Section 140 at a Glance
Contents
1. Statutory Text of Section 140
(1) A registered person, other than a person opting to pay tax under section 10, shall be entitled to take, in his electronic credit ledger, the amount of CENVAT credit of eligible duties 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, within such time and in such manner as may be prescribed:
Provided that the registered person shall not be allowed to take credit where the amount is not admissible as input tax credit under this Act, where the required returns for the six months immediately preceding the appointed day have not been furnished, or where the credit relates to goods manufactured and cleared under notified exemption notifications.
(2) A registered person, other than a person opting to pay tax under section 10, shall be entitled to take credit of the unavailed CENVAT credit in respect of capital goods, not carried forward in a return under the existing law for the period ending with the day immediately preceding the appointed day, within such time and manner as prescribed, subject to the credit being admissible under the existing law and under this Act. “Unavailed CENVAT credit” means the amount remaining after subtracting credit already availed on the capital goods from the aggregate credit to which the person was entitled under the existing law.
(3) A registered person who was not liable to be registered under the existing law, or was engaged in the manufacture of exempted goods or provision of exempted services, or was availing specified works-contract or similar legacy treatment, or was a first/second stage dealer, registered importer or depot of a manufacturer, may take eligible duties relating to inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the appointed day, subject to the statutory conditions regarding taxable use, ITC eligibility, duty-paying documents, invoice period and other prescribed requirements.
(4) A registered person who was engaged in the manufacture of taxable as well as exempted goods or provision of taxable as well as exempted services under the existing law but whose supplies become taxable under this Act may claim the credit referred to in sub-section (1) and, subject to the applicable conditions, credit under sub-section (3) in respect of qualifying stock.
(5) A registered person shall be entitled to take credit of eligible duties and taxes in respect of inputs received on or after the appointed day where the duty/tax had been paid under the existing law and the invoice or other relevant document was recorded in the books within the prescribed period, subject to the statutory conditions. The provision also covers eligible input services received after the appointed day where the relevant service-tax conditions are met.
(6) A registered person who was paying tax at a fixed rate or a fixed amount in lieu of the tax payable under the existing law may take eligible duties in respect of qualifying inputs and stock on the appointed day, subject to the prescribed conditions including taxable use, ITC eligibility, possession of duty-paying documents and the prescribed invoice period.
(7) Notwithstanding anything contained in this Act, input tax credit relating to services received prior to the appointed day by an Input Service Distributor shall be eligible for distribution as credit under this Act within the prescribed time and manner, including where the relevant invoices are received prior to, on or after the appointed day, subject to the statutory and prescribed conditions.
(8) Where a registered person having centralised registration under the existing law obtains registration under this Act, the person may take the carried-forward CENVAT credit in the electronic credit ledger subject to the statutory conditions. The credit may be transferred to registered persons having the same PAN for which the centralised registration was obtained under the existing law.
(9) Where CENVAT credit for input services was reversed under the existing law because consideration was not paid within three months, the credit may be reclaimed within the prescribed time and manner if the registered person pays the consideration within three months from the appointed day, subject to the statutory conditions.
(10) The amount of credit under sub-sections (3), (4) and (6) shall be calculated in such manner as may be prescribed.
Explanation 1. “Eligible duties” covers the specified additional duties of excise, customs duties and excise duties listed in the provision, including National Calamity Contingent Duty, in relation to qualifying stock.
Explanation 2. “Eligible duties and taxes” covers the specified eligible duties and service tax identified in the provision for the purposes of the relevant transitional claims.
Explanation 3. “Eligible duties and taxes” excludes cesses not specified in the relevant explanations and cesses collected as additional customs duty under the specified Customs Tariff provision.
2. Section 140 Explained in Simple Language
Before GST, businesses accumulated credit under different indirect-tax laws such as Central Excise, Service Tax and State VAT. GST replaced many of those taxes, so the law needed a mechanism for eligible old credit to move into the new electronic credit ledger.
That mechanism is Section 140.
Think of Section 140 as a set of “doors”
Different taxpayers entered GST with different types of old credit. Section 140 created different doors for those situations.
| Situation | Main provision |
|---|---|
| Credit already carried forward in old return | 140(1) |
| Unused credit on capital goods | 140(2) |
| Stock credit for specified persons | 140(3) |
| Old taxable + exempt business now taxable under GST | 140(4) |
| Inputs/input services received after GST but old tax paid | 140(5) |
| Legacy fixed-rate/composition taxpayer | 140(6) |
| ISD credit for pre-GST services | 140(7) |
| Centralised registration | 140(8) |
| Reversed old service-tax credit reclaimed after payment | 140(9) |
3. Section 140 Roadmap
4. Section 140(1): Credit Carried Forward in the Last Pre-GST Return
This is the most familiar transitional-credit category. A registered person, other than a person opting for composition under Section 10, could take eligible CENVAT credit carried forward in the return for the period ending immediately before the appointed day.
