Key points of transitional Provisions under GST Act

Key points of transitional Provisions under GST Act.

1.  Migration of Existing taxpayers. (Section 139)

On and from the appointed day, every person registered under any of the existing Indirect tax law and having a Valid PAN shall be issued a certificate of registration on provisional Basis. Provisional registration can obtain directly by applying for provisional registration through your existing TIN Number or Service Tax Number.

 2.  Carry Forward of Cenvat Credit – Section 140 (1)

A registered person must file its last return in respect of Excise, VAT, Service tax etc carefully to avoid loss of eligible Cenvat Credit. The amount of Cenvat credit claimed on inputs, capital goods and input services which is carried forward in the last return filed immediately before the appointed day shall be transferred to electronic credit ledger subject to the conditions.

The Conditions for carry forward of credit are following: –

  • The Said amount of Credit is admissible as input tax credit under this Act.
  • The registered person has furnished all the returns required under the existing law (i.e. Central Excise and VAT) for the period of six months immediately preceding the appointed date.
  • The said amount of credit does not relate to goods sold under exemption notification.
  • Under SGST law, Credit Claim related to Section 3, Section 5(3), Section 6, Section 6A or Section 8 of the central sale tax Act 1956 shall not be eligible to be credited to the electronic credit Ledger.

3.  Unavailed Cenvat Credit in respect of Capital Goods – Section 140 (2)

A registered person also takes unavailed credit in respect of capital goods provided the registered person must maintain proper documentation of capital good received prior to appoint date. He will be entitled to credit only when Input Tax Credit on such goods are admissible under the existing law and is also admissible in GST.

Unavailed Credit mean the balance amount of credit that remains after subtracting the credit already availed from the total eligible Cenvat credit available on capital goods.

According to FAQ issued by CBEC, if a registered person purchases capital goods under the existing law in the June quarter of 2017-18 and received the invoice within 30th June but the capital goods received on 5th July 2017 under GST Regime then such person will be entitled to take credit provided such credit was admissible as Cenvat Credit in the existing law and is also admissible as credit in CGST.

For tax planning purpose, A company can defer the purchase of any capital goods like furniture etc for which credit is not available under the earlier law.

4.  Registration by Unregistered Person or FSD or SSD or Importer or Work Contract services etc. under GST – Section 140 (3)

A registered taxable person who was not liable to be register the existing law or who was engaged in manufacturing of exempted goods or providing exempted services, works contract services, or an assessee availing of benefit of Notification No. 26/2012-ST dated 20.06.2012, or a first stage or second stage dealer or a registered importer or a depot of a manufacturer, shall be entitled to take credit of the eligible duties and taxes paid in respect of inputs held in stock and inputs contained in semi-finished or finished good held in stock on the appointed day subject to the following conditions: –

  • Such inputs and/or goods are used or intended to be used for making taxable supplies under this Act
  • The said registered person is eligible for input tax credit on such inputs under this Act
  • He must have the possession of the invoices and/or other prescribed documents evidencing payment of duty under the earlier law in respect of such inputs
  • Such Invoices and/or other prescribed documents issued should not be earlier than 12 months from the appointed day, and
  • The supplier of services is not eligible for any abatement under the Act.
  • The said taxable person shall passes on the benefit of such credit by the way of reduction in prices to the recipient

Provided that Credit of only those inputs would be allowed to be carried forward which is available under the existing law

 5.  Exempted Service as well as taxable services or Manufacturing of Exemption goods as well as taxable goods is liable to tax under this Act – Section 140 (4)

A registered taxable person who was engaged in manufacturing of exempted goods as well as taxable goods or providing exempted services as well as taxable services and after appointed day exempted goods or exempted services are liable to tax under this act then he shall be entitled to take credit subject to the following conditions: –

  • The amount of Cenvat Credit which is carry forward in a return furnished under the existing law
  • The amount of Cenvat Credit of eligible duties and taxes paid in respect of inputs held in stock and inputs contained in semi-finished or finished good held in stock on the appointed day which is pertaining to exempted goods or exempted services.

6.  Credit of Inputs or input services received on or after appointed day – Section 140(5).

A registered person shall be entitled to take credit of eligible duties and taxes in respect of Input or input services that are received on or after the appointed day on which duty or tax has been paid under the earlier law provided that the invoice or other taxpaying document of the same is recorded in the books of account of the assessee within a period of 30 days from appointed day. Registered person shall furnish a statement in respect of credit has been taken under this section.

7.  Transfer from Normal Tax Scheme under earlier tax law to Composition scheme under GST Act –

Where an assessee paying tax under the normal scheme of the earlier law has opted to pay tax under the composition scheme of the GST Act then the amount of Cenvat credit carried forward in a return or unveiled amount of Cenvat credit on capital goods shall not be allowed to be carried forward under GST Act.

