CMA Tips for GST implementation & optimization of tax & working capitals

Now every day there is some development or news about GST from various corners like 1. GST council meeting updates 2. CBEC updates like release of FAQ on MGL 3. GSTN updates 4. of India updates- draft law/formats released on return, Registration and payment
CMA Rajendra Rathi

Now every day there is some development or news about GST from various corners like

1. GST council meeting updates

2. CBEC updates like release of FAQ on MGL

3. GSTN updates

4. of India updates- draft law/formats released on return, Registration and payment

5. Industry association & professional bodies updates on difficulties of trade

6. IT developments/enablers for GST.

On Whatsapp also lots of groups are active having whatsap group name as GST and all industries/trades are also searching for hiring experts for GST implementation.

In above fast changing environment I have tries to summaries following important tips /suggestion for smooth implementation of GST in respective business.

(1) Industry/Trade need to decide their registration strategy in view of model GST law i.e.

(i) State wise one registration

(ii) May take separate registration for business vertical(AS-17)

(iii)To declare principle place of business and additional place of business.

(2) All existing direct sale and depot sale to be reviewed in view of GST i.e.

(i) Stock transfer within state will not attract GST

(ii) Stock transfer outside state will attract IGST which is cenvatable.

(iii) GTA services will be taxable for above both and reverse charge will be continue mostly.

Case Study

Direct sale – Outside state

Particulars Under existing Under GST
Ex plant price 100 100
Excise Duty 12.5 18
Total 112.5 118
CST – 2% 2.25
Total 114.75 118
Less: cenvat set off 12.50 18
Total cost net of cenvat 102.25 100

Depot sale

No. Particulars Existing GST
1 Depot sale 100 100
2 Freight 10 10
3 Depot margin 2 2
Total 112 112
4 Ex. Duty 12.50% on (1,2,3) 14
GST 18% (1,2,3) 20
Total 126 132
5 VAT -5% 6
Total 132 132
6 Less: cenvatable 20 20
Total 112 112
7. 4% branch transfer reversal 4
Total cost net of cenvat and reversal 116 112

It is very clear from the above case study that under both scenario i.e. direct sale outside stateas well as depot sale out side state is beneficial under GST in view of 100% ITC on IGST and non applicability of CST 2% which was cost to the trade.

Further depot sale is also beneficial to manufacturer under GST as 4% ITC reversal not required under GST .

Now all big manufacturers may need to re-visit their warehousing policy as earlier warehouses were taken for taking benefit of VAT but now in view of uniform taxation across India following simple suggestion can be considered for effective working capital management model GST law.

1. Ware house within manufacturing site state : each manufacturer need to plan to keep maximum stock in ware house within state to save additional tax outgo for transfer.

2. Warehouse outside manufacturring site state : warehouse within manufacturer state to be reviewed thoroughly and possibility can be explored to keep bigger warehouses near the border of state where manufacturing plants are there to achieve lead time reduction in case of requirement of customers of near state.

For example,

If manufacturing plants are in Gujarat, warehouse can be planned within Gujarat locations near border for Rajasthan / Madhya Pradesh / Maharashtra etc to cater the demand of near by state customers/market.

For customer facilitation purpose warehouse can be kept in other state with utmost saleable stock qty only to avoid working capital blockage in tax and multiple movement.

Important point for transitional provision

i. Transitional provision are from 141 to 162- E

ii. Total 27 sections are involved for allowing credit / transaction during transitional phase.

iii. 143 – cenvat credit carried forward in return to be allowed as ITC.

All pending documents credit to be availed to avoid loss of credit after appointed day.

iv. 144 -unavailed cenvat credit on capital goods not carried forward – to be allowed – balance 50% credit of CG will be allowed thru this section.

v. 150 -Inputs removed for job work and returned after the appointed day – declaration by principal and job worker is must for all pending cases on appointed day to be ensured.

vi. 154 – Pending refund claim to be disposed of under earlier law.

All refund claim under existing law to be filed before appointed day as far as possible

vii. 159 – Treatment of long term construction/ work

Suitable clause to be inserted in such long term contracts.

viii. 160 – Progressive or periodic supply of goods or services

All invoices covered under periodic supply of services categories to be cleared before appointed day to avoid additional tax out go 3% (15 % to 18%)

ix. 162 – Credit distribution by ISD.

x. 162 A – tax paid on goods lying with agent to be allowed as credit.

All 4 conditions to be fulfilled for credit allowed on stock lying on appointed day.

1. Both principle and agent need to declare the details in prescribed format.

2. Invoice date not earlier than 12 months from appointed day so all material earlier than 12 months can be return to plant for salvaging credit.

xi. 162 B – capital goods lying with the Agent

xii. 162 C-branch transfer

xiii. 162 E – deduction at source.

Further centralise registration is not allowed / permissible under GST as per model GST law and also confirm by commissioner GST (policy) on 15.10.2016 at Mumbai meeting.

Under GST following return prescribed for manufacturer.





In outward supply return each invoice to be uploaded in GSTR – 1 with HSN code/ invoice no. / date value / tax etc.

Section 29 is relating to matching/ reversal / reclaim of ITC.

Means every inward supply need to match with corresponding outward supply furnished by taxable person in his valid return.

In case of import which document will be considered i.e Bill of entry etc and in case of receipt of goods in instalment how matching will be taken care need clarity.

It is suggested to develop robust IT system for timely/ correctly uploading outward supply / inward receipt as it has link with GST compliance rating also( Sec 116) .

It is understood that exemption available under VAT/ ExciseBoth act will continue so mostly 99 exemption will continue for which list is awaited.

Reverse charge will continue.

No abatement will be there hence proper planning for clearing of all pending invoices to be cleared before 31.3.2017 to save addition on paying an abated value.

Captive consumption for business is not taxable.

As supply is not from one taxable to another taxable person.

Above analysis is based on Draft MGL and draft return/ rule released in public domain. Provision may change under final GST Act in view of many representation made to Govt for amendments. CMA Professional can continue regular knowledge sharing session for better understanding and smooth implementation of GST with optimizing tax planning and working capital management.

We would like to thank CMA Harshad Deshpande, who is also the Chief Editor of WIRC Bulletin, ICAI, for his effort to make the content on GST available to larger section of people and for dissemination of knowledge on the topic , which is of prime importance  not only for the taxpayers but also for common man of the Country.

Article been published with permission from CMA Harshad Deshpande given on behalf of Western India Regional Council of India of The Institute of Cost Accountants of India.

Source- WIRC Bulletin Diwali Special Edition on GST

what is HSN Code under GST?

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