Important conditions
- The credit had to be admissible as ITC under the CGST Act.
- The required returns for the six months immediately preceding the appointed day had to be furnished.
- The credit could not relate to goods manufactured and cleared under notified exemption notifications.
- The claim had to follow the prescribed time and manner.
A manufacturer had eligible CENVAT credit of ₹12 lakh carried forward in its final pre-GST return. If the credit satisfied Section 140 and the prescribed conditions, the eligible amount could transition into the GST electronic credit ledger.
5. Section 140(2): Unavailed CENVAT Credit on Capital Goods
Capital goods were treated separately because under the old CENVAT system credit could be availed over time. A portion might already have been availed before GST while another eligible portion remained unavailed.
Section 140(2) allowed eligible unavailed CENVAT credit on capital goods, subject to the credit being admissible under the old law and also admissible as ITC under GST.
Total eligible CENVAT credit on a machine under the old law = ₹10 lakh. Credit already availed = ₹6 lakh. The unavailed portion is ₹4 lakh, subject to all Section 140(2) conditions.
6. Section 140(3): Credit on Inputs and Stock for Specified Persons
Section 140(3) addresses specified taxpayers who could not simply rely on the old CENVAT closing balance route. It covered categories such as persons not liable to registration under the existing law, persons manufacturing exempted goods or providing exempted services, specified works-contract/service situations and certain dealers/importers/depots.
Core stock conditions
- The inputs or goods must be used or intended for making taxable supplies under GST.
- The person must be eligible for ITC on the inputs under the GST law.
- Duty-paying invoices or prescribed documents must be available, subject to the specific statutory rule.
- The relevant invoices must fall within the statutory look-back period; the provision specifies invoices issued not earlier than twelve months immediately preceding the appointed day.
- Other category-specific conditions must be satisfied.
Rule 117 and the transition rules prescribed additional procedures and, for specified taxpayers without duty-paying documents, the historical deemed-credit mechanism under Rule 117(4) was linked to Section 140(3). CBIC's FAQ explains the historical 60%/40% deemed-credit mechanism and its limited transition period. citeturn0search3turn3search12
7. Section 140(4): Businesses With Both Taxable and Exempt Legacy Activities
Some businesses under the old regime had both taxable and exempt manufacturing or services. When GST began, their GST supplies could become taxable in a different way.
Section 140(4) dealt with such taxpayers and permitted:
- the credit referred to in Section 140(1), and
- subject to the applicable conditions, stock credit under Section 140(3).
| Old regime | GST transition |
|---|---|
| Taxable + exempt activities | Specified credit could transition through 140(4). |
| Old CENVAT balance | 140(1) route. |
| Qualifying stock | 140(3) route subject to conditions. |
8. Section 140(5): Inputs and Input Services Received After 1 July 2017 but Old Tax Paid
This provision addresses a common transition problem: the tax regime changed on 1 July 2017, but goods or services connected with the old tax system could still be received after that date.
Where qualifying inputs or input services were received on or after the appointed day and the applicable duty/tax had been paid under the existing law, Section 140(5) provided a route to credit subject to the statutory conditions.
Practical idea
CBIC's FAQ specifically identifies Section 140(5) as the transition provision for eligible service-tax credit where invoices/services were received around the GST transition. citeturn0search5
A qualifying service was supplied under the old Service Tax regime, tax was paid under the old law, but the invoice/service was received after 1 July 2017. Section 140(5), subject to its conditions, addressed this transition situation.
9. Section 140(6): Taxpayers Paying Tax at a Fixed Rate or Fixed Amount Under the Old Law
Businesses that were paying tax under a legacy fixed-rate or fixed-amount scheme could have stock on the appointed day without a normal CENVAT balance equivalent to that of a regular taxpayer.
Section 140(6) provided a stock-credit route for qualifying inputs and goods contained in semi-finished or finished goods.
Key conditions included
- Inputs/goods used for making taxable supplies under GST.
- Eligibility for ITC under GST.
- Possession of invoices or documents evidencing payment of duty under the existing law.
