FMCG dealers, who are unable to get credit on their past stock due to unavailability of Tran-2 form, are forced to pay tax from their own pocket. They are now expecting to get GST cost compensation from their FMCG companies. The companies, however, have clarified that they are not liable for such costs.
The GST was implemented in the country on July 1 which immediately put a hold on the selling of the past stock paid with old taxes. Whereas many dealers and companies had successfully sold out their stocks within two weeks before the implementation of GST, the others were not so fortunate and are now facing the issue of input credit on their pre-stock goods.
An official of a leading FMCG company was reported saying, “There is a lot of fine print within the GST that is yet to be clarified. There is confusion in the trade on issues such as input credit which are still persisting. We are awaiting clarity on the same.”
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As per GST rules, the dealers can claim input tax credit on transition stock using the GST Form Tran-1 (if tax/duty documents are available) and/or Tran-2 (when no duty docs are available) on or before the deadline. However, the facility of filing the Tran-2 form is not yet activated on GSTN portal. So, the dealers are not able to claim any credit for now and are therefore forced to pay tax on their own. This has increased their operating capital cost.
Dabur India’s CFO Lalit Malik said, “The non-availability of input credit on opening inventory will have adverse impact on working capital. Prompt clarification will be helpful to avoid hardship.”
The major effect has been on dealers who have central excise duty paid goods in stock on which they have already paid VAT and now wish to claim credit for the same. The Tran-2 form, which was supposed to be filled in order to claim the credit, is still not available on the portal. The transition credit can be claimed within first six months after GST implementation, and it can be used to pay taxes on the fresh stock.
But as of now, the Tran-2 facility has not been activated on the GSTN, and dealers are forced to pay their tax in cash which may lead to increase in working capital cost.
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The facility for filing Tran-1 is, however, activated and users are given the deadline of August 28 for filing this form for claiming input credit on the past stock, only if they have the relevant tax documents available.
The unavailability of Tran-2 filing for this tax duration will put back the operations of these businesses by one month as the next due date of tax payment is September 20. This may further affect the cash flows of many companies.
