Transitional Provisions under Goods and Service Tax
By: – CSSANJAY MALHOTRA
Goods and Services Tax – GST
Dated:- 19-9-2016
As Goods and Service Tax will bring in Business Transformation; it's important to understand the Transitional Provisions to ensure that the proposed tax system takes care of existing tax credits, payments and should not be a "TAX COST" for the assessee's in GST.
Due care has to be taken in shift over from Present set of Indirect Tax system to GST Regime so that the required compliances shall be complied with and taxes paid under present taxation system should be rolled over in GST Law.
Appointment of Officers under GST Act (Section 141) of Model GST Law provides that all the officers appointed under Central / State Laws relating to Taxes shall be deemed to have been appointed as GST Officers under the respective Acts.
Migration of Existing Tax Payers (Section 142)
* All the persons registered under the present Tax structure shall be m
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of CENVAT / VAT as available on the day immediately preceding the day on which GST Act comes into force. Tax credit has to be taken as opening balance in Electronic Ledger i.e. online Input Tax Credit Ledger in GSTIN.
* CENVAT Credit available under Excise and Service Tax as on date preceding to GST Act date shall be carried forward in Electronic Ledger under the head “CGST” and Vat credit under the head “SGST”.
* Tax Credit has to be carry forward provided the same is admissible both under present and in GST law.
* Tax Credit shall be recovered as tax arrears by Central / State GST officers if the same is found to be recoverable as a result of any proceeding initiated before or after the GST Act comes into force.
* The above provisions shall be incorporated under respective CGST and SGST Acts.
Unavailed CENVAT Credit on Capital Goods not carry forward in return to be allowed in GST in certain situation (Section 144)
* Unavailed CENVAT credit means that the tax credit on cap
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ral / State GST officers if the same is found to be recoverable as a result of any proceeding initiated before or after the GST Act comes into force.
* The above provisions shall be incorporated under respective CGST and SGST Acts.
Credit of eligible duties and taxes in respect of inputs held in stock to be allowed in certain situations (Section 145)
Any person who is into the sales of exempted goods under the present law is exempted from Registration and further he shall have to get himself registered under the GST Act if the products come out of exemption or is subject to levy under the GST Act.
Such registered persons under the GST Act shall be eligible to claim Input Tax credit in respect of Inputs, WIP held in stock , Inputs contained in final products as on the date immediately preceding to the Date from which GST Act comes into force.
Credit of eligible duties and taxes on inputs held in stock to be allowed to a taxable person switching over from composition scheme (Sectio
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pect of the period ending with the day immediately preceding the appointed day, switches over to the composition scheme under section 8, he shall pay an amount, by way of debit in the electronic credit ledger or electronic cash ledger, equivalent to the credit of input tax in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the day immediately preceding the date of such switch over:
Provided that after payment of such amount, the balance of input tax credit, if any lying in his electronic credit ledger shall lapse.
* The above provisions shall be incorporated under respective CGST and SGST Acts.
Exempted Goods Returned to Place of Business in GST regime(Section 148)
* No Tax shall be payable by the person returning the exempted goods provided the said goods are cleared not earlier than a period of 6 months from the date of enactment of GST Act and further returned to supplier of goods within a period of 6 months from the dat
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sing within a period of 6 months from the date on which GST Act comes into force, then NO Tax shall be payable.
* Tax shall be payable by manufacturer if the inputs are not received back within a period of 6 months from the date when GST comes into force OR Tax is to be paid by Job Worker if the goods after processing are returned back after a period of 6 months after the GST enactment date.
* If registered person shows sufficient cause, then the period of 6 months may be extended by another 2 months by the competent authority.
* The above provisions shall be incorporated under respective CGST and SGST Acts.
Semi-finished Goods removed for job work and returned on or after the appointed day (Section 151)
* In case Semi-finished goods are removed for carrying out certain manufacturing processes under the provisions of present tax law for further processing, testing, repair, etc and are returned after processing within a period of 6 months from the date on which GST Act comes in
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re not received back within a period of 6 months from the date when GST comes into force OR Tax is to be paid by person returning the goods if the goods after processing are returned back after a period of 6 months after the GST enactment date.