- Relevant invoices within the statutory twelve-month period.
- Compliance with the prescribed calculation and procedure.
A legacy taxpayer paying tax at a fixed rate held eligible input stock on 30 June 2017. Section 140(6) provided a specific transitional route, rather than treating the taxpayer like a normal CENVAT-credit claimant under 140(1).
10. Section 140(7): Input Service Distributor Credit
Section 140(7) deals with services received before GST by an Input Service Distributor (ISD) where the corresponding credit was to be distributed under GST.
The current wording provides that the credit can be distributed under GST within the prescribed time and manner, including where the invoices relating to the services are received before, on or after the appointed day, subject to the statutory framework.
The wording of Section 140(7) was amended retrospectively, with the 2024 Finance Act change concerning the timing of invoices for such services being brought into force from 1 November 2024. The current text should therefore be used rather than an old 2017-only version. citeturn2search3
11. Section 140(8): Centralised Registration Under the Existing Law
Some service providers operated under centralised registration under the old Service Tax regime. GST changed the registration architecture.
Section 140(8) allowed a registered person who had centralised registration under the existing law and obtained registration under GST to take qualifying carried-forward CENVAT credit into the electronic credit ledger, subject to the conditions in the section and prescribed procedure.
An important feature is that the transitional credit could be transferred to registered persons having the same PAN for which the centralised registration had been obtained under the existing law.
A service provider had a centralised Service Tax registration before GST and then obtained multiple GST registrations under the GST framework. Section 140(8) provided the mechanism for moving and, where applicable, distributing the eligible old credit among registrations with the same PAN.
12. Section 140(9): Reclaim of Credit Reversed for Non-Payment
Under the old service-tax/CENVAT framework, credit relating to input services could be reversed when consideration was not paid within three months.
Section 140(9) addressed a specific transition situation: where such CENVAT credit had been reversed because consideration was not paid within three months, the credit could be reclaimed under the prescribed conditions if the consideration was paid within three months from the appointed day.
An eligible input-service credit was reversed under the old law because the supplier had not been paid within the required three-month period. If the recipient subsequently made the required payment within the transition period specified by Section 140(9), the provision allowed reclaim subject to its conditions and prescribed procedure.
13. Calculation Concepts and “Eligible Duties”
Section 140 does not treat every historical levy as transferable GST ITC. The explanations identify the duties and taxes that qualify for the relevant transitional provisions.
Eligible duties
Explanation 1 identifies specified additional duties of excise/customs, excise duties and National Calamity Contingent Duty for the relevant stock-credit provisions.
Eligible duties and taxes
Explanation 2 identifies specified duties and service tax for the relevant transitional provisions, including service tax on qualifying inputs and input services.
Cess exclusion
Explanation 3 clarifies that “eligible duties and taxes” excludes cesses that are not specified in Explanation 1 or Explanation 2 and specified cesses collected as additional customs duty.
14. Rules, Forms and the Transitional ITC System
Section 140 operated together with the transitional provisions in the CGST Rules. Rule 117 prescribed the declaration mechanism for transitional credit and historically used FORM GST TRAN-1. The transition rules also contained the stock/deemed-credit mechanism associated with TRAN-2.
| Item | Role in the original transition |
|---|---|
| Section 140 | Statutory entitlement and conditions for categories of transitional credit. |
| Rule 117 | Procedural declaration of transitional credit. |
| TRAN-1 | Electronic declaration covering several Section 140 categories. |
| TRAN-2 | Historical mechanism for specified deemed-credit claims where applicable. |
Rule 117 originally prescribed a 90-day filing period, with extensions under specified circumstances. Transitional-credit filing deadlines subsequently became the subject of extensions, technical-difficulty procedures and extensive litigation. citeturn0search17turn3search12
15. Practical Examples Covering Section 140
Old-law return shows eligible CENVAT credit of ₹8 lakh. Subject to Section 140(1) conditions, the eligible balance could transition to GST.
A machine had total eligible CENVAT credit of ₹5 lakh, of which ₹3 lakh had already been availed. The ₹2 lakh unavailed portion could be considered under 140(2), subject to conditions.
A manufacturer previously making exempt goods holds eligible input stock on 30 June 2017. Section 140(3) provided a route to eligible stock credit subject to its conditions.
A trader not registered under the old excise system has stock with no duty-paying document. The historical deemed-credit route under Rule 117(4), linked to 140(3), was subject to strict conditions and a limited period.
