Transitional Credit under GST & its Effect on Tax Audit:

This is the time when everyone is busy for finalizing his books for Tax Audit. Before finalizing   the books I want to draw your attention on Transitional Credit and its effect on Tax Audit. This is one thing which one may be able to be skip while finalizing the books. In this article, I will consolidated various Accounting entries which everyone should be required to check for different section under GST.

If Credit taken u/s 140(1) i.e. existing credit carried forward in GST and its accounting entries:

Pre GST Credit:                                                                    Post GST:

Particulars	Amount	Particulars	Amount
Cenvat Credit in last Excise Returns	250	Input Credit available to CGST Credit Ledger	250
Input Credit available in Last Vat returns	350	Input Credit available to SGST Credit Ledger (350 – 210)	140
Tax incidence of Non submitting of statutory forms (C form to be submitted for sale value of Rs.6,000/-)                    (5.5% -2%)	210

 Accounting Entries:

Paticular	Amount
Electronic Credit CGST Ledger A/c Dr	250
Electronic Credit SGST Ledger A/c Dr	140
To Cenvat Credit A/c	250
To Input Vat A/c	140

If Credit taken u/s 140(2) i.e. Non Avail credit on Capital Goods carry forward in GST and its accounting entries:

Pre GST:

Paticular	Amount
Cenvat Credit available for Capital Goods	350
Input Tax Credit availed so far	175
Balance not available	175

Accounting Entries:

Paticular	Amount
Electronic Credit CGST Ledger A/c Dr	175
To Input CENVAT Credit A/c	175

If Credit taken u/s 140(3) i.e. Deemed Credit on Closing Stock as on 30.06.2018 taken by trader (Excise Document is not available)

If anyone is taken the credit u/s 140(3) after satisfying the conditions specified in the section then following entries should be required to be passed t pass on the benefit to the customer.

Entry to be passed on sale of such goods:

Paticular	Amount
Party Account      Dr	XXX
Transitional Discount Account Dr	XXX
To  Sales	XXX
To  CGST Liability Ledger Account	XXX
To  CGST Liability Ledger Account	XXX

Entry to be passed for taking credit:

Paticular	Amount
CGST Liability Ledger Account   Dr	XXX
To Transitional Discount Account	XXX

For ease of understanding following is the example:

Particulars	Amount
Base Price	5000
Add: CGST @6%	300
Add: SGST @6%	300
Total Value	5600
Less: Discount Eligible Credit@40% of CGST	(120)
Selling Price	5480

Entry:

On Sale

Party Account      Dr	5480
Transitional Discount Account Dr	120
To  Sales	5000
To  CGST Liability Ledger Account	300
To  CGST Liability Ledger Account	300

For taking Credit:

CGST Liability Ledger Account   Dr	120
To Transitional Discount Account	120

If Credit taken u/s 140(3) i.e. Credit of Excise element in Closing Stock as on 30.06.2018 taken by trader (Excise Document is available)

Entry to be passed on sale of such goods:

Particular	Amount
Electronic Credit CGST Ledger A/c Dr	XXX
To Purchases/ Sundry Income	XXX

Above entries should be checked before finalizing the books of accounts and signing the reports. Your feedback and suggestions are valuable.

By  CA. Monika N Rathi

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