GST brings in a paradigm shift
in indirect taxation, first time in a legislation technology is going to play a
significant part and that is where challenge is expected especially for SME
sector. Considering that we have 81
lakhs registered persons which has a significant SME representation, technology
will pose a serious challenge.
This article purports to unravel some mysteries
relating to transition from existing laws to GST, and what needs to be done
prior to GST implementation date, so that we do not loose on transition credit.
Chapter XX of Central Goods
and Services Act, 2017 deals with Transitional Provisions. Sections 139 to 142 enact the transitional
provisions. Similar provisions are
available in SGST acts of States also.
Transitional provisions are in 4 sections
Section 139 – Moving of
existing registered personal in existing laws to GST
Section 140 – Moving of input
tax credit (relating to Central Excise & Service tax) to GST
Section 141 – Treatment of job
work under new law for goods already moved to Jobworkers
Section 142 – Provisions relating
to material returns, pricing, refund, appeals etc which exist under the current law and
how they will be treated under GST
In this article we will
discuss provisions of Section 140 and some portions of Section 142 (relating to
sales returns and pricing). Explanations
are purported to be simple to show a flavour of provisions, for full text of
provisions please refer to CGST Act, or send me a message separately.
Section 140(1)
·
A Registered
Person if they do not opt for compounding scheme, as provided in Section 10, can
claim the balance of CENVAT Credit & Service tax Credit shown in last returns
under existing laws before implementation of GST, as CGST credit.
· Similarly under provisions of SGST Act (to be
enacted by States) balance of VAT shown in last returns in existing law before implementation
of GST, can be claimed as SGST credit.
Section 140(2)
· A Registered Person if they do not opt for
compounding scheme, as provided in Section 10, can claim the unavailed CENVAT
credit on capital goods as CGST.
· Similarly under provisions of SGST Act (to be
enacted by States), unavailed balance of
VAT on Capital goods can be claimed as SGST credit.
Section 140(3)
· A Registered Person if they manufacture exempted
goods or they are a first stage dealer or second stage dealer or a registered
importer or a depot of a manufacturer, can claim the tax on closing stock
provided (apart from other conditions)
Ø They
can show the invoice under which the stocks were purchased and this invoice
should have excise duty value on it along with evidence of payment of such
duty.
Ø This
invoice should be within 12 months of the date of GST implementation.
· If the Registered person is not able to provide
invoice with excise duty as mentioned above then they will be allowed credit in
the below formula
Ø At
the point of sales – provided sales happens within 6 months
Ø On
the sale value 40% of CGST will be given as credit under CGST law. Meaning a credit of 3.6% under CGST will be
available
·
Similarly under provisions of SGST Act (to be
enacted by States), VAT on closing
stocks can be claimed as SGST credit subject to similar conditions under CGST.
Section 140(5)
If invoice is raised by vendor
prior to GST implementation and material is received after GST implementation then
credit of these taxes can be availed under CGST provided the same is accounted
within 30 days and proof of this accounting shown. Extension of time beyond 30 days can be
provided by Commissioner in case to case basis.
Similar provision is also available for SGST under State GST Act.
Section 142(1)
For Unregistered person, any
material billed before GST implementation to be returned after GST
implementation, then
·
this material should have been invoiced maximum
6 months prior to GST implementation
·
Should be returned within 6 months after GST
implementation
·
If the above 2 conditions are satisfied then
refund will be provided
For Registered Person any
material billed before GST implementation to be returned after GST
implementation, then the person returning the material should make it as a
supply under GST charging CGST / SGST / IGST on those products against which
the registered person can claim credit.
Similar provisions will be
part of to be enacted State GST acts for VAT
Section 142(2)
Any upward or downward price
changes for supplies made before GST implementation should be made through
supplementary invoice / debit notes / credit notes and GST to be paid or
refunded accordingly. If refund has to
be taken to ensure that the vendor reveres the GST credit before going in for
refund.
Procedure for claiming transitional credit
All details should be
submitted in eform GST TRAN-1 in GST portal
