Section 140(3) of CGST Act

Section 140(3) of CGST Act covers a unique situation, Here we have analysed the section and explain the various terms used in this part of Law.

Section 140(3) of CGST Act 

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,

• First of all that person shall be registered in the GST. There can be two ways. If that person was not liable to be registered in existing law then they will have to take a fresh registration. In all other cases he was already registered so they need to migrate to GST.

Benefit under this section is available to following registered person

1. Who was not liable to be registered under the existing Law. Under the current excise provisions the exemption limit for registration is Rs. 1.5 Crores. In service tax the threshold limit to take registration is Rs. 20lac.
2. Who was engaged in the manufacture of exempted goods
3. Who was providing the exempted services
4. Who was providing the works contract services and was availing the notification no. 26/2012
5. First stage dealer
6. Second stage dealer
7. Registered importer
8. Depot of manufacturer

Entitlement:

That person will be eligible to take into his ITC ledger credit of “Eligible Duties” in respect of inputs held in

1. Stock
2. Semi-finished stock
3. Finished goods

• Conditions for eligibility:

  1. Such inputs/goods are used or intended to be used for making taxable supplies.
  2. Such registered person is eligible for input tax credit on such inputs under this Act
  3. Invoice or other prescribed documents evidencing payment of duty under the existing law in respect of such inputs
  4. Such invoices /other prescribed documents were issued not earlier than twelve months
  5. The supplies are not eligible for any abatement under this Act.

Related Topic:
Karnataka AAR Ruling in the case of Airbus Group India Private Limited

Section 140(1) provides for the ineligibility of credit in respect of credits relates to goods manufactured and cleared under such notifications as are notified by the government.Here a major difference we are required to notice. Under Section 140(3) of CGST Act the goods/services are exempted in existing law but will be taxable in GST. Then credit in respect of stock will be available because ITC was not available earlier.In case of 140(1) goods are exempted but ITC was available. Thus the ITC for output which is already cleared will not be available.

(Proviso to section 140(3) is not covered here.We will cover it in a separate article)