19/06/2017
Transitional Provisions Under Goods and Services Tax
“A detailed analysis vis a vis rules declared on 6th June 2017”
“Taxes are the price of development and civilization, and it is worth it ….” Oliver Wendell Holmes, Jr
Introduction
The statutory provisions relating to transitional phase under GST is governed by Chapter XX of the Central Goods and Services Tax Act 2017. The following sections have been referred in the said chapter-
| Section | Particulars |
| 139 | Migration of existing taxpayers |
| 140 | Transitional arrangements for input tax credit |
| 141 | Transitional provisions relating to job work |
| 142 | Miscellaneous transitional provisions |
In this article, the reference has been made to Sec 139-141.
Sec 139- Migration of Existing Tax Payers
Grant of Certificate of Provisional Registration in FORM GST REG-25, to every person*
Conditions
-registered under any of the existing laws
-valid Permanent Account Number
-validating his e-mail address and mobile number, either directly or through a Facilitation Centre notified by the Commissioner
After Provisional Registration, following information is required to be submitted within three months
a. an application electronically in FORM GST REG–26 , duly signed or verified through EVC,
b. information and documents specified in the said application on the Common Portal
Evaluation of the above information
| If correct a certificate of registration in FORM GST REG- 06 shall be made available to the registered person electronically on the Common Portal | If incomplete/ incorrect notice to show cause in FORM GST REG-27 and an opportunity of being heard, cancel the provisional registration granted under and issue an order in FORM GST REG-28 |
*Not applicable to a person deducting tax at source or an Input Service Distributor
Sec 140- Transitional Arrangements for Input Tax Credit
| Section | |
| 140(1) | Carry forward unutilized input credit under the CENVAT Credit Rules, 2004 |
| 140(2) | Credit of unavailed CENVAT credit in respect of capital goods, not carried forward in a return, shall be allowed |
| 140(3) | Credit of eligible duties in respect of inputs held in stock allowed in certain situations |
| 140(4) | Credit of eligible duties and taxes in respect of inputs held in stock allowed in certain situations |
| 140(5) | Credit of eligible duties and taxes in respect of inputs or input services during transit |
| 140(6) | Credit of eligible duties and taxes on inputs held in stock to be allowed to a taxable person switching over from composition scheme |
| 140(7) | Credit distribution of service tax by Input Service Distributor |
| 140(8) | Provision for transfer of unutilized Cenvat Credit by taxable person having centralized registration under the earlier law Where a registered person having centralized registration |
| 140(9) | Reclaiming CENVAT credit reversed due to non-payment of consideration |
Sec 140(1)- Carry forward unutilized input credit under the CENVAT Credit Rules, 2004
Input tax means the tax as defined u/s 2(62) of CGST Act 2017
Conditions
– credit is admissible as input tax credit under this Act
-furnished all the returns required under the existing law for the period of six months immediately preceding the appointed date
-amount of credit does not relates to goods manufactured and cleared under such exemption notifications as are notified by the Government
Form in which the credit would be availed under the GST Law
Would be available as a balance in the Electronic Credit Ledger of the tax payer. FORM GST TRAN-1 (To be submitted electronically within 90 days of the appointed day)
Not applicable to a person opting for composition scheme
Sec 140(2)- Credit of unavailed CENVAT credit in respect of capital goods, not carried forward in a return, shall be allowed.
Unavailed credit means Total eligible credit under the existing law less availed credit under the existing law.
Conditions
– eligible input credit under both, the existing law and the GST law
– in respect of input credit which is not carried forward in the return filed for the last period under the existing law.
Form in which the credit would be availed under the GST Law
Would be available as a balance in the Electronic Credit Ledger of the tax payer. FORM GST TRAN-1 (To be submitted electronically within 90 days of the appointed day).
Contents of the declaration
Specify separately the following particulars in respect of every item of capital goods as on the appointed day-
(i) the amount of tax or duty availed or utilized by way of input tax credit under each of the existing laws till the appointed day, and
(ii) the amount of tax or duty yet to be availed or utilized by way of input tax credit under each of the existing laws till the appointed day;
Not applicable to a person opting for composition scheme.
Sec 140(3)- Credit of eligible duties in respect of inputs held in stock allowed in certain situations
Applicability
a. who was not liable to be registered under the existing law,or
b. who was engaged in the manufacture of exempted goods, or
c. who was engaged in the provision of exempted services or
d.who was providing works contract service and was availing of the benefit of notification No. 26/2012—Service Tax, dated the 20th June, 2012 or
e. first stage dealer
f. second stage dealer
g. registered importer
h. a depot of a manufacturer
Conditions
– eligible input credit in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock
– not available for input services
– such inputs 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;
– the said registered person is in possession of invoice or other prescribed documents evidencing payment of duty under the existing law in respect of such inputs
– such invoices or other prescribed documents were issued not earlier than twelve months immediately preceding the appointed day
– the supplier of services is not eligible for any abatement under this Act
Registered person who was not registered under the existing law and is not in possession of any document evidencing payment of central excise duty.
Credit will be allowed for six tax periods from the appointed date if following conditions are satisfied
Conditions
– Goods are not exempted/ nil rated
– document for procurement of such goods is available with the registered person
– registered person availing of this scheme and having furnished the details of stock held by him in accordance with the provisions submits Form GST Tran 2 at the end of each of the six tax periods during which the scheme is in operation indicating therein the details of supplies of such goods effected during the tax period
– amount of credit allowed shall be credited to the electronic credit ledger of the applicant maintained in FORM GST PMT-2 on the Common Portal
– the stock of goods on which the credit is availed is so stored that it can be easily identified by the registered person.
Amount of Credit allowed
| goods which attract central tax at the rate of nine per cent. or more | @60% |
| for other goods of the central tax applicable on supply of such goods after the appointed date | @40% |
| integrated tax is paid on such goods which attract central tax at the rate of nine per cent. or more | @30% |
| integrated tax is paid for other goods | @20% |
Sec 140(4)- Credit of eligible duties and taxes in respect of inputs held in stock allowed in certain situations
Applicability
a. A registered person, who was engaged in the manufacture of taxable as well as exempted goods under the Central Excise Act, 1944
b. A registered person, who was engaged in the provision of taxable as well as exempted services under Chapter V of Finance Act, 1994
c. which are liable to tax under this Act
d. applicable only for inputs (not capital goods)
e. on ‘ELIGIBLE DUTIES only as stated in explanation 1 to Section 143(10)
Credit Allowed
– Amount of CENVAT credit carried forward in a return furnished under earlier law in terms of section 140(1)
– Amount of Cenvat credit of eligible duties in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the appointed day, relating to exempted goods or services, in terms of section 140(3)
Form in which the credit would be availed under the GST Law
Would be available as a balance in the Electronic Credit Ledger of the tax payer. FORM GST TRAN-1 (To be submitted electronically within 90 days of the appointed day)
Sec 140(5)- Credit of eligible duties and taxes in respect of inputs or input services during transit
Applicability
a.Applicable to both goods and services
b. inputs or input services received on or after the appointed day
c. but the duty or tax in respect of which has been paid by the supplier under the existing law
Conditions
– Invoices/duty paid documents must be recorded in the books within 30 days for the appointed date which may be extended by the commissioner for another 30 days on showing sufficient cause
– The recipient of inputs or input services must furnish a statement including the following details
(i) the name of the supplier, serial number and date of issue of the invoice by the supplier or any document on the basis of which credit of input tax was admissible under the existing law,
(ii) the description and value of the goods or services,
(iii) the quantity in case of goods and the unit or unit quantity code thereof,
(iv) the amount of eligible taxes and duties or, as the case may be, the value added tax [or entry tax] charged by the supplier in respect of the goods or services, and
(v) the date on which the receipt of goods or services is entered in the books of account of the recipient.
Sec 140(6)- Credit of eligible duties and taxes on inputs held in stock to be allowed to a taxable person switching over from composition scheme
Applicability
a.Registered person under the existing and GST law
b. either paying tax at a fixed rate or paying a fixed amount in lieu of the tax payable under the existing law
c. credit of eligible duties
d.on inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the appointed day
d.not applicable to input services
e.not applicable to capital goods
Conditions
– the person should have opted for payment of tax under the regular scheme under the GST law (cannot be a composition taxpayer u/s 10 of CGST Law)
– Such inputs must be used or intended to be used for making taxable supplies under the GST Laws.
– Such goods should qualify as eligible inputs under the GST law
-Invoice and other documents should be in possession in the recipient including
(a) The invoice / other document should evidence the payment of duty / tax on such goods.
(b) The invoice should not be more than 12 months prior to the date of introduction of GST
Sec 140(7)- Credit distribution of service tax by Input Service Distributor.
The input tax credit on account of any services received prior to the appointed day by an Input Service Distributor shall be eligible for distribution as credit under this Act even if the invoices relating to such services are received on or after the appointed day.
Sec 140(8)- Provision for transfer of unutilized Cenvat Credit by taxable person having centralized registration under the earlier law
Applicability
a. registered person having centralized registration under the existing law
b. credit of the amount of cenvat credit carried forward in a return
c. return furnished under the existing law
Conditions
– Credit transfer will require filing of a return within 3 months
– Credit is required to be eligible under the GST law
– Credit is permitted to be transferred to other locations of the person which qualify as taxable persons in GST having the same PAN.
Sec 140(9)- Reclaiming CENVAT credit reversed due to non-payment of consideration
Applicability
availment of credit in in case of input services, the payment of consideration for which is not made within a period of 3 months from the date of invoice/challan etc.
Conditions
– Payment is then made after the appointed day.
– The payment is made within 3 months from the appointed day
Sec 141- Transitional provisions relating to job work
| Inputs removed for job work and returned on or after the appointed day |
| Tax Not payable | Tax payable when and by whom | Exemption |
| Goods were not dispatched / removed as such or after partial processing for job work under the earlier law prior to appointed day Such goods are returned within 6 months or within the extended period from the appointed day to the said place of business | Goods are liable for payment of taxes under GST Such goods are returned after 6 months from the appointed day If goods are not returned within 6 months or extended period, input tax credit availed in respect of inputs removed will be recovered from the Principal | Principal and Job Worker should declare details of inputs held in stock by the Job worker on behalf of the sender on the appointed day. |
| Semi-finished goods removed for job work and returned on or after the appointed day |
| Tax Not payable | Tax payable when and by whom | Exemption |
| Semi Finished Goods were removed/ dispatched for processing under the earlier law prior to appointed day Such Goods are returned within 6 months or within the extended period from the appointed day to said place of business | Goods are liable for payment of taxes under GST Such goods are returned after 6 months or within the extended period from the appointed day If the goods are not returned within 6 months or extended period , input tax credit availed in respect of semi finished goods removed will be recovered from the Principal | Principal and Job Worker should declare details of semi finished goods held in stock by the Job Worker on behalf of the Principal on the appointed day. |
| Finished goods removed for carrying out certain processes and returned on or after the appointed day |
| Tax Not payable | Tax payable when and by whom | Dispatches of goods from other premises |
| Excisable goods manufactured were removed without payment of duty/ dispatched for processing/ testing/ under the existing law prior to appointed day Such goods are returned within 6 months or within the extended period from the appointed day to the said place of business. | Goods are liable for payment of taxes under GST Such goods are returned after 6 months or within the extended period from the appointed day If goods are returned within 6 months or extended period, input tax credit availed in respect of inputs removed will be recovered from the sender | Sender may transfer goods from such other place within 6 months on payment of tax in India or export without payment of duty. |
Highlights of the Draft CDT rules issued on 6th June 2017
1. Who Can issue the Credit Transfer Document-
A registered manufacturer registered under Excise law
2. What is CDT-
A sufficient evidence of payment of excise duty on goods manufactured and cleared before the appointed date.
3. Issue to Whom–
It must be issued only to person who was unregistered person under Excise Law but he is registered under the CGST Act, 2017.
4. When can be CTD issued-
CTD will be issued if the value of such goods is more than Rs 25,000 per piece and it bears the brand name of manufacturer. Also, it must be identifiable as a distinct number such as engine number of car.
5. Characteristics of a valid CTD
It shall be serially numbered and would contain the excise registