TRAN 1 & TRAN 2
Transition of old input credit to GST Regime
GST is a comprehensive indirect tax on the manufacture, sale, and consumption of goods and services. It’s a single tax that replaced multiple indirect taxes in countries like India.
Tran 1 and Tran 2 in GST
“Tran 1” and “Tran 2” refer to specific forms that were part of the transition provisions when GST was first implemented in July 2017.
Tran 1: This form was designed for businesses to claim credit for taxes paid before the implementation of GST. It was essential for those who had stock that was taxed under the previous regime (like VAT, Excise, Service Tax) and was unsold at the time of transitioning to GST. By filling out the Tran 1 form, businesses could claim credit for this pre-GST tax, preventing double taxation.
Tran 2: This form was relevant for traders who didn’t have proper invoices for their stock during the transition. It allowed them to claim a provisional tax credit in the GST regime. This was particularly useful for businesses that had stock purchased without paying the earlier tax regime or without proper documentation.
Things to keep in mind under GST Tran
When dealing with the transition provisions under GST (Goods and Services Tax), specifically relating to TRAN-1 and TRAN-2 forms, there are several critical points businesses and tax professionals need to keep in mind. These points are essential for ensuring compliance and making the most of the transitional provisions:
1. Eligibility for Credit
Understand the eligibility criteria for claiming input tax credit (ITC) for taxes paid under the previous regime (VAT, Excise, Service Tax).
Ensure that the goods or services in question are eligible for credit under the GST regime.
Maintain proper documentation, including invoices and receipts, which substantiate the claims made in the TRAN forms.
Ensure that the invoices are GST-compliant and reflect the correct details necessary for claiming ITC.
3. Deadlines and Timelines
Be aware of the deadlines for filing TRAN-1 and TRAN-2. Missing these deadlines could result in the loss of credit.
Stay updated with any extensions or modifications in the filing dates announced by the GST Council.
4. Accurate and Truthful Declaration
Ensure that all information provided in the TRAN forms is accurate and truthful. Inaccuracies can lead to penalties, interest, or even prosecution.
Reconcile the credit claimed in TRAN forms with the financial statements and tax returns of the previous tax regime.
5. Technical Aspects of Filing
Familiarize yourself with the technical process of filing TRAN-1 and TRAN-2 on the GST portal.
Check for any system requirements or specific formats needed for uploading data.
6. Transitional Provisions
Understand the specific transitional provisions applicable to your business sector.
Evaluate how these provisions impact your tax liabilities and credit availabilities.
7. Consultation and Advisory
Seek advice from GST experts or consultants, especially in complex scenarios or where large amounts of credit are involved.
Regularly check updates or circulars released by the GST Council or tax authorities.
8. Audit and Compliance Checks
Be prepared for audits or scrutiny from tax authorities regarding the transitional credit claimed.
Maintain a clear audit trail that supports the claims made in your TRAN forms.
Steps to File TRAN-1 or TRAN-2 Form on the GST Portal
- GST Portal Access: Visit the official GST portal (gst.gov.in).
- Log in using your credentials (GSTIN/Username and password).
- Navigate to the Form: Once logged in, go to the ‘Services’ menu.
- Select ‘Returns Dashboard’ or a similar option where you can find the list of returns/forms.
- Select the Financial Year and Return Filing Period: Choose the relevant financial year and the return filing period for which you want to file the TRAN-1 or TRAN-2.
- Open the Form: Find the TRAN-1 or TRAN-2 form in the list of available forms.
- Click on the ‘Prepare Online’ or ‘Prepare Offline’ option, depending on your preference.
- Filling the Form: If you choose ‘Prepare Online’, fill in the details directly on the portal.
- For ‘Prepare Offline’, download the form, fill it out, and then upload it back to the portal.
- Ensure all mandatory fields are accurately completed. This may include details of taxes paid under the previous regime, the amount of credit being carried forward, etc.
- Upload Supporting Documents (If required): Some forms may require uploading of supporting documents. Check if this applies and upload the necessary files.
- Verification and Submission: Verify the details entered in the form.
- Complete the declaration and choose the authorized signatory.
- Sign the form digitally using a Digital Signature Certificate (DSC) or EVC (Electronic Verification Code).
- Submit the Form: After signing, submit the form.
- You should receive an acknowledgment, and the form’s status will be updated.
Points to Remember
- Accuracy: Ensure all data entered is accurate to avoid issues with credit claims or compliance.
- Deadlines: Be aware of the submission deadlines for the specific form.
- Documentation: Keep all relevant documents handy for reference and potential future audits.
To claim input tax credit (ITC) on former stocks under the GST regime, the balance of closing stock ruled by the business as of July 1, 2017 must be shown in TRAN – 1. Form TRAN -2 Would be submitted by a dealer or trader who has registered for GST but was previously unregistered.