Reconciliation of Past Credits & ITC Doubts under GST Regime 2017


Reconciliation of Past Credits & ITC Doubts under GST Regime 2017

Reconciliation of Past Credits & ITC Doubts under GST: Goods and Services Tax (GST) is a destination based tax on consumption of Goods & Services which subsume various indirect taxes, assembled under one canopy to reduce multiplicity of taxes & mitigate cascading effects. It will be levied at all stages right from manufacture up to final consumption with credit of taxes paid at previous stages available for setoff. In a nutshell, only value addition will be taxed.

Reconciliation of Past Credits & ITC Doubts under GST

How To Identify Missed Credits

  • Capital goods purchased by service provider
  • Credit of balance 50% on capital goods
  • Doubtful credits ignored earlier – maintenance of building / equipment’s, rent on cafeteria & car parking, building alteration / renovation etc.,
  • Credit on import of services – check expenditure in foreign currency
  • Credits deferred for payment to vendor
  • Review of trail balance

How to Identify Excess Credits

  • Rule 6 (3) reversal not made – Trading, exports proceeds not realised etc.,
  • Goods sold at less than cost
  • Partial rebating not done
  • Unreversed CENVAT credit / ITC claim, remaining after OC is obtained


Credit reversed

  • under protest to avoid interest / penalties
  • as pre-deposit for appeal
  • for Rule 5 refund
  • under Rule 6 (3) on provisional basis
  • Review all such credits and take back credits where necessary
  • Reverse charge liability under dispute – pay tax and take credit

Global Reconciliation For Past Credits In Vat, Central Excise And Services Tax

UP GST Act 2017

Claim of Tax on Stocks In Hand Under Section 140 (3)

(3) A registered person, who was not liable to be registered under the existing law, or who was engaged in the manufacture of exempted goods or provision of exempted services, or who was providing works contract service and was availing of the benefit of notification No. 26/2012—Service Tax, dated the 20th June, 2012 or a first stage dealer or a second stage dealer or a registered importer or a depot of a manufacturer, shall be entitled to take, in his electronic credit ledger, credit of eligible duties in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the appointed day …


  • Used or intended to be used for making taxable supplies under this Act;
  • Eligible for input tax credit on such inputs under this Act;
  • In possession of duty paying document
  • Duty paying document not more than one year old; and
  • the supplier of services is not eligible for any abatement under this Act:

PROVISO TO 140 (3)

Provided that where a registered person, other than a manufacturer or a supplier of services, is not in possession of an invoice or any other documents evidencing payment of duty in respect of inputs, then, such registered person shall, subject to such conditions, limitations and safeguards as may be prescribed, including that the said taxable person shall pass on the benefit of such credit by way of reduced prices to the recipient, be allowed to take credit at such rate and in such manner as may be prescribed

How to identify the Category of goods under the new GST


  • such goods were not unconditionally exempt from tax or were not nil rated
  • the document for procurement of such goods is available with the registered person.
  • submits a statement containing details of supply in FORM GST TRAN 2 at the end of each of the six tax periods
  • the amount of credit allowed shall be credited to the electronic credit
  • the stock of goods on which the credit is availed is so stored that it can be easily identified by the registered person

Methodology of Stock Taking Evidence And Duty / Tax Paying Documents

  • Identify stock more than 1 year old – Use LIFO method
  • Segregate stock on which full credit is available from the one on which partial credit is allowed
  • Prepare stock register (location-wise)
  • Collate documents in relation to claim for transition credit (separate for full credit and partial credit)
  • Prepare e-book and archive for future reference

How to evaluate the itc in place and integrating to the gstn app?

  • Ensure to avail all missed out credits before transitioning into GST
  • Ensure to reverse ineligible credits including Rule 6 (3) reversal / partial rebating
  • Bifurcate credits into Central and State credits
  • File transition declaration within 90 days to reflect transition credits in GST App
  • In case of partial credits under proviso to Sec 140 (3), provide details of sale and claim credits


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