Section 18 — Transitional arrangements for input tax credit.

18. Transitional arrangements 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 (74 of 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: 



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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,— 

(a) 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 

(b) 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 



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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.