 8.  Transfer from Composition Scheme under earlier tax law to Normal Tax Scheme under GST Act – Section 140 (6).

Where a registered person either paying tax at a fixed rate or paying a fixed amount in lieu of tax payable under the existing law i.e. under the Composition scheme of the earlier law has opted to pay tax under the Normal scheme of the GST Act, then it can take credit of eligible duties and taxes in respect of input held in stock, inputs held in semi-finished or finished goods held in stock on the appointed day subject to following conditions.

  • Such inputs or goods are used or intended to be used for making taxable supplies under this Act
  • He is not paying tax under the composition scheme of this Act
  • He is eligible for Input Tax Credit on such inputs under this Act
  • The Said registered person is in possession of the invoices and/or other prescribed documents evidencing payment of duty under the earlier law in respect of such inputs and
  • Such Invoices and/or other prescribed documents issued should not be earlier than 12 months from the appointed day.

9.  Treatment of Centralised Registration under the Existing Law in GST – Section 140 (8).

Where a registered person having a centralised registration under the existing law and get PAN based state wise registration under GST then the amount of Cenvat credit which is carried forward in the last return filed immediately before the appointed day shall be transferred to electronic credit

The registered person shall furnish his return within three months from the appointed day for the period ending with the day immediately preceding the appointed day. Such credit shall be allowed subject to condition that the said return is either an original return or a revised return where the credit has been reduced from that claim earlier.

Registered person may be transfer such credit to any of registered persons having the same Permanent Account Number for which the centralised registration was obtained under the existing law.

10.  Reversal of Cenvat Credit due to Non-Payment – Section 140 (9).

Where the Cenvat Credit availed for the input services provided under the existing law has been reversed due to non-payment of the consideration within a period of 3 month then such credit can be reclaimed subject to conditions that the registered person has made the payment of the consideration for that supply of services within a period of three months from the appointed day.

11.  Sales Return of Duty Paid Goods / Exempted Goods – Section 142 (1)

In case the registered taxable person has removed any duty paid goods/exempted goods not being earlier than six months prior to the appointed day and the same are returned back to any place of business within six months on or after the appointed day, then the registered person shall be eligible for refund of the duty paid under the existing law in respect of duty paid goods and no tax shall be payable in respect of exempted goods only if the goods are returned by a person who is not registered under the GST Act.

In case the goods are returned by a registered taxable person, then such transaction shall be considered as a supply and, accordingly, chargeable to tax.

If the goods are returned after six months, then tax shall be levied on the same at the rate applicable under the GST Act.

12.  Return of Goods Sent on Approval Basis – 142 (12)

In case the registered taxable person has sent any goods on approval basis before six months from the appointed day and the same are either rejected or not approved by the buyer and returned back to the registered person within six months on or after the appointed day, then no tax shall be payable on such goods. The period of Six months may be extended for a further period of two month by the commissioner.

In case the goods are returned after the period of 6 months, then such goods shall be subject to tax under the GST Act and tax thereon shall be paid by the person returning the goods.

Further, if the goods are not returned within 6 months, then such goods shall be subject to tax under this Act and tax thereon shall be paid by the registered person, i.e., the person who has sent the goods on approval basis.

13.  Inputs or semi-finished goods removed for job work and returned on or after the appointed day – Section 141 (1) & (2)

If inputs as such or after partial processing or semi-finished goods have been sent under the earlier laws to a job worker for job work and returned under the GST regime then no tax is liable to be paid if such goods are returned back within 6 months from the appointed day. Period of Six month may be extended by the commissioner for a further period not exceeding two months.

If the said goods are not returned within a period of 6 months, then the registered person should reverse the input tax credit availed under the earlier law on such goods in accordance the provision of Section 142(8)(a).

The job worker and manufacturer are required to declare the details of inputs held in stock by the job worker on behalf of the manufacturer on the appointed day.

14.  Finished goods sent out for any process or activity not amounting to manufacture – Section 141 (3).

Where any Excise goods manufactured at a place of Business has been removed without payment of duty for carrying out test or any process which is not amounting to manufacture, irrespective of the fact whether manufacturer is registered or not under the earlier law, if returned within Six month from the appointed day then no tax will be paid. Period of Six month may be extended by the commissioner for a further period not exceeding two months.

If goods are not returned after 6 months from the appointed day then Input tax credit shall be liable to be recovered in terms of section 142(8)(a).

Thus, we can say that the registered person must make sure that the goods sent on job work basis are returned back within the permissible time to avoid the loss of Input Tax Credit.

