
3.3 The expression “eligible duties” under section 140(1) does not in any way
refer to the condition regarding goods in stock as referred to in Explanation 1 to
section 140 or to the condition regarding inputs and input services in transit, as
referred to in Explanation 2 to section 140.
4. Further, it has been decided not to notify the clause (i) of sub-section (b) of
section 28 and clause (i) of sub-section (c) of section 28 of CGST (Amendment)
Act, 2018 which link Explanation 1 and Explanation 2 of section 140 to section
140(1). This would ensure that the credit allowed to be transitioned under
section 140(1) is not linked to credit of goods in stock, as provided under
Explanation 1, and credit of goods and services in transit, as provided under
Explanation 2. However, the duties and taxes for which transition is allowed
shall be governed by para 3.2 above.
5. No transition of credit of cesses, including cess which is collected as
additional duty of customs under sub-section (1) of section 3 of the Customs
Tariff Act, 1975, would be allowed in terms of Explanation 3 to section 140,
inserted vide sub-section (d) of section 28 of CGST Amendment Act, 2018 which
shall become effective from the date the same is notified giving it retrospective
effect.

6. Trade may be suitably informed and difficulty, if any, in the implementation

of this circular may be brought to the notice of the Board.

Yours faithfully,

(KUMAR VIVEK)
OSD (CX.3/8) 

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