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Transitional Provisions
On 23-06-2017 at Fortune Park JP Celestial, Bangalore
- BY CA B D Chandrashekar
M/s. Shekar & Yathish
Bangalore
Shekar & Yathish 1
Flow of the session
• Why Transition?
• Process of Migration
• Transfer of Credits to GST Returns
• Credit on Stock lying with registered person
not liable to register under earlier law.
• Special Provision for Traders
• Credits from Centralized registration
• Miscellaneous Transition transactions
Shekar & Yathish 2
Why Transition???
• We have stock of Goods on date of GST. Stock has suffered VAT & Excise. Same stock would be sold with GST now.
– What happens to the amount of VAT Credit?
– What happens to the amount of Excise Credit if you are a manufacturer?
– What happens to the amount of Excise Credit if you are a not a manufacturer?
Shekar & Yathish 3
Why Transition???
• You have sold goods with VAT pre-GST and goods are returned post GST. Can you claim VAT credit in GST return for this transaction?
• You have purchased goods with Excise Duty before GST. You have returned those goods post GST. Can you reverse Excise credit in GST returns?
• You have a refund pending under Service Tax. What happens under GST?
Shekar & Yathish 4
Migration to GST
• Actual Migration Process to start from
the appointed day
• Valid PAN is compulsory
• Certificate of registration is granted on
provisional basis
• Final certificate of registration to
granted on submission of required
documents.
Shekar & Yathish 5
How to take Credits into GST
Return
Balance of Credit under Earlier Law
Under GST
Excise Shall be carried forward as CGST
Service Tax Shall be carried forward as CGST
VAT Shall be carried forward as SGST
Shekar & Yathish 6
Cases where credits will not be
allowed to C/f to GST
• Opting into Composition Scheme
• If such ITC is restricted under GST
• If last 6 months returns are not furnished;
• If credit relates to manufactured goods notified by the Government.
• Where GST Tran 1 is not filed within 60 days.
• For transfer of VAT credit, all forms C/F/H/I Forms are collected.
Shekar & Yathish 7
Credit of Capital Goods not
availed
• Balance Credit can be claimed even if not claimed in the return
• Credit should be admissible under GST Act
• Need to declare the following, asset-wise –
– Amount of Credit availed under earlier law
– Balance remaining un-utilized
Shekar & Yathish 8
What would be implication on
the following
• A Trader
• Person Engaged in the manufacture of Exempted or provision of exempted services
• Works contract service provider availing option under notification No. 26/2012—ST
• First stage dealer or a second stage dealer
• Registered importer
• Person paying fixed rate of tax or paying a fixed amount in lieu of normal tax.
Shekar & Yathish 9
What are the credits they can
take?
• Following credits can be taken by
such persons –
– Credit of Inputs lying in stock,
– In semi-finished goods and
– In Finished goods
Shekar & Yathish 10
Conditions for taking such credit
• Should have valid duty paying document
• Inputs or Goods are for making taxable supplies
• Should be eligible credits under GST
• Invoices should not be older than twelve months
• Supplier of services is not eligible for any abatement under this Act
• Details of stock held on appointed date must be declared for claiming credit.
Shekar & Yathish 11
Issues!
• Credit of
– Education Cess,
– SHE Cess &
– KKC are available?????
• In case of Interstate Stock transfers,
where 2% of credits are reversed and
lying in stock, no credit would be
allowed.
Shekar & Yathish 12
Special Provision for Traders not
having duty paying document
• Can claim credit of excise on goods
lying in stock to the extent of
40%/60% of Output Tax
• Credit can be taken on payment of
Output Tax
• Scheme will be available for 6 months
Shekar & Yathish 13
Conditions for such a trader to
claim credit
• Goods are not wholly exempt from duty of excise or were not nil rated.
• Document for procurement of such goods is available.
• To furnish a separate statement FORM GST TRAN--- after end of each of 6 months.
• Amount of credit allowed shall be credited to the electronic credit ledger
• Stock of goods on which the credit is availed is so stored so as to easily identify.
Shekar & Yathish 14
Trader under GST
• Can he take credit of Capital Goods?
• Can he take credit of Input Services?
• Trader to Compare ―Availing credit
based on document Vs 40 % Scheme‖
• Any planning possible for trader now?
Shekar & Yathish 15
Person Manufacturing both
Taxable as well as exempt goods
under GST • Can take credit as per last return if
returns are filed for previous 6 months
and ITC is allowed under GST
• Can take the credit of goods lying in
stock which was earlier not available,
due to that being exempt, subject to
above 5 conditions.
• Details of stock held on appointed date
must be declared for claiming credit.
Shekar & Yathish 16
Manufacturing both – Conditions
to claim credit
• Should have valid duty paying document
• Inputs or Goods are for making taxable supplies
• Should be eligible credits under GST
• Invoices should not be older than twelve months
• Supplier of services is not eligible for any abatement under this Act
• Details of stock held on appointed date must be declared for claiming credit.
