Understanding the Transitional Provisions in GST
By: – Uday Ranalkar
Goods and Services Tax – GST
Dated:- 8-10-2016<\/p>\n
Understanding the transitional provisions under GST Model Law
\nWith the formation of Goods & Services Tax (GST) Council and its immediate first meeting the Central Government has given clear indications about its commitment to implement the proposed GST law from 1st April, 2017. The trade, industry and professionals have geared up to understand the new law, its provisions and its probable impact. Amidst all these discussions the important point which needs to be discussed at length is the transitional provisions from current indirect tax laws regime to GST regime. The understanding of the transitional provisions is utmost essential for a smooth migration to new regime.
\nChapter XXV of the Model GST Law as published by the Ministry of Finance prescribes the transitional provisions under GST. The provisions are important for existing assesees who are registe<\/p>\n
= = = = = = = =<\/p>\n
Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n TRATION = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n e assesees have an option to opt for a single registration or multiple registrations for different business verticals situated in same state. The published draft GST Rules for registration brings the further clarity over the procedure. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n return filled under current indirect tax laws would be considered and recognized. The closing credit balance as per books of account would be immaterial. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n al Goods & Service Tax, SGST- State Goods & Service Tax) = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n ch is not carried forward in the return filed for the last period under the existing law. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n s transitional credit; = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n rer, which might lead to double taxation of a single transaction. The Institute of Chartered Accountants of India in its 'Suggestions on Model GST Law 'provides that the proposed Section 150 be amended so that GST be collected only once, either from job worker or the manufacturer. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n claims should be disposed of under earlier law. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n uld be dealt and disposed in accordance of the provisions earlier indirect tax laws. The provisions of GST would not be applicable in case of such pending appeal or revision or review or reference. Any amount allowed as input tax credit would be refunded in cash to the assesee. However, if the input credit is disallowed then such amount would become recoverable as an arrear of tax under the GST Act, viz., SGST or CGST, as applicable. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n","protected":false},"excerpt":{"rendered":" Understanding the Transitional Provisions in GSTBy: – Uday RanalkarGoods and Services Tax – GSTDated:- 8-10-2016 Understanding the transitional provisions under GST Model Law With the formation of Goods & Services Tax (GST) Council and its immediate first meeting the Central Government has given clear indications about its commitment to implement the proposed GST law from … Continue reading “Understanding the Transitional Provisions in GST”<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-1598","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=\/wp\/v2\/posts\/1598","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1598"}],"version-history":[{"count":0,"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=\/wp\/v2\/posts\/1598\/revisions"}],"wp:attachment":[{"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1598"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1598"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1598"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
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\nSection 142 of the Model GST law provides for migration of existing tax payers to GST.
\nThe said section specifically provides for the registration process for the persons having registrations under indirect tax laws.
\n * The existing registrants would be granted provisional registration certificates on appointed day. The said provisional certificate would be valid for 6 months from the date of its issue. The Central \/ State Government have the authority to extend the period of 6 months based on the recommendation of the Council. Every taxpayer will be allotted a state wise PAN-based 15-digit Goods and Services Taxpayer Identification Number (GSTIN). Various digits in GSTIN will denote the following:
\nState Code
\nPAN
\nEntity Code
\nBLANK
\nCheck Digit
\n2
\n3
\n4
\n5
\n6
\n7
\n8
\n9
\n10
\n11
\n12
\n13
\n14
\n15
\n * The person who holds a provisional certificate of registration would be required to furnish certain information as prescribed within prescribed time period. The GST database will <\/p>\n
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\n Relevant forms for associated with registration process under GST:
\nSr.No
\nForm
\nPurpose
\nRemarks
\n1
\nGST REG-20
\nSubmission of information and documents as specified by the persons getting the provisional registration under the GST act.(Migrants)
\nWithin 6 months from date of issue of provisional registration certificate.
\n2
\nGST REG-21
\nIssue of provisional registration certificate and GSTIN to persons registered under existing laws.(Migrants)
\nPersons registered and having PAN.
\n3
\nGST REG-22
\nCancellation of provisional registration by order If information furnished is not correct and complete.
\n******
\n4
\nGST REG-23
\nShow Cause Notice before cancelling provisional registration.
\n******
\n5
\nGST REG-24
\nApplication for cancellation of provisional re<\/p>\n
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\nConsider following illustration:
\nOn the assumption that the GST would be applicable w.e.f 1stApril, 2017,the amount of CENVAT credit carried forward would be the figures of closing balance of CENVAT credit reflected in the return for the period ending on 31st March, 2017. The hypothetical figures are given in the table below. The eligibility of the credit under GST regime is discussed in column (4) & (5) of below table.
\nSr.No
\n(1)
\nVarious input credit
\n(2)
\nAmount (In Rs.)
\n(3)
\nCredit eligible under GST for supplier of goods?
