Transitional Provision under GST law

CA Sanjeev Singhal 02 Oct 2016 7,195 Views 0 comment Print Goods and Services Tax | Articles

CA. Sanjeev Singhal

There are 22 sections under transitional provision of GST Law when all major indirect tax Act’s going to subsumed under the GST Law. This is most important provisions as these are applicable from the appointed day means when the GST Law shall be applicable. Why this is important and relevant because of the fact that on very first day we need to apply these provisions with due intelligence after extracting the exact meaning of law. Otherwise this will lead to wrong brought forward of CENVAT . Though the provision will be applicable one time but carry due weight as long as transition is concern .How the CENVAT will be available on appointed day whether on the basis of last return filed under earlier law or as per the opening stock is answered in GST Law which has been described as below:

1. General provision [S. 141]

Officer appointed in law by Central and State Govt. for discharging various function relating to taxes on goods and services and how the order may be issued or rule can be make consistent with the smooth transition of GST.

2. Migration of existing taxpayer to GST [ S.142]

Every registered person under earlier shall be issued provision certificate under on the appointed day and certificate will be valid for six months . Such validity may be extended on the recommendation of GST council.

Every person to whom certificate is issued within prescribed time submit information as desired. After submission of certificate , final registration shall be issued u/s 19 of the Act.

Provision certificate may be cancelled if the required information has not been submitted.

3. CENVAT credit amount Carry forward in return to be allowed as Input Tax Credit[ S.143]

Registered taxable person shall be allowed to take in his electronic credit ledger a/c the amount of CENVAT carry forward in his return filed under earlier law. Both under CGST and SGST.

Central tax like excise and service tax shall be brought forward under CGST electronic credit ledger and State tax like VAT Input shall be carry forward under SGST electronic credit ledger.

Any amount wrongly taken as credit in CGST and SGST shall be recovered as arrear under this Act weather before or after the appointed day.

4. Unavailed CENVAT Credit on capital goods, not forward in return, will be allowed in certain situation; [ S.144 ]

A registered taxable person shall be allowed to take credit in Electronic ledger a/c for the CENVAT on capital goods, not carry forward in return in earlier law, in such manner as prescribed.

“Unavailed CENVAT Credit” Means the amounts remains after subtracting the amount of CENVAT credit availed on capital goods under earlier law. “Explanation -1”

“ Capital Goods Means “ as defined under Rule 2(a) of CENVAT Rule,2004.

Any CENVAT wrongly taken shall be recovered as arrear under the ACT. Explantion-2

Example : 50% of CENVAT on capital goods under service tax can be availed only in next year or if 100 cenvat on capital goods have not availed in first year which can be taken under this Act.

Q : if RTP purchased capital goods and received the invoice before 31.03.2016 but not received the capital good. Capital Goods has been received in April,2017. Will he entitle for ITC.

Ans: Yes

Q; A purchased capital goods on which VAT credit was not available though in GST it is available. Will the A will get the credit.

Ans ; No .Since he was not entitle for ITC under the earlier Law.

These provision are applicable both under CGST and SGST.

5. Credit of eligible duties and taxes in respect of input held in stock to be allowed in allowed in certain situations

Person who was not registered in earlier law but become taxable person under this Act which are liable to pay tax shall be entitle to take credit in Electronic credit ledger A/c of eligible duties and taxes in respect of input held in stock on the appointed day subject to the following conditions;

Such input / goods shall be used for making taxable supplies under this Act.
Such taxable person are eligible for credit under this Act.
Said taxable person is holding valid invoice or document under the earlier law and having evidence that tax were paid on input.
Such invoice or documents must not be older that 12 months immediately proceeding the appointed day . Means if appointed day is 1.4.2017 then invoice from 1.4.2016 shall be treated as valid documents.

B] credit shall be calculated in accordance with GAAP as prescribed.

C] Credit provided to taxable person shall be recovered as arrear tax under this act if the amount is found to be recoverable under any proceeding in earlier law after the appointed day.

These provision will apply for CGST and SGST both.

