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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”.
In section 140 of the principal Act, with effect from the 1st day of July, 2017,––
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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;
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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;
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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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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.
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.
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To
The Principal Chief Commissioners/ Chief Commissioners/ Principal
Commissioners/ Commissioner of Central Tax (All)
The Principal Director Generals/ Director Generals (All)
Madam/ Sir,
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
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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.
Yours faithfully,
(KUMAR VIVEK)
OSD (CX.3/8)
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