GST Transitional Provisions and Recommended Actions

Bullet Points on Transitional Provisions and Recommended Actions

I. REGISTRATION

• Application for provisional registration (valid for 6 months) within the scheduled dates
• Application for registration and furnishing the information for permanent registration
• Grant of Permanent Registration

◊ Action :

√ Registration procedure is to be followed in all the States where there is place of business.

√ Important task : Gathering of information for registration.

II. CARRY FORWARD OF CREDIT IN ELECTRONIC CREDIT LEDGER

• Ensure cenvat credit and VAT input to be carried forward is properly reflected in the last returns.
• Ensure that the credits are properly reflected in electronic credit ledger

III. UNAVAILED CENVAT CREDIT ON CAPITAL GOODS

Unavailed cenvat credit on capital goods not carried forward in the return under existing law as it is allowed only in subsequent years will be allowed under GST regime.

◊ Actions :

√ Ensure a proper working file is maintained which shows detailed bifurcation of credit taken and credit allowed in subsequent years.

√ Ensure that unutilised credit is admissible under GST regime.

√ Ensure that unavailed cenvat credit on capital goods is reflected in electronic credit ledger.

IV. INPUT CREDIT TO THOSE PRESENTLY NOT LIABLE FOR REGISTRATION OR MANUFACTURER OF EXEMPTED GOODS

Credit of eligible duties and taxes in respect of inputs held in stock or contained in semi-finished goods or finished goods held in stock will be allowed in GST regime to a registered person under GST regime who is not liable for registration or is a manufacturer of exempted goods under the current regime.

◊ Actions :

√ Start capturing the duties and taxes paid under the current regime.

√ Ensure that there is detained breakup of stock in hand as on the date when GST is implemented along with duties and taxes paid on the same.

√ Ensure that credit is shown in electronic credit ledger.

V. TAXPAYER OPTING OUT OF COMPOSITION SCHEME

A taxpayer who is currently paying tax under composition scheme and opts out of composition scheme will be 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 on the appointed date of GST implementation.

◊ Actions :

√ Start capturing the duties and taxes paid under the current regime.

√ Ensure that there is detained breakup of stock in hand as on the date when GST is implemented along with duties and taxes paid on the same.

√ Ensure that credit is shown in electronic credit ledger.

VI. TAXPAYER OPTING FOR COMPOSITION SCHEME

A taxpayer who is currently paying full tax and opts for composition scheme will be have to pay an amount equivalent to the credit of input taxes in respects of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the date when GST is implemented.

◊ Actions :

√ Ensure that there is detained breakup of stock in hand as on the date when GST is implemented along with duties and taxes paid on the same. This will help to avoid ambiguities at the time of assessment.

√ The amount is to be paid via debit in the electronic credit ledger.

VII. RETURN OF GOODS AND RETURN OF GOODS SENT ON APPROVAL BASIS

When goods are sold under the existing law and tax thereon is paid and subsequently is returned then there will be two possibilities :

♦ NO TAX IS PAYABLE

> Ensure goods which are removed with six months prior to date of GST implementation are returned within a period of six months from the date when GST is implemented.

♦ TAX IS PAYABLE

> If goods are not returned within time then GST would be payable.

◊ Actions :

√ Ensure that there is identity of goods returned back with the original supply of goods under the present regime.

VIII. REMOVAL OF INPUTS, SEMI-FINISHED GOODS AND FINISHED GOODS FOR JOB WORK

When inputs, semi-finished goods and finished goods are removed for job work under the existing law and subsequently is returned by the job worker then there are will be two possibilities which are to be taken care of :

♦ NO TAX IS PAYABLE

> Ensure goods which are removed with six months prior to date of GST implementation are returned within a period of six months from the date when GST is implemented.

♦ TAX IS PAYABLE

> BY JOB WORKER – If job worker returns goods after a period of six months from date of GST implementation.

> BY MANUFACTURER – If job worker does not return goods after a period of six months from the time of GST implementation.

◊ Actions :

√ A reconciliation as on the date of GST implementation is to be prepared by Manufacturer and Job Worker of goods sent for job by manufacturer and received for job work by job worker as a declaration has to be made by both the parties under the GST regime.