6. Credit of eleigible duties and taxes on input held in stock to be allowed to taxable person switching from composition scheme. [ S.146]

RTP [ Registered Taxable Person] who was paying tax at fixed rate or in lieu of the tax in earlier law shall be entitles to take credit on input held in stock in semi finished or finished form on appointed date. Provided

Such input are used for making taxable goods.
Said person is not paying tax u/s 8 of this Act means composition scheme under this Act.
Such RTP was eligible to take credit under the earlier law.
Eligible to take credit under this act.
Said taxable person is holding valid invoice or document under the earlier law and having evidence that tax were paid on input.
Such invoice or documents must not be older that 12 months immediately proceeding the appointed day .

B] credit shall be calculated in accordance with GAAP as prescribed.

C] Credit provided to taxable person shall be recovered as arrear tax under this act if the amount is found to be recoverable under any proceeding in earlier law after the appointed day.

These provision will apply for CGST and SGST both.

7. Amount payable in respect of taxable person switching to composition scheme[ S.147]

Where RTP has carry forward the eligible credit in return under the earlier law just the day proceeding the appointed date and switch over to composition scheme u/s 8. He shall pay by way of debit to electronic credit ledger or cash ledger equal to credit of input tax in respect to input held in stock and input contained in semi finished goods and finished goods. If any credit lying in his credit ledger will also lapse.

Applicable for both CGST and SGST.

8. Exempted goods return to the place of business on or after the appointed date [s.148]

Any goods on which duty was exempted under earlier law , not being earlier than six months prior to appointed day, has been return back on or after the appointed day , no tax shall be payable under this act if such goods has been returned within six month from the appointed day.

Example : if appointed date is 1.4.2017 and exempted goods were sold after 1.10.2016 but returned on or before 30.9.2017, no tax shall be payable.

If the goods has been return after six months month from the appointed date then tax shall be paid by person returning the goods means purchaser.

Applicable for both CGST and SGST.

9. Duty paid goods return to the place of business on or after the appointed date[ S.149]

Any goods on which duty was paid under earlier law , not being earlier than six months prior to appointed day, has been return back on or after the appointed day , no tax shall be payable under this act if such goods has been returned within six month from the appointed day

If the goods has been return after six months from the appointed date then tax shall be paid by person returning the goods means purchaser

Every RTP receiving such goods within six months can take the input credit of duty paid earlier means goods received till 30.9.2017.

Applicable both for CGST and SGST.

10. Input removed for Job work and returned on or after the appointed date [ S.150]

Where any input has been received in factory and has been removed as such or after partial processing to job worker , has been return back on or after the appointed day , no tax shall be payable under this act if such goods has been returned within six month from the appointed day

The period of six month on sufficient cause may extend to another two months

If the goods has been returned after six months or extended period of two months by Job worker from the appointed date then tax shall be paid by job worker returning the goods.

If the goods has been not been returned within six months or extended period of two months from the appointed date then tax shall be paid by manufacturer if such goods are liable to tax .

The above provision will apply only If manufacturer and job worker declare the goods held in stock on appointed date within time as prescribed .

Applicable both under CGST and SGST.

11. Semi finished goods removed for Job work and returned on or after the appointed date [ S.151]

Where any semi finished goods has been removed from the factory for further manufacturing process in accordance with earlier law prior to appointed date , has been return back on or after the appointed day , no tax shall be payable under this act if such goods has been returned within six month from the appointed day

The period of six month on sufficient cause may extend to another two months

If the goods has been returned after six months or extended period of two months by person returning goods from the appointed date then tax shall be paid by person returning the goods.

If the goods has been not been returned within six months or extended period of two months from the appointed date then tax shall be paid by manufacturer if such goods are liable to tax

The above provision will apply only If manufacturer and job worker declare the goods held in stock on appointed date within time as prescribed

Applicable both under CGST and SGST.

12. Issue of supplementary invoices , debit or credit note where price is revision in pursuance of contract [ S.153 ]

Where any contract has been entered prior to appointed day and wherein price of any goods or services has been revised upward on or after the appointed day, person sold the goods, issue supplementary invoice or debit note containing such particulars as prescribed to the receiver of goods or services . Such invoice or debit note shall be issued in respect of Outward supply made under this act.

Where any contract has been entered prior to appointed day and wherein price of any goods or services has been revised downward on or after the appointed day, person sold the goods, issue invoice or credit note containing such particulars as prescribed to the receiver of goods or services . This will reduce the input tax credit of recipient of the invoice or credit note.