* If registered person shows sufficient cause, then the period of 6 months may be extended by another 2 months by the competent authority.
* The above provisions shall be incorporated under respective CGST and SGST Acts.
Issue of supplementary invoices, debit or credit notes where price is revised in pursuance of a contract (Section 153)
* In case the price of goods are revised upwards after their clearance from the supplier premises, the taxable person issuing the goods has to issue supplementary Invoice or Debit Note containing such particulars as may be prescribed under the GST Rules within a period of THIRTY DAYS of such price revision.
* In case the price of goods are revised downwards after their clearance from the supplier premis
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x/Duty/Interest or any other amount shall be refunded as per the then provisions of Tax laws and any amount accruing to him shall be paid in cash.
* If the claim is fully or partially rejected, then the amount so rejected shall stands to lapse.
* The above provisions shall be incorporated under respective CGST and SGST Acts.
Claim of CENVAT Credit to be disposed of under earlier Law (Section 155)
* Claim for CENVAT Credit on account of any appeal, revision, review or reference shall be disposed off in accordance with the provisions of earlier law and any amount stands accrue to the person shall be paid in Cash.
* In similar way, any amount stands recoverable on account of any appeal, revision; review or reference shall be recoverable as Tax arrears and shall not be admissible as input tax credit under this Act.
* The above provisions shall be incorporated under respective CGST and SGST Acts.
Finalisation of proceedings relating to Output Tax Liability (Section 156)
* Ever
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ference whether before or after the enactment of GST Act, the same shall be refunded to him in Cash or as per the provisions of earlier act.
* The above provisions shall be incorporated under respective CGST and SGST Acts.
Treatment of the amount recovered or refunded in pursuance of Revision of Returns (Section 158)
* Where any duty / interest / penalty or any other amount stands recoverable due to Revision in Return furnished under earlier law, the same shall be recovered as Tax arrears and amount shall not be admissible as input tax credit under this Act.
* Where any duty / interest / penalty or any other amount becomes Refundable due to Revision in Return furnished under earlier law, the same shall be refunded to him in Cash or as per the provisions of earlier act.
* The above provisions shall be incorporated under respective CGST and SGST Acts.
Treatment of long term construction / works contracts (Section 159)
* Tax is applicable at the rates specified under GST Act i
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ISD on the invoices issued before the enactment of GST and received after the enactment of said act.
Tax paid on Goods lying with Agents to be allowed as Credit under SGST Law (Section 162A)
* This provisions shall be incorporated only under respective SGST Acts.
* Input Tax credit is admissible to the Agent in respect of goods lying at his place subject to the following conditions:-
* (i) the agent is a registered taxable person under this Act;
* (ii) both the principal and the agent declare the details of stock of goods lying with such agent on the date immediately preceding the appointed day in such form and manner and within such time as may be prescribed in this behalf;
* (iii) the invoices for such goods had been issued not earlier than twelve months immediately preceding the appointed day; and
* (iv) the principal has either reversed or not availed of the input tax credit in respect of such goods.
Tax paid on Capital Goods lying with Agents to be allowed as Cred
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* Input Tax credit shall not be admissible in respect of any amount reversed prior to the introduction of GST Act.
Goods sent on approval basis returned on or after the appointed day (Section 162D)
* No Tax shall be payable by manufacturer if the goods sent on approval basis not earlier than 6 months from date of enactment of GST Act and are further not received back within a period of 6 months from the date when GST comes into force.
* If registered person shows sufficient cause for delay, then the period of 6 months may be extended by another 2 months by the competent authority.
* The above provisions shall be incorporated only under SGST Acts.
Deduction of Tax at Source (Section 162E)
* Where a supplier has made any sale of goods in respect of which tax was required to be deducted at source under the earlier law and has also issued an invoice for the same before the enactment of GST act, NO deduction of tax at source shall be made by the deductor under the said section w
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