1. Application in respect of tax or duty credit carried forward under any existing law or on goods held in stock on the appointed day
Rule 1 of draft GST Transitional Provision Rules requires voluminous details like the amount of tax or duty availed or utilized by way of input tax credit under each of the existing laws till the appointed day, the amount of duty or tax yet to be availed or utilized by way of input tax credit under each of the existing laws till the appointed day; etc. And an application to be filed by the taxable person
Issues
This would be a humongous task for existing manufacturers/Dealers/service providers to upload such data on the GST portal. Also, the requirement to file an application defeats the concept of seamlessness of credit. It may be inferred that ‘application’ may lead to ‘approval’ by tax administration which might not purport the concept of ease-of-doing-business.
Suggestion
It is suggested that the requirement of ‘application’ be replaced with ‘intimation’ and the elaborate information required to be filed on GSTN be simplified to support the assessees during transition.
2. Time Limit to carry forward credit under any existing law or on goods held in stock on the appointed day
Rule 1 of draft GST Transitional Provision Rules provides that every registered person entitled to take credit of input tax under section 140 shall, within 60 days of the appointed day, submit an application electronically in FORM GST TRAN-1, duly signed, on the Common Portal specifying therein, separately, the amount of tax or duty to the credit of which the said person is entitled under the provisions of the said section.
Issue
The said time limit of 60 days is very less and also there exists no provision for extension of such time limit.
Suggestion
It is suggested that time limit of 60 days be reviewed and a provision for extension of time limit under special circumstances be provided to allow for proper compilation of carry forward of duties and taxes paid under the existing law and documentation thereof.
3. Credit to be allowed when document evidencing payment is not in the possession
As per Rule 1(3)(a) of draft GST Transitional Provision Rules a registered person, who was not registered under the existing law, availing credit in accordance with the proviso to sub-section (3) of section 140 shall be allowed to avail input tax credit on goods held in stock on the appointed day in respect of which he is not in possession of any document evidencing payment of central excise duty.
Such credit shall be allowed at the rate of [forty per cent.] of the central tax applicable on supply of such goods after the appointed date and shall be credited after the central tax payable on such supply has been paid.
The scheme shall be available for six tax periods from the appointed date
Issues
- 40% is too small a sum considering the tax paid under existing law and central tax to be paid under GST.
- 6 months’time for supply of the stock and payment of the CGST will be a short period. In the event of not happening the supply, the eligible credit would lapse. Also, this time period conflicts with the time allowed under section 140(8) of CGST Act.
Suggestions
It is suggested that:
- percentage of 40% be suitably increased to 60%, to enable the taxable person to compete with the persons who are acquiring goods under new regime.
- time period of six tax periods from the appointed date be reviewed in cases where supply doesn’t take place eventually leading to loss of credit. The words “six tax periods”be replaced with the words ‘next tax period but not later than due date of filing return for September 2018 or annual return ,whichever is earlier’.
4. Declaration of Stock held by Principal
Rule 2 of draft GST Transitional Provision Rules provides that every person to whom the provisions of section 141 apply shall, within 60 days of the appointed day, submit an application electronically in FORM GST TRAN- 1, specifying therein, the stock or, as the case may be, capital goods held by him on the appointed day details of stock or, as the case may be, capital goods held by him as a principal at the place/places of business of his agents/branch, separately agent-wise/branch-wise.
Issue
The Rule specifies for declaration of stock by principal under the provisions of sec 141 which contains the provisions related to job work. However, rule 2 does not provide for declaration of stocks in case of Job Work rather it provides for agents/branch etc. Due to this a principal, whose material is lying at Job worker premises would not be able to declare his stock under this rule.
Suggestion
It is suggested that in order to enable a principal to declare his stock in case of Job worker this rule be redrafted as follows: –
Every person to whom the provisions of section 141 apply shall, within sixty days of the appointed day, submit an intimation electronically in FORM GST TRAN-1, specifying therein, the stock or, as the case may be, capital goods held by him on the appointed day details of stock or, as the case may be, capital goods held by him as a principal at the place/places of business of his Job workers, agents/branch, separately agent-wise/branch-wise.
5. Interest on wrong claim of transition credit
Rule 4 of draft GST Transitional Provision Rules provides that amount credited under sub-rule (3) of rule 1 may be verified and proceedings under section 73 or, as the case may be section 74 shall be initiated in respect of any credit wrongly availed, whether wholly or partly. Thus it also provides for demand of interest in case of wrong claim of transition credit.
Issue
The rate on interest applicable in case of wrong claim of transitional credit is not provided for.
Suggestion
It is suggested that the words ‘…..interest under sub-section 1 of section 50 will apply….’be added to the said rule. added to the said rule.
Source- http://www.idtc.icai.org/
