Transitional Provisions under GST Law

Under Section 143 of GST Law, the CENVAT or Input Tax Credit carried forward in the last return prior to GST under earlier law be available as ITC under GST. The registered taxable person shall be entitled to such credit and it will get credited to his electronic credit ledger.

According to the explanation to Section 144 (1) of GST Law, a registered taxable person purchases capital goods in the last quarter of 2016-17. Though the invoice is received within 31st March but the capital goods are received on 5th April, 2017 (i.e. in GST regime) such a person can get full credit of CENVAT in 2017-18. He will be entitled to full credit in 2017-18.

As per the provision to Section 144(1), the tax payer shall be entitled to credit only when ITC on such goods were admissible under the earlier law and is also admissible in GST. Since on the two items credit is not available under the earlier law, the said person cannot claim it in GST.

Under Section 143 to 146, if a person wrongly enjoyed the credit, the recovery relating to ITC will done under GST only.

For instance, a manufacturer having a turnover of Rs. 60 lakhs was enjoying SSI exemption earlier, will have to be registered under GST Law. Under Section 9 of GST Law, the said turnover exceeds the basic threshold of Rs. 10 lakhs.

Likewise, as per Section 145 read with Section 9 and Schedule III of GST Law a trader having turnover below the threshold under VAT making sales through e-commerce operator will be required to be registered in GST. There will be no threshold for such persons.

ITC will not be allowed to a service provider on VAT paid inputs held as stock on the appointed day because VAT does not cover services. Under it goods are covered.

Suppose, a registered taxable person has ITC of Rs. 1,000/- which was credited to his electronic credit ledger from the last returns under the earlier law. Now he switches over to composition scheme in GST, he is not entitled for refund.

As per Section 147 of GST Law, he shall have to remit an amount equivalent to the credit of input tax on inputs held in stock on the day immediately preceding the date of switchover. The amount can be paid either through the electronic credit ledger or the electronic cash ledger. Where payment is made through the electronic credit ledger, excess ITC balance lying if any will lapse.

In case sales return under CST (i.e. Central Sales Tax Act) is allowable as deduction from the turnover within 6 months say goods are returned in GST by a buyer after 6 months of sales, according to section 149 first of all to find out whether the goods are taxable in GST or not. Secondly to check whether the goods were returned after 6 months from the appointed day. If the answer is both happenings to be ‘Yes’ then the person returning the goods will have to pay tax in GST.

However, where the goods are returned within 6 months from the appointed day, no tax will be payable by the person returning them if the goods are identifiable and tax was paid under the earlier law at the time of its sale, made not earlier than 6 months from the appointed day.

In case a manufacturer or a job worker become liable to pay tax if the inputs or semi finished goods sent for job work under the earlier law are returned after completion of job work after the appointed day, then as per section 150 & 151 of GST Law, tax shall be payable by the manufacturer or the job worker under the following circumstances:

1. Inputs or semi finished goods are sent to the job worker in accordance with the provisions earlier law before the appointed day.

2. The job worker returns the same within six months from the appointed day or with an extended period of 2 months.

3. Both the manufacturer and the job worker declare the details of inputs held in stock by the job worker on the appointed day in the prescribed form.

Job worker shall return the goods within prescribed time. If it is not returned then As per Section 150(1) and Section 151(1) of GST Law, tax would be payable by the job worker. Further the manufacturer will also be liable to pay tax on expiry of the specified time limit.

Under Section 152, a manufacturer can as per the provisions of the earlier law transfer the said goods to the premises of any registered taxable person on payment of tax or without payment of tax for exports within 6 months or extended period from the appointed day.

Finished goods removed from a factory for carrying out certain processes under earlier law are returned on or after the appointed day, then as per section 152, tax will be payable in GST by the manufacturer or by the job worker where the goods removed prior to the appointed day for carrying out process not amounting to manufacture are returned within 6 months from the appointed day or extended period of 2 months.

The person returning the goods shall become liable to pay tax if the said goods are liable to tax in GST and are returned after 6 months from the appointed day.

The extension period not automatic. It shall be extended by the competent authority only on sufficient cause being shown.

The taxable person may issue the debit or credit note(s) or a supplementary invoice within 30 days of the price revision. According to Section 153 of the GST Law, in case where the price is revised downwards the taxable person shall be allowed to reduce his tax liability only if the recipient of the invoice or crdit note has reduced his ITC corresponding to such reduction of tax liability.

As per Section 154 of the GST Law, the pending refund claims shall be disposed of in accordance with the provision of the earlier law.

Under Section 155 and 156 any appeal or revision relating to a claim of CENVAT or ITC which is pending under the earlier law, it shall be disposed of in accordance with the provisions of earlier law only in both the cases.

If the appellate authority or revisional order goes in favour of the taxable person, the refund shall be made in accordance with the provisions of the earlier law only. In case any recovery is to be made then it will be made as an arrear of tax under GST.

As per Section 158, the refund arising from revision of return(s) furnished under the earlier law, the same shall be refunded in accordance with the provisions of the earlier law.

As per Section 159, if any goods or services are supplied in GST, in pursuance of contract entered under earlier law, on such supplies GST will be payable.

As per Section 160 of GST Law, consideration for a particular supply of services was received under the earlier law and tax shall be payable on supply of goods or services on or after the appointed day if the consideration for it has been received prior to the appointed day and the duty or tax thereon has already been paid under the earlier law.

Section 161 states that, the supply of goods or services was made under the earlier law but a part of the consideration say like retention money is received in GST regime tax will be payable in GST. Provided full duty or tax on such supply has already been paid under the earlier law.

According to Section 162, if services are received by the ISD under the earlier law, the ITC relating to it be distributed in GST regime irrespective of whether the invoices relating to such services is received on or before after he appointed day.

Where goods including capital goods belonging to the principal are lying with the agents on the appointed day, the agent can take ITC on the same. However the agent can take such credit on the fulfilment of the following conditions:-

1. The agent is a registered taxable person in GST.

2. Both the principal and the agents declare the details of stock lying with the agents on the date immediately preceding the appointed day.

3. The invoices for such goods had been issued not earlier than 12 months immediately proceeding the appointed day.

4. The principal has either reversed or not availed of the ITC in respect of such goods.

The provision is applicable to SGST law only,

Goods were sent on approval before the appointed day but are returned to the seller after 6 months from the appointed ay, tax to be paid under GST if such goods are liable to tax in GST and the person who rejected or not approved the goods returns it after 6 months may be extended by 2 months from the appointed day

The provision is applicable to SGST law only.