A business had taxable and exempt output under the old law but its relevant GST supplies became taxable. Section 140(4) connected 140(1) and qualifying 140(3) stock credit.
Inputs were received after 1 July 2017, but qualifying old-law tax had already been paid. Section 140(5) addressed the transition subject to its conditions.
A qualifying service-tax input service was received around the appointed day and the invoice timing crossed the GST start date. Section 140(5) provided the transitional route subject to the applicable conditions.
A legacy taxpayer paying tax at a fixed rate held input stock on 30 June 2017. Section 140(6) provided a dedicated transition mechanism.
An ISD had received services before GST and needed to distribute eligible credit under GST. Section 140(7) addressed the transition.
A service provider had centralised registration and multiple GST registrations after 1 July 2017. Section 140(8) allowed eligible credit to transition and permitted transfer to same-PAN registrations subject to conditions.
Old-law input-service credit was reversed for non-payment within three months. The recipient paid within the transition period. Section 140(9) addressed reclaim subject to its conditions.
A taxpayer has a legacy credit balance containing a levy not covered by the eligible-duty definitions. Explanation 3 is relevant because not every cess automatically forms part of eligible transitional credit.
16. Transitional Credit Disputes and Technical Filing Issues
Section 140 has generated substantial litigation, especially around TRAN-1/TRAN-2 filing, technical glitches, statutory time limits and whether a substantive credit claim should be lost because of procedural or portal difficulties.
Courts have considered the distinction between the existence of an eligible transitional credit and the procedural mechanism for declaring it. A 2020 Madras High Court decision discussed the different purposes of the Section 140 sub-sections and the nature of transitional credit. citeturn3search0
CBIC also issued Circular No. 182/14/2022-GST concerning reporting of transitional credit pursuant to judicial directions, including certain TRAN-1/TRAN-2 claims. citeturn3search12
17. Records and Internal Controls
For historical transitional-credit matters, a strong working paper should trace the credit from the old law to the GST electronic credit ledger.
| Working-paper item | What to preserve |
|---|---|
| Old return | Final pre-GST return showing carried-forward credit. |
| Capital goods schedule | Asset-wise eligible credit, availed credit and unavailed balance. |
| Stock statement | Inputs, semi-finished and finished goods held on 30 June 2017. |
| Duty-paying documents | Invoices/documents supporting old duties. |
| Ageing | Invoice dates for the statutory look-back conditions. |
| TRAN-1/TRAN-2 | Submitted forms, acknowledgements and supporting files. |
| Electronic credit ledger | Proof of credit actually reflected after transition. |
| Technical-error evidence | Screenshots, tickets, ARN/filing attempts and portal communications where relevant. |
| Legal correspondence | Notices, replies, orders and judicial directions. |
18. Section 140 vs Section 139 vs Section 141
| Provision | Main subject |
|---|---|
| Section 139 | Migration of existing taxpayers / GST registration transition. |
| Section 140 | Transitional arrangements for input tax credit. |
| Section 141 | Transitional provisions relating to job work. |
19. Common Misunderstandings
“Section 140 allows every old tax credit to be carried into GST.”
No. Only specified eligible duties/taxes and credit categories satisfying statutory conditions can transition.
“Any closing balance in the old return is automatically valid GST ITC.”
No. Section 140(1) contains eligibility and return-filing conditions.
“Section 140 is only for manufacturers.”
No. Different sub-sections cover manufacturers, service providers, traders, importers, ISDs, composition/fixed-rate taxpayers and centralised service providers depending on the situation.
“Old capital-goods credit is covered only by 140(1).”
Section 140(2) specifically addresses unavailed CENVAT credit on capital goods.
“TRAN-1 is a normal current GST return.”
No. It was a historical transitional declaration mechanism.
“Any invoice from 2016 can support stock credit.”
The relevant sub-sections contain specific invoice-age and other conditions. Section 140(3) and 140(6), for example, contain a twelve-month condition.
“Section 140(5) covers capital goods in transit.”
The transition provision discussed under 140(5) concerns qualifying inputs/input services received after the appointed day; it should not be treated as a general capital-goods transition provision.
“Paying old tax means the credit must be available.”
Payment is not the only condition. The particular transitional sub-section and all statutory requirements must be satisfied.
20. Questions People Commonly Search
- What is Section 140 of the CGST Act?
- What is transitional ITC under GST?
- What is Section 140(1) GST?
- What is Section 140(2) for capital goods?
