There are a few questions in the minds of taxpayers with the changes / shifting many products from exempted to the taxable.

We have tried to answer the most common questions, the 1st one being, " Can we claim input tax credit (ITC) on the products which are shifted from exempted to taxable and are in stock as on 18.07.2022?".The 2nd one being "Manner and Time-limit to claim the credit" and the next one being " Can we declare the revised retail sale price (MRP) on the unsold stock manufactured /packed / imported prior to revision of GST, after inclusion of the applicable/ increased amount of tax? ".

Can we claim input tax credit (ITC) on the products which are converted from exempted to taxable and are in stock as on 18.07.2022?

As per Section 18(1)(d) of the CGST Act 2017 read with Rule 40 of the CGST Rules 2017, where an exempt supply of goods or services or both by a registered person becomes a taxable supply, such person shall be entitled to take credit of input tax in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock relatable to such exempt supply and on capital goods exclusively used for such exempt supply on the day immediately preceding the date from which such supply becomes taxable.

Provided that the credit on capital goods shall be reduced by such percentage points as may be prescribed.

Rule 40 (1) (a) of the CGST Rules 2017, specifies that the input tax credit on capital goods, in terms of clauses (d) of sub-section (1) of section 18, shall be claimed after reducing the tax paid on such capital goods by five percentage points per quarter of a year or part thereof from the date of the invoice or such other documents on which the capital goods were received by the taxable person.

Manner and Time-limit to claim the credit

Rule 40 (1) (b) of the CGST Rules 2017 specifies that the registered person shall within a period of thirty days from the date of becoming eligible to avail the input tax credit under sub-section (1) of section 18 or within such further period as may be extended by the Commissioner by a notification in this behalf, shall make a declaration, electronically, on the common portal in FORM GST ITC-01 to the effect that he is eligible to avail the input tax credit as aforesaid.

Provided that any extension of the time limit notified by the Commissioner of State tax or the Commissioner of Union territory tax shall be deemed to be notified by the Commissioner.

The declaration on the common portal in FORM GST ITC-01 shall clearly specify the details relating to the inputs held in stock or inputs contained in semi-finished or finished goods held in stock, or as the case may be, capital goods on the day immediately preceding the date from which the supplies made by the registered person becomes taxable, in the case of a claim under clause (d) of sub-section (1) of section 18;
The input tax credit claimed in accordance with the provisions of clauses (d) of sub-section (1) of section 18 shall be verified with the corresponding details furnished by the corresponding supplier in FORM GSTR-1 or as the case may be, in FORM GSTR- 4, on the common portal.

Can we declare the revised retail sale price (MRP) on the unsold stock manufactured /packed / imported prior to revision of GST, after inclusion of the applicable/ increased amount of tax?

The Department of Consumer Affairs vide its letter dated 01.08.2022 has clarified the Impact of GST on unsold stock of Pre-Packaged Commodities under Legal Metrology (Packaged Commodities) Rules 2011.

The department, in the letter addressing the Controller of Legal Metrology, has clarified that central government permits the manufacturers or packers or importers of pre-packaged commodities to declare the revised retail sale price (MRP) on the unsold stock manufactured /packed / imported prior to revision of GST, after inclusion of the applicable/ increased amount of tax or after reducing the reduced amount of tax due to GST, if any, in addition to the existing retail sale price (MRP) upto 31st January, 2023 or till such date the stock is exhausted , whichever is earlier.

Declaration of the changed retail sale price (MRP) shall be made by way of stamping or putting sticker or online printing, as the case may be, after complying with the following conditions:
(i) The difference between the retail sale price originally printed on the package and the revised price shall not, in any case, be higher than the extent of increase in the tax, if any, or in the case of imposition of fresh tax, such fresh tax, on account of implementation of GST Act and Rules. In the case of reduction of tax, the revised price shall not, in any case, be higher than the extent of price after reduction of tax, if any.
(ii) The original MRP shall continue to be displayed and the revised price shall not overwrite on it.
(iii) Manufacturers or packer or importers shall make at least two advertisements in one or more newspapers in this regard and also by circulation of notices to the dealers and to the Director of Legal Metrology in the central Government and Controllers of Legal Metrology in the states and Union Territories, indicating the change in the price of such packages.

It is also clarified that any packaging material or wrapper which could not be exhausted by the manufacturer or packer or importer prior to revision of GST, may be used for packing of material upto 31st January, 2023 or till such date the packing material or wrapper is exhausted, whichever is earlier after making corrections required in retail sale price (MRP) on account of implementation of GST by way of stamping or putting sticker or online printing as the case may be.