12 November 2022
CBIC issues guidelines on transitional credit verification; Clarifies amendments to IDS refund provisions
The Central Board of Indirect Taxes and Customs (CBIC) has issued Circular Nos. 181/13/2022-GST and 182/14/2022-GST, both dated 10 November 2022, to inter alia clarify the applicability of amendments relating to refund under Inverted Duty Structure (IDS), and to provide guidelines to jurisdictional tax officers for verification of fresh as well as revised Form TRAN-1/TRAN-2 filed during the period 1 October 2022 to 30 November 2022.

The gist of these Circulars is as follows:

Refund under IDS

(Circular No. 181/13/2022-GST)
Sr. No. Issue Clarification
1. Whether the formula prescribed under Rule 89(5) of the CGST Rules, 2017 for calculation of refund of unutilized ITC on account of inverted duty structure, as amended vide Notification No. 14/2022-Central Tax dated 5 July 2022, will apply only to the refund applications filed on or after 5 July 2022, or whether the same will also apply in respect of prior refund applications filed and pending before the proper officer as on said date?
  • The amended formula will apply only to refund claims filed on or after 5 July 2022.
  • The refund claims filed before 5 July 2022 will be dealt with as per the earlier formula, which existed at the time of filing the refund claims.
2. Whether the restriction placed on refund of unutilized ITC on account of inverted duty structure in case of certain goods falling under Chapters 15 and 27 vide Notification No. 9/2022-Central Tax (Rate) dated 13 July 2022, which has been made effective from 18 July 2022, would apply to the refund applications pending as on the said date as well or whether the same would apply only to the applications filed on or after 18 July 2022 or whether the same will be applicable to refunds pertaining to prospective tax periods alone? Restriction imposed on goods falling under Chapters 15 and 27 would apply only to refund claims filed on or after 18 July 2022 and would not apply to refund claims filed before the said date.

Our Analysis

A key aspect that requires detailed consideration is whether the date of filing the refund claim, as clarified by the Board, is important or whether it is the period of the refund claim for applicability of the amendments.  
Verification of Transitional Credit

(Circular No. 182/14/2022-GST)
  • Transitional credit claimed by the taxpayers will be credited to the Electronic Credit Ledger only post verification of the claim by the jurisdictional tax officer based on the order issued in this regard.
  • Verification of claims is to be done within 90 days, i.e., between 1 December 2022 to 28 February 2023.
  • GSTN will issue a separate advisory for entering the details on the portal by the tax officers.
  • Central and State tax officers shall carry out parallel verification for respective tax components, where a claim is made for both Central and State taxes.
  • Modalities for co-ordination between Central and State tax authorities have been prescribed.
  • The counter-part officer shall submit a verification report to the jurisdictional tax officer specifying the amount of transitional credit which may be allowed and the amount which is liable for rejection with detailed reasons/grounds.
  • Opportunity of a personal hearing shall be given to the taxpayer, where the entire claim/part of the claim is proposed to be disallowed.
  • If there is no change from the earlier filed TRAN-1/TRAN-2, then such a claim of transitional credit is liable for rejection by the tax officer through a reasoned order.
  • Reasoned order shall be passed by the jurisdictional tax officer specifying thereof, the amount of transitional credit allowed to be transferred to the Electronic Credit Ledger and a copy of the order shall also be uploaded on the common portal.
Annexure I to the Circular provides the description of entries in Form TRAN-1 and checks for each entry.
We have attached the same for ready reference.
Our Comments
These guidelines should ensure a smooth and uniform process for the verification of transitional credit claimed by the taxpayers.
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