\n(4)
\nCredit eligible under GST for supplier of service ?
\n(5)
\n1.
\nCentral Excise
\n3,00,000
\nYes-CGST
\nYes- CGST
\n2.
\nCredit under VAT
\n2,00,000
\nYes- SGST
\nNo
\n3.
\nService Tax
\n1,00,000
\nYes- CGST
\nYes- CGST
\n4.
\nKrishi Kalyan Cess
\n5,000
\nNo
\nYes- CGST
\n5.
\nSwacch Bharat Cess
\n5,000
\nNo
\nNo
\n6.
\nAddition<\/p>\n
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\nHere it is pertinent to note that, the CENVAT credit of CGST components and\/or SGST components cannot be cross utilized with or interchanged.
\n * Capital goods:
\nSection 144 of the Model GST Law provides for the unavailed CENVAT Credit on capital goods not carried forward in a return, to be allowed in certain circumstances.
\nIn current scenario, as per sub-rule (2) (a) of Rule 4 of the CENVAT Credit Rules, 2004, the only fifty percent of the credit of the duties paid is taken in a financial year. Remaining fifty percent can be taken in subsequent financial year. In case of VAT there are different scenarios like 6 or 12 equated monthly installments, or likewise.
\nNow the said section 144 enables the assesee to carry forward the unavailed (pending) CENVAT credit on capital goods. The credit carried forward would be available as a balance in the electronic credit ledger of the registrant. The term unavailed CENVAT credit has been d<\/p>\n
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\nIt is necessary to take note of the fact that the CENVAT credit of capital goods forming component of CGST and\/or SGST cannot be cross utilized with or interchanged.
\n * Inputs held in stock:
\nSection 145 of the Model GST Law provides for the credit of eligible duties and taxes in respect of inputs held in stock to be allowed in certain situations.
\nThere might be a situation where a person is not liable to be registered under the existing law or who is engaged in the manufacture of exempted goods under the existing law but now liable to tax under the GST regime. In such scenario the said section enables the person, now liable to register, entitled to take credit of eligible duties and taxes in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the appointed day.
\nThe classic cases would be where the assesees are availing a Small Scale Industr<\/p>\n
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\n * The inputs should be intended for use in making taxable supplies under the GST law;
\n * The inputs should be held in stock on the appointed day;
\n * The goods (held in stock) should have been qualified as inputs under earlier law and should also qualify as eligible inputs under the GST law; and
\n * The taxable person should be in possession of the relevant documents which should not be older than 12 months from the date of introduction.
\n1. JOBWORK
\nSection 150 of the Model GST Law provides for the inputs removed for job work and returned on or after the appointed day.
\nThe said section 150 seeks to provide clarity over the taxability of the inputs removed as such or removed, from factory, after being partially processed sent to a job worker for further processing, testing, repair, reconditioning before the appointed day and received in the factory after the appointed day. In such cases, the model GST law proposes to exempt such inputs if received back in the<\/p>\n
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\n * INVOICING
\nSection 153 of the Model GST Law provides for the issue of supplementary invoices, debit or credit notes where price is revised in pursuance of a contract.
\nThe model GST law envisages a situation of price revision, either upward or downward, for a supply under a contract. In such cases the provision has been made to issue a supplementary invoice, debit note or credit note as the case may be.
\n * Increase in agreed price:
\nIf, in pursuance of a contract entered into prior to the appointed day, there is an increase in agreed price after the appointed day then the taxable person (supplier of the goods\/service) n shall issue a supplementary invoice or a debit note within 30 days from the date of s<\/p>\n
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\nThe assesees are entitled to file various refund claims under existing indirect tax regime, namely, central excise or service tax or VAT \/ CST. The said section gives a clarity that any refund claim of any duty\/tax and interest, if any, paid on such duty\/tax or any other amount filled before the appointed day shall be disposed off in accordance with the provisions of such earlier indirect tax laws under which it was filed. Accordingly, the refund would be paid in cash to the assesee and not by credit to any of his electronic credit ledger under GST law.
\nAttention is invited to the proviso to said section 154 which provides that where any claim for refund is fully or partially rejected, the amount so rejected shall lapse. No provision for appeal is provided for with respect to such refund claims. Hence, assesses need to take utmost care while filling such refund claims.
\nIllustration: Assuming that the GST will be implemented from 1st A<\/p>\n
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\n * Proceedings relating to output duty liability:
\nSection 156 of the Model GST law provides for the Finalization of proceedings relating to output duty liability.
\nThe said section 156 provides for appeal or revision or review or reference, relating to any output duty liability, pending as on appointed day under any of the earlier laws. It provides that same would be dealt and disposed in accordance of the provisions earlier indirect tax laws. The provisions of GST would not be applicable in case of such pending appeal or revision or review or reference.<\/p>\n
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