15.  Treatment of Price Revision under a Contracts or agreements – Section 142 (2)

If a registered person entered into a contract or agreement for supply of goods or services prior to the appointed day and on or after the appointed day the price of good or services is revised upwards or downwards then the registered person may issue a supplementary invoice or Debit / Credit Note in respect of the same under the GST Act within 30 days of such price revision.

If tax liability of the registered person is reduced, due to downward revision of price, then the registered person may be able to take benefit only if the recipient has reduced his corresponding input tax credit to such reduction of tax liability.

A registered person must insert a price escalation clause in its agreement with vendors and Customers to take the benefit of Section 142 (2).

16.  Pending refund claims of Cenvat Credit, duty, tax etc – Section 142 (3)

Every claim for refund filed by any person before, on or after the appointed day, for refund of any amount of CENVAT credit, duty, tax, interest or any other amount paid under the existing law shall be disposed off in accordance with the provisions of the earlier law and any amount accruing there upon shall be paid in cash.

If the claim for refund of Cenvat credit has been fully or partially rejected, the amount so rejected shall lapse.

Provided that no refund shall be allowed of any amount of Cenvat Credit, if the amount of Cenvat Credit has been carried forward under this Act as on appointed day.

17.  Pending refund claims of Duty in case of Exports – Section 142 (4)

If a registered person exports any goods or services before or after the appointed day on which tax has been paid under the earlier law and the registered person has applied for refund of such tax or duty after the appointed date, then such refund claim shall be processed according to the provisions of the earlier law.

If the claim for refund of Cenvat credit has been fully or partially rejected, the amount so rejected shall lapse.

Provided that no refund shall be allowed of any amount of Cenvat Credit, if the amount of Cenvat Credit has been carried forward under this Act as on appointed day.

18.  Refund of tax in case of non-provision of services – Section 142 (5)

If registered person filed after the appointed day, any claim for refund of tax paid under the earlier law in respect of which services not provided by it, then such refund claim shall processed in accordance with the provisions of the earlier law and any amount eventually accruing to him shall be paid in cash, notwithstanding anything in the contrary contained under the provisions of existing law other than the provisions of Section 11B (2) of Central Excise Act 1944.

19.  Treatment of pending adjudication proceedings – Section 142 (6) & (7)

In case of any appellate proceedings filed by a registered taxable person relating to claim for Cenvat credit or any output duty initiated before, on or after the appointed day under the exiting law, then such proceedings shall be disposed of in accordance with provisions of the earlier law. If any amount becomes admissible to the assesse, then such amount shall be paid in cash to it and if the amount rejected then it shall not be admissible as input tax credit under the Act.

Provided that no refund shall be allowed of any amount of Cenvat Credit, if the amount of Cenvat Credit has been carried forward under this Act as on appointed day.

If any amount becomes recoverable, then such amount shall be recovered from it under the existing law otherwise shall be recovered as arrears of tax under the GST Act and the amount so recovered shall not be allowed as input tax credit under this act.

20.  Revision of return after appointed day – Section 142 (9)

After the appointed day if registered person revised any return which is filed under the existing law and due to revision if any amount is found to be recoverable or any amount of Cenvat Credit is found to be inadmissible the same shall be recovered as an arrear of tax under existing law and if not recovered under the existing law then to be recovered as an arrear of tax under GST. The amount so recovered shall not be allowed as input tax credit under this act.

After the appointed day if registered person revised any return (with in the time limit) which is filed under the existing law and due to revision if any amount is found to be refundable or any amount of Cenvat Credit is found to be admissible the same shall be refund to him in cash under the existing law. The amount rejected shall not be allowed as input tax credit under this act.

 21.  Treatment of Input Service Distributor (ISD) – Section 140(7)

The Input Service Distributor shall be allowed to distribute the input tax credit on input services received by it prior the appointed day under the GST Act even if the invoices relating to such services are received on or after the appointed day.

22.  Treatment of Goods lying with agents.

In case any inputs or capital goods belonging to the registered person are lying with its agent on the appointed day, then the registered taxable person can take the credit in respect of those goods provided

  • The principal and the agent both declare the stock of goods lying with agent
  • Invoice for such goods should not be more than 12 months old preceding the appointed day.

The agent can also take the credit in respect of goods lying with him provided that the agent is registered under the GST Act and the principal has not availed of the input tax credit in respect of such inputs or capital goods.

23.  Treatment of Tax deducted at sources – Section 142 (13)

If the registered person has made any sale of goods in respect of which Tax deducted at sources was required to be deducted and has also issued an invoice in respect of the same before the appointed day but the registered person has not received the payment before the appointed day, then no TDS shall be deducted under the GST Act.

 

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