Shekar & Yathish 17
Credit on Goods in Transit or
Services received post GST
• Goods in transit as on date of transition or Input Services received after transition date
• Invoice raised under earlier law.
• Can Credit be taken to GST? – Yes. If the invoice is recorded within 30 days
of transition
– 30 days can be extended to a further period of 30 days by Commissioner
– Details of such stock is to be declared by registered person
Shekar & Yathish 18
Centralized registrants
• Shall be allowed to take credit of the amount of carried forward in a return. – Return for last period is filed within three
months of the appointed day.
• Credit shall be allowed if return is either an original return or a revised return where the credit has been reduced from that claimed earlier.
• Said credit should be admissible as ITC under GST.
• Can transfer to any of the registered persons having the same PAN
Shekar & Yathish 19
Credits reversed due to Non-
Payment
• Where CENVAT credit has been
reversed due to non-payment within a
period of three months under old law
• Credit can be reclaimed if payment is
made within three months from the
appointed day.
• Details of such credits are to be
declared
Shekar & Yathish 20
Job Worker
• Credit of Inputs/Semi-finished/Finished Goods goods sent out for Job-Work are lying in Job Worker’s Premises as on appointed date – – If goods not returned within 6 months from
appointed date, credit is to reversed. Commissioner could extent to further 2 months
• In case of Semi-finished goods/Finished goods, it can either be sent back to principal or can be sold directly from J/w’s premises
• Principal & Job-worker to declare, within 60 days, stock lying with his agents/branch, separately agent-wise/branch-wise
Shekar & Yathish 21
Sales Returns post GST
• Sales before GST and Sales returns after GST - Tax amount can be claimed as refund if - – Sale should not be earlier than six months
– Goods should be returned within 6 months from the appointed date
– Returns of goods should be from a person other than registered person (Only B2C returns).
– Such goods are to be identified to the satisfaction of proper officer
• If the said goods are returned by a registered person, the return of such goods shall be deemed to be a supply
Shekar & Yathish 22
Price Revisions post GST
• Upward revision - Where the sale/provision of service has taken place pre-GST – Price revision would be liable to GST.
• Downward revision of Price post GST - Where the sale/provision of service has taken place pre-GST – It can be reduced from liability to GST.
– Recipient of credit note should reduce the amount from his ITC.
Shekar & Yathish 23
Pending refunds and litigations
• Refund under earlier law would be
dealt under earlier law.
– If claim for refund of CENVAT credit is
fully or partially rejected, the amount so
rejected shall lapse.
• Recovery of Tax would be treated as
arrears under GST.
Shekar & Yathish 24
Revision of returns
• If revision results to excess credit –
Should go for refund – Unjust
enrichment to apply.
• If revision results to recovery – Should
pay as GST.
Shekar & Yathish 25
Running Contracts
• Contracts entered Pre-GST
• Activity is happening during GST
• GST would only apply!
Shekar & Yathish 26
Goods Sent on Approval Basis
• Goods sent on approval basis not to be liable for GST if – – Goods are sent not earlier than six months
– Goods are returned to the seller after appointed date
– Goods are returned within six months from the appointed day:
– Six months may be extended by the Commissioner for a further period not exceeding two months:
• Person to declare stocks sent on approval basis in GST Tran 1 within 60 days of appointed date.
• Tax shall be payable in case of sale on approvals sent before GST, if Goods are returned after specified period or not retuned within specified period.
Shekar & Yathish 27
Action plan
• Reconciling of returns to books
– Excise, Service tax, Vat, Luxury Tax, etc.,
– Missed out credit can be taken
• Form C, F, H, E-1/II
– Put task force in companies to collect forms
• Review of Refund and tax recredit of
claims
– Doubtful v/s. Reasonable chance
Shekar & Yathish 28
Immediate
Action plan
• Action plans – Composition dealers – Should all composition dealers to convert
to Regular registration under VAT? Any ways under GST, has to move to regular scheme.
– Stock > 12 months • Identify all the stocks prior to 1-7-2016
– Try to get credits of inputs on say 31-5-2017, but restrictions on in VAT provisions. Max 3 months credit available.
Shekar & Yathish 29
Before 1-7-2017
Action plan
• Returns to be filed for 6 months before
appointed date
• CST is a cost for stock transfers
– Follow Just in time purchases
• Works Contractor – Composition Scheme
– Cut off transactions
• Stocks with agents to be declared
Shekar & Yathish 30
Before 1-7-2017
Industry-wise Impact
• Software Industry
– Clarity in Goods Vs Services
– Centralized registrations to be re-looked
– Working Capital Requirents
– Perquisites to Employees
– ERP changes
– Training to Staff
Shekar & Yathish 31
Industry-wise Impact
• Real-estate
– Composition Vs Regular Scheme
– Working Capital
– Pending Litigations
– Barter in VAT Vs GST
Shekar & Yathish 32
Industry-wise Impact
• Manufacturing
– Existing Set-up of having go-downs etc.
– Working Capital Savings for intrastate
transfers
– Used to most of the procedures since
beginning
Shekar & Yathish 33
