Section 18 of UTGST Act, 2017 - Transitional Input Tax Credit
Section 18 of the Union Territory Goods and Services Tax Act, 2017 sets out transitional arrangements for bringing eligible value added tax (VAT) and entry tax credits into the GST electronic credit ledger when GST commenced. It addresses credit carried forward in returns, capital goods, stock, goods received after the appointed day and certain former fixed-rate taxpayers.
Historical transition provision: This section relates to migration from pre-GST tax laws on the appointed day (generally 1 July 2017). Its original transition periods should not be mistaken for fresh deadlines in 2026. Eligibility, later amendments, prescribed forms, applicable extensions and proceedings must be checked against the operative rules and notifications.
Full text of Section 18 - Transitional arrangement for input tax credit
(1) A registered person, other than a person opting to pay tax under section 10 of the Central Goods and Services Tax Act, shall be entitled to take, in his electronic credit ledger, credit of the amount of Value Added Tax and Entry Tax, if any, carried forward in the return relating to the period ending with the day immediately preceding the appointed day, furnished by him under the existing law, not later than ninety days after the said day, in such manner as may be prescribed: Provided that the registered person shall not be allowed to take credit in the following circumstances, namely:- (i) where the said amount of credit is not admissible as input tax credit under this Act; or (ii) where he has not furnished all the returns required under the existing law for the period of six months immediately preceding the appointed day; or (iii) where the said amount of credit relates to goods sold under such exemption notifications as are notified by the Government: Provided further that so much of the said credit as is attributable to any claim related to section 3, sub-section (3) of section 5, section 6 or section 6A or sub-section (8) of section 8 of the Central Sales Tax Act, 1956 that is not substantiated in the manner, and within the period, prescribed in rule 12 of the Central Sales Tax (Registration and Turnover) Rules, 1957 shall not be eligible to be credited to the electronic credit ledger: Provided also that an amount equivalent to the credit specified in the second proviso shall be refunded under the existing law when the said claims are substantiated in the manner prescribed in rule 12 of the Central Sales Tax (Registration and Turnover) Rules, 1957.
(2) A registered person, other than a person opting to pay tax under section 10 of the Central Goods and Services Tax Act, shall be entitled to take, in his electronic credit ledger, credit of the unavailed input tax credit in respect of capital goods, not carried forward in a return, furnished under the existing law by him, for the period ending with the day immediately preceding the appointed day in such manner as may be prescribed: Provided that the registered person shall not be allowed to take credit unless the said credit was admissible as input tax credit under the existing law and is also admissible as input tax credit under this Act. Explanation.- For the purposes of this section, the expression "unavailed input tax credit'' means the amount that remains after subtracting the amount of input tax credit already availed in respect of capital goods by the taxable person under the existing law from the aggregate amount of input tax credit to which the said person was entitled in respect of the said capital goods under the existing law
(3) A registered person, who was not liable to be registered under the existing law or who was engaged in the sale of exempted goods or tax free goods or goods which have suffered tax at first point of their sale in the Union territory and the subsequent sales of which are not subject to tax in the Union territory under the existing law but which are liable to tax under this Act or where the person was entitled to the credit of input tax at the time of sale of goods, shall be entitled to take, in his electronic credit ledger, credit of the value added tax and entry tax, if any, in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the appointed day subject to the following conditions, namely:- (i) such inputs or goods are used or intended to be used for making taxable supplies under this Act; (ii) the said registered person is eligible for input tax credit on such inputs under this Act; (iii) the said registered person is in possession of invoice or other prescribed documents evidencing payment of tax under the existing law in respect of such inputs; and (iv) such invoices or other prescribed documents were issued not earlier than twelve months immediately preceding the appointed day: Provided that where a registered person, other than a manufacturer or a supplier of services, is not in possession of an invoice or any other documents evidencing payment of tax in respect of inputs, then, such registered person shall, subject to such conditions, limitations and safeguards as may be prescribed, including that the said taxable person shall pass on the benefit of such credit by way of reduced prices to the recipient, be allowed to take credit at such rate and in such manner as may be prescribed.
(4) A registered person, who was engaged in the sale of taxable goods as well as exempted goods or tax free goods under the existing law but which are liable to tax under this Act, shall be entitled to take, in his electronic credit ledger,- the amount of credit of the value added tax and entry tax, if any, carried forward in a return furnished under the existing law by him in accordance with the provisions of sub-section (1); and the amount of credit of the value added tax and entry tax, if any, in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the appointed day, relating to such exempted goods or tax free goods in accordance with the provisions of sub-section (3).