- What is Section 140(3) transitional credit?
- What is deemed credit under GST transition?
- What is Section 140(5) GST?
- What is GST credit for goods in transit from pre-GST period?
- What is Section 140(6) for composition taxpayers?
- What is Section 140(7) ISD transitional credit?
- What is Section 140(8) centralised registration?
- What is Section 140(9) reclaimed CENVAT credit?
- What is TRAN-1?
- What is TRAN-2?
- Can old CENVAT credit be carried forward into GST?
- Section 140 CGST Act explained with examples
21. Frequently Asked Questions
1. What is Section 140 of the CGST Act?
It provides transitional arrangements for eligible input tax credit from the pre-GST indirect-tax regime into GST.
2. What is Section 140(1)?
It covers eligible CENVAT credit carried forward in the return for the period ending immediately before the appointed day, subject to statutory conditions.
3. What is Section 140(2)?
It covers unavailed CENVAT credit relating to capital goods, subject to eligibility under both the old law and GST.
4. What is Section 140(3)?
It covers specified taxpayers claiming credit relating to eligible inputs and stock held on the appointed day, subject to detailed conditions.
5. What is Section 140(4)?
It addresses taxpayers who had both taxable and exempt activities under the old law but whose relevant supplies became taxable under GST.
6. What is Section 140(5)?
It provides a transitional route for qualifying inputs and input services received on or after the appointed day where the relevant old-law duty/tax was paid, subject to conditions.
7. What is Section 140(6)?
It addresses specified taxpayers who paid tax at a fixed rate or fixed amount under the old law and had qualifying stock at the GST transition.
8. What is Section 140(7)?
It addresses transitional credit relating to services received by an Input Service Distributor before GST and its distribution under GST.
9. What is Section 140(8)?
It deals with centralised registration under the old law and transition of eligible credit to GST registrations, including transfer to same-PAN registrations subject to conditions.
10. What is Section 140(9)?
It addresses reclaim of certain CENVAT credit reversed for non-payment of input-service consideration under the old law.
11. What are eligible duties?
They are the specified duties listed in Explanation 1 for the relevant transitional provisions.
12. What are eligible duties and taxes?
They are the specified duties and service tax listed in Explanation 2 for the relevant transitional provisions.
13. What is TRAN-1?
It was the historical electronic declaration used for reporting several categories of transitional credit under Section 140.
14. What is TRAN-2?
It was a historical declaration mechanism associated with specified deemed-credit claims for stock where duty-paying documents were unavailable, subject to the transition rules.
15. Can Section 140 be used for new ITC claims in 2026?
Section 140 is a transitional provision linked to the introduction of GST. It is not a general mechanism for claiming ordinary current-year ITC.
16. Is every old cess transferable as transitional credit?
No. Explanation 3 specifically excludes cesses not covered by the eligible-duty/tax definitions and the specified customs-cess category.
17. Why are Section 140 disputes still seen?
Historical transitional-credit claims have generated disputes involving filing deadlines, technical portal issues, eligibility, documents and judicial directions.
18. Is Section 140 related to Section 139?
Yes, both are in the transitional chapter, but their subjects differ: Section 139 concerns migration of taxpayers, while Section 140 concerns transitional ITC.
22. Quick Revision – Section 140
- Section 140 = Transitional arrangements for input tax credit.
- 140(1): eligible carried-forward CENVAT credit.
- 140(2): unavailed CENVAT credit on capital goods.
- 140(3): specified stock-credit situations.
- 140(4): taxable + exempt legacy activities becoming taxable under GST.
- 140(5): qualifying inputs/input services received after GST start where old-law tax was paid.
- 140(6): specified fixed-rate/fixed-amount legacy taxpayers.
- 140(7): ISD transitional services.
- 140(8): centralised registration.
- 140(9): reclaim of specified reversed input-service credit.
- 140(10): prescribed calculation for specified stock-credit provisions.
- The provision is historical and should not be confused with ordinary current GST ITC.
- Eligibility depends on the exact sub-section, documents, timing, old-law eligibility and GST-law eligibility.
23. Legal Disclaimer
This page is provided for general educational and compliance-workflow purposes. GST law, rules, notifications, circulars, instructions and judicial interpretation can change, and transitional-credit disputes can depend heavily on the relevant historical date and facts. Before taking a tax, accounting or litigation decision, verify the law, rules, notifications, circulars and judicial directions applicable to the particular claim and obtain professional advice where appropriate. This page is not a substitute for professional legal advice.