Transitional provisions related to credit under GST
By: – Abhishek Gupta
Goods and Services Tax – GST
Dated:- 29-12-2016
Transitional Provisions for CENVAT Credit under GST
Need for Transitional Provisions
To facilitate the implementation of any new law or amendment in old law, role of transitional provisions comes into play. As India in gearing up for one of the biggest tax reform of its country, it is very important to read, analyze and assess the impact of GST Law and in amid these discussions of GST, transitional provision plays a very critical role for smooth migration to GST.
Implementation of GST from 1st April, 2017 seems to be a challenging task. Finance Minister Shri Arun Jaitley after meetings with GST council has shared his concerns on the deadline of GST but he is trying his best for GST rollout. On Goods and Service tax council's 7th meeting, Shri Arun Jaitley said that “the drafts of Central GST and the compensation law have been mostly approved with t
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004.
Balance of CENVAT Credit carried forward in the return will become opening balance of input tax credit in electronic credit ledger. This balance of CENVAT credit will be known as CGST (central goods & service tax).
What is electronic credit leger in GST?
All the input taxes under various major heads i.e. CGST, SGST and IGST shall be credited to an electronic ledger. Any availment of input tax credit will be credited in the ledger and any utilization, refund, reversals will be debited in the ledger.
Section 2(43) of Model GST Law, “electronic credit ledger” means the electronic credit ledger referred to in section 44(2).
As per section 44(2) self-assessed input tax credit shown in the return will be credited in a ledger which will be called as electronic credit ledger.
GST will subsume VAT and entry tax in itself, therefore, closing balance of VAT and entry tax carried forward in a return shall be entitled for input tax credit. This balance of Vat or entry tax will be known
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AT Credit in his electronic credit ledger. The expression “un-availed CENVAT Credit” means the amount that remains after subtracting the amount of CENVAT credit already availed in respect of capital goods by the taxable person under the earlier law from the aggregate amount of CENVAT credit to which the said person was entitled in respect of the said capital goods under the earlier law.
A registered taxable person is not allowed to avail credit under this section unless CENVAT Credit was admissible to him under the earlier law and GST as well.
It is very important to recap here that time limitation of availing credit from 1 year from date of invoice is applicable only on inputs or input services and not on capital goods.
Similarly a registered taxable person can take in his electronic credit ledger, the un-availed input tax credit(levied under state VAT laws) in respect of capital goods, which is not carried forward by such taxable person in his return filed for the period immediate
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cility has been now extended to them also by virtue of section 169 of revised model GST law.
Similarly, in case of VAT or entry tax, a person who has not liable to be registered under the respective VAT laws or who was engaged in the sale of exempted goods under the earlier law but liable to pay tax under this act can also take input tax credit in electronic credit ledger.
Credit of eligible duties and taxes in respect of inputs held in stock to be allowed in certain situations
A registered taxable person who was engaged in manufacture of non-exempted as well as exempted goods or provision of non-exempted as well as exempted services shall be entitled to take in ledger credit carried forward in return and credit of inputs held in stock relating to exempted goods or services.
Credit of duties and taxes in respect of input and input services in respect of goods in transit
It may be happen that the goods may have been dispatched before the appointed day, on payment of appropriate e
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electronic credit ledger of inputs held in stock subject to following conditions:-
* The inputs or goods should be used for making taxable outward supply under the GST
* Assessee should not be working under composition scheme
* Taxable person is eligible for availing input tax credit on such inputs
* Taxable person is in possession of supporting documents
* Such documents were not issued earlier than 12 months immediately preceding the appointed day
Illustration:
X ltd. registered in Delhi is manufacturing medical equipment's on which 10% excise duty is applicable and is providing health care services which is exempted by notification number 25/2012. Also, Delhi vat @5% is payable on sale of medical equipment's. No composition scheme is opted by X ltd under earlier law as well as under GST law. X ltd. is also engaged in inter-state sale of goods attracting CST@2% and paying Octroi (entry tax) on receipt of goods in Delhi.
In 2016-17, the following data is available:
Clo
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pment's (amount of sale) ₹ 20, 00, 000
Supply of health care services ₹ 10, 00, 000
Out of above supplies, X ltd. made inter-state supply of value ₹ 5, 00, 000
Rate of CGST, SGT and IGST are 9%, 9% and 18% respectively.-
Suggest tax compliances as GST will roll-out on 1st April, 2017 considering an assumption that supplies of goods or services made by X ltd. will be taxable under GST.
Solution:
As per section 167 of Model GST Law:
Closing balance carried forward in return will become input tax credit under GST
Input tax credit as per section 167 will be:
Particulars
Amount
Remarks
Capital Goods
1,00,000
It can be claimed as ITC in electronic credit ledger at any period of time. No time limitation is given
Inputs
25,000
Input Services
19,000
Total-CGST
1,44,000
It can be claimed as ITC in electronic credit ledger within 90 days from the appointed day
VAT
10,000
Entry tax
12,000
Total-SGST
22,000
Refund of CST as per earlier law is allowe
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