Section 140 of CGST Act - Transitional Arrangements for Input Tax Credit
Section 140 of the Central Goods and Services Tax Act, 2017 provides the statutory framework for carrying eligible pre-GST CENVAT credit and specified duties and taxes into the GST regime. It applies to transitional credit connected with the appointed day, 1 July 2017, and operates with the CGST Rules, particularly Rule 117 and the prescribed TRAN forms.
Updated: 15 September 2026
- Section 140 is a transitional provision, not a general ongoing input tax credit provision.
- The Finance Act, 2020 retrospectively inserted or substituted the words relating to credit being taken "within such time and in such manner as may be prescribed" in several parts of Section 140 with effect from 1 July 2017.
- Section 140 must be read with the applicable transitional rules, including Rule 117 and FORM GST TRAN-1 / TRAN-2 requirements.
- Explanation 3 excludes cesses not specified in Explanations 1 or 2 and certain cesses collected as additional customs duty.
Meaning and scope of Section 140
The provision was enacted to bridge the change from the earlier indirect tax regime to GST. Depending on the category of taxpayer and credit, it deals with credit carried forward in earlier returns, unavailed capital-goods credit, eligible duties on stock, credit relating to goods or services in transit, Input Service Distributor credit, centralised registrations and certain credits earlier reversed for non-payment.
The expression "existing law" is defined in Section 2(48) of the CGST Act to cover laws, notifications, orders, rules or regulations relating to levy and collection of duty or tax on goods or services made before commencement of the CGST Act by a competent authority.
Section 140 - provision-wise explanation
Section 140(1) - CENVAT credit carried forward
A registered person, other than a person opting for composition levy under Section 10, may take in the electronic credit ledger CENVAT credit of eligible duties carried forward in the return for the period ending immediately before the appointed day, within the prescribed time and manner. Credit is barred where it is not admissible under the CGST Act, where the required returns for the preceding six months were not furnished, or where the credit relates to goods cleared under notified exemption notifications.
Section 140(2) - Unavailed CENVAT credit on capital goods
Eligible registered persons may take the unavailed portion of CENVAT credit on capital goods that was not carried forward in the earlier-law return, within the prescribed time and manner, provided the credit was admissible under both the existing law and the CGST Act. "Unavailed CENVAT credit" is the difference between the total credit entitlement on the capital goods and the credit already availed under the existing law.
Section 140(3) - Credit on inputs held in stock
This provision covers specified persons who were outside or partly outside the earlier CENVAT chain, including persons not liable to registration under the existing law, persons dealing in exempted goods or services, specified works-contract service providers, first-stage or second-stage dealers, registered importers and manufacturer depots. Eligible duties on inputs in stock and inputs contained in semi-finished or finished goods held on the appointed day may be credited within the prescribed time and manner, subject to statutory conditions such as taxable use, eligibility under GST and possession of prescribed duty-paying documents. The special proviso addresses certain traders without duty-paying documents, subject to prescribed safeguards and passing the benefit through reduced prices.
Section 140(4) - Taxable and exempt activities under the earlier law
A person who was engaged in both taxable and exempt manufacture or services, where the relevant supplies became taxable under GST, may take the carried-forward credit under sub-section (1) and eligible duties relating to stock attributable to the earlier exempt activity in accordance with sub-section (3).
Section 140(5) - Inputs or input services received after the appointed day
Eligible duties and taxes on inputs or input services received on or after the appointed day, where the supplier paid the duty or tax under the existing law, may be taken within the prescribed time and manner if the duty or tax paying document was recorded in the recipient's books within 30 days from the appointed day. The Commissioner could extend that accounting period by up to a further 30 days on sufficient cause, and a prescribed statement was also required.
Section 140(6) - Persons paying fixed rate or fixed amount under existing law
A person who paid tax at a fixed rate or fixed amount in lieu of tax under the existing law may claim eligible duties on qualifying inputs in stock and inputs contained in semi-finished or finished goods held on the appointed day, within the prescribed time and manner, subject to the conditions in sub-section (6), including taxable use, non-composition status under Section 10, GST credit eligibility and prescribed duty-paying documents not older than 12 months immediately before the appointed day.
Section 140(7) - Input Service Distributor
Input tax credit for services received before the appointed day by an Input Service Distributor may be distributed as credit under the CGST Act within the prescribed time and manner even where the related invoices were received on or after the appointed day.
Section 140(8) - Earlier centralised registration
A person holding centralised registration under the existing law and obtaining registration under GST may take qualifying CENVAT credit carried forward in the return for the period ending immediately before the appointed day, within the prescribed time and manner. The provision also contains conditions for a return furnished within three months after the appointed day and permits transfer of eligible credit to registered persons having the same PAN for which the centralised registration was obtained.
Section 140(9) - Reclaim of credit reversed for non-payment
Where CENVAT credit on input services under the existing law was reversed because consideration was not paid within three months, the credit may be reclaimed within the prescribed time and manner if payment for the service was made within three months from the appointed day.
Section 140(10) - Calculation
Credit under sub-sections (3), (4) and (6) is to be calculated in the prescribed manner.
Eligible duties and taxes
Explanation 1 specifies the "eligible duties" relevant to sub-sections (3), (4) and (6). These include specified additional duties of excise, additional duties under Section 3(1) and Section 3(5) of the Customs Tariff Act, duties of excise under the First and Second Schedules to the Central Excise Tariff Act, and National Calamity Contingent Duty, subject to the statutory context. The former reference to the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 was omitted retrospectively with effect from 1 July 2017.
Explanation 2 defines "eligible duties and taxes" for sub-section (5) and additionally includes service tax leviable under Section 66B of the Finance Act, 1994. Explanation 3 clarifies that unspecified cesses and specified cess collected as additional customs duty are excluded.
Rule 117, TRAN-1 and TRAN-2
Rule 117 of the CGST Rules prescribes the transition mechanism for persons entitled to credit under Section 140. The rule historically required electronic declaration in FORM GST TRAN-1 and also provided the mechanism connected with FORM GST TRAN-2 for specified deemed-credit cases. These provisions concern the migration of pre-GST credit and should be distinguished from ordinary current-period ITC claims under the CGST Act.
Important amendments to Section 140
The CGST (Amendment) Act, 2018 made retrospective changes effective from 1 July 2017, including insertion of "of eligible duties" in sub-section (1), omission of the textile additional-duty entry from Explanations 1 and 2, and insertion of Explanation 3. The Finance Act, 2020 retrospectively amended several sub-sections from 1 July 2017 to expressly provide that transitional credit must be taken within such time and in such manner as may be prescribed.
Practical legal points
For a legacy transitional-credit dispute, identify the precise sub-section invoked, the type of pre-GST duty or tax involved, whether the credit was admissible under the earlier law and GST law, the relevant return or stock position on the appointed day, compliance with Rule 117 and the applicable TRAN form, and any later order or circular affecting the claim. Because Section 140 has retrospective amendments and substantial litigation history, the law applicable to the specific facts and procedural history should be checked before relying on a general summary.
Official resources
For authoritative verification, refer to the CBIC GST portal, the CGST Rules, and the CBIC circulars and orders. The Gazette text of the relevant amending Act or notification prevails where there is any inconsistency in a convenience compilation.