EXAMPLE-120

Alpha Limited engaged in the manufacturing of goods. Alpha Limited is  not registered under GST as their turnover below threshold limit. But on 1st September, 2017 their aggregate turnover crosses the threshold limit of 20 lakh. On 31st August, 2017 alpha Limited had stock of raw materials worth rupees 1 lakh, raw material in semi finished stock  worth rupees 5 lakh and in finished stock of worth rupees 3 lakh. GST paid at the rate of 12% on raw materials.

1. Specify the registration requirement of Alpha Limited.

2. Whether entitled to take credit on input held in stock if registered on 25^th September 2017.

3.  Whether entitle to take credit on input held in stocks if registered on 28^th   October, 2017.

Answer

1.                  Section 22(1)- Every supplier shall be registered under GST in the state or union territory, where he makes taxable supply of goods/services or both, If his aggregate turnover exceeds ten lakhs in Special category states and in other states exceeds 20 lakhs rupees .

 As per section 25(1), every person liable to registration u/s 22 and u/s 24, shall apply within 30 days from the date on which he become liable to registration.

 Thus Alpha Ltd is liable for registration up to 30^th September, 2017.

2.                  Section 18(1) provides that a person who has applied for registration under the Act within 30 days from the date on which he becomes liable to registration and has been granted such registration shall, subject to such conditions and restrictions as may be prescribed, 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 on the day immediately preceding the date from which he becomes liable to pay tax under the provisions of this Act.

Thus, in view of the above provision, as Alpha Ltd has applied before 30 days from the date on which he is liable to registration so he is entitled to take credit of stock held on 31^st August, 2017.

Input tax credit available =( 1 lakh +3 lakh +5 lakh)9 lakh *12% = 1.08 lakh

3.                  It may be noted that credit on pre-registration stock would not be admissible if the registration has not been obtained with in a period of 30 days from the date on which he becomes liable to registration. (Clarification given under Frequent Asked Questions)

Thus Alpha Ltd will not be eligible for credit on stock as not applied for registration with in 30 days.