(5) A registered person shall be entitled to take, in his electronic credit ledger, credit of value added tax and entry tax, if any, in respect of inputs received on or after the appointed day but the tax in respect of which has been paid by the supplier under the existing law, subject to the condition that the invoice or any other tax paying document of the same was recorded in the books of account of such person within a period of thirty days from the appointed day: Provided that the period of thirty days may, on sufficient cause being shown, be extended by the Commissioner for a further period not exceeding thirty days: Provided further that the said registered person shall furnish a statement, in such manner as may be prescribed, in respect of credit that has been taken under this sub-section
(6) A registered person, who was either paying tax at a fixed rate or paying a fixed amount in lieu of the tax payable under the existing law shall be entitled to take, in his electronic credit ledger, credit of value added tax in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the appointed day subject to the following conditions, namely:- (i) such inputs or goods are used or intended to be used for making taxable supplies under this Act; (ii) the said registered person is not paying tax under section 10 of the Central Goods and Services Tax Act; (iii) the said registered person is eligible for input tax credit on such inputs under this Act; (iv) the said registered person is in possession of invoice or other prescribed documents evidencing payment of tax under the existing law in respect of inputs; and (v) such invoices or other prescribed documents were issued not earlier than twelve months immediately preceding the appointed day.
(7) The amount of credit under sub-sections (3), (4) and (6) shall be calculated in such manner as may be prescribed.
Explanation of Section 18, sub-section by sub-section
Section 18(1): VAT and entry tax carried forward in returns
A registered person other than a person paying tax under the CGST composition scheme could claim eligible VAT and entry tax reflected in the final return under the previous law, subject to the specified filing period and prescribed manner. Credit was excluded where inadmissible under UTGST, where the required previous six months' returns had not been filed, or where it related to notified exempt sales. Additional restrictions and refund treatment applied to unsubstantiated Central Sales Tax claims.
Section 18(2): Unavailed credit on capital goods
The unclaimed portion of input tax credit relating to capital goods, not carried forward in the old-law return, could be brought forward only if the credit was admissible both under the previous law and the UTGST Act. The statutory explanation defines unavailed input tax credit as the total eligible capital-goods credit less credit already taken under the old law.
Section 18(3): Tax on eligible stock
This provision covers specified taxpayers previously outside registration or dealing in exempt, tax-free or first-point-taxed goods, where the relevant goods became taxable under UTGST or credit was available at the time of sale. It requires intended taxable use, credit eligibility, and qualifying invoices or other tax-payment documents generally issued within the twelve months before the appointed day. A prescribed alternative method could apply to certain persons lacking invoices, subject to safeguards and passing on the benefit through reduced prices.
Section 18(4): Businesses with both taxable and exempt sales
Where a business had dealt in both taxable and exempt or tax-free goods, it could combine qualifying carry-forward credit under sub-section (1) with qualifying stock-related credit under sub-section (3), subject to each provision's conditions.
Section 18(5): Inputs received after GST commencement
Credit for inputs received on or after the appointed day, on which the supplier had paid tax under the previous law, depended on timely recording of the supporting invoice or document. The section specified thirty days, with a possible further extension not exceeding thirty days for sufficient cause, and a prescribed statement.
Section 18(6): Former fixed-rate or lump-sum taxpayers
Specified taxpayers previously paying tax at a fixed rate or amount could claim eligible VAT on qualifying stock, subject to taxable use, non-participation in the CGST composition scheme, UTGST credit eligibility, documentary proof and the twelve-month invoice condition.
Section 18(7): Calculation
Credits under sub-sections (3), (4) and (6) are to be calculated in the prescribed manner, rather than on an unrestricted self-assessed basis.
Important terms and connected provisions
Appointed day: The GST transition date relevant to the provision, ordinarily 1 July 2017. Electronic credit ledger: The GST account recording eligible input tax credit under the statutory framework. Inputs: Goods used or intended to be used in the course or furtherance of business, as defined in the CGST Act. Capital goods: Goods whose value is capitalised in the books and which are used or intended for business, subject to the statutory definition.
Read this section with Section 17 (migration of existing taxpayers), Section 19 (job work), Section 20 (other transitional matters) and Section 21 (application of CGST provisions). Related procedural provisions include CGST Section 140 and the applicable transitional rules and FORM GST TRAN-1 / TRAN-2, where relevant.
Official Act, rules and notifications
For statutory text and any applicable amendments or special transition relief, consult the UTGST Act, 2017 (India Code PDF), India Code, CBIC GST, CBIC Tax Information Portal and GST Council. Where a historical claim is disputed, the relevant dates, forms, notifications and judicial directions should be examined individually.