IX. REVISION IN PRICE PURSUANCE OF A CONTRACT

When a contract is entered before the date when GST is implemented and subsequently there is revision in price in GST regime then the effects thereon are to be taken care of :

• UPWARD REVISION IN GST REGIME

> LIABLE TO GST

− A supplementary invoice or debit note is to be issued within thirty days of upward price revision and this will be deemed to have been issued in respect of outward supply.

• DOWNWARD REVISION IN GST REGIME

> REDUCTION IN GST LIABLILTY

– A supplementary invoice or credit note is to be issued within thirty days of downward price revision and this will be deemed to have been issued in respect of outward supply.

X. REFUND CLAIMS

Service tax manual refund claims and VAT refund claims filed before GST is implemented shall be disposed of under the existing provisions and will be paid in cash. This will not be adjustable against any liability under GST.

◊ Actions :

√ All refunds of pending assessment will have to be claimed in cash.

√ Working has to be done for credits which are to be carried forward under present regime and are allowed in GST regime.

√ Proper documentation for credit carried forward in GST regime is required to be maintained.

√ Refund amount can either be claimed as cash refund or it can be carried forward in the last return under the existing laws and subsequently claim credit of the same in GST regime by reflecting the amount in electronic credit ledger. Therefore, based on the quantum, decision is to be made on whether cash refund is to be claimed or whether amount is to be carried forward in the last return and claim credit in GST regime.

XI. APPEALS, REVISION, REVIEW, ASSESSMENT

• All claims and recovery initiated under the existing law shall be under existing laws. This shall not be admissible as input tax credit under GST regime.
• If any amount becomes recoverable as a result of appeal, revision, review or reference then it shall be recoverable as an arrear of tax under GST.
• On account of revision of returns under the existing law, if there is any amount refundable then it will be paid in cash

XII. WORKS CONTRACTS / LONG TERM CONSTRUCTION

All supplies made in pursuance of contract entered before GST shall be liable to tax as per GST provisions

◊ Actions :

√ Agreements will have to be modified accordingly

XIII. CONTINOUS SUPPLY OF GOODS AND SERVICES

In cases of supply made after GST is implemented but consideration is received before GST is implemented and full tax thereon is paid under existing laws then no GST is payable

◊ Actions :

√ Time of supply rules will not be applicable here

√ Care should be taken that GST is not chargeable in these cases. A proper working file along with evidence of payment of taxes under existing laws is to maintained

√ Care should be taken that GST is not paid when advance is paid particularly for procurement of services and service tax is already paid

√ Agreements will have to be modified

XIV. TREATMENT OF RETENTION PAYMENTS

In cases of supply made before GST implementation but part consideration is received after GST is implemented and full tax thereon is paid under existing laws then no GST is payable

◊ Actions :

√ Time of supply rules will not be applicable here.

√ Care should be taken that GST is not chargeable in these cases. A proper working file along with evidence of payment of taxes under existing laws is to maintained.

√ Care should be taken that GST is not paid when advance is paid particularly for procurement of services and service tax is already paid.

√ Agreements will have to be modified.

XV. INPUT SERVICE DISTRIBUTOR

An input service distributor is eligible for distribution of credit under GST on account of services received before GST is implemented even if the invoices relating to such services are received after the date of GST implementation.

XVI. TREATMENT FOR GOODS AND CAPITAL GOODS LYING WITH AGENT

Agent will be entitled to take credit of goods and capital goods belonging to principal and lying with agent on the date of GST implementation

◊ Actions :

√ Agent has to take registration under GST.

√ A reconciliation has to be made by principal and agent as they have to declare the stock of goods and capital goods lying with agent on the date when GST is implemented.

√ Invoices for such goods are issued immediately preceding the date of GST implementation.

√ Principal should not avail input tax credit in respect of such goods and capital goods.

XVII. DEDUCTION TO TAX AT SOURCE

Deductor shall not deduct tax at source under the GST regime when the payment to supplier is made after GST is implemented whereas the sale of goods and invoice for the same was issued before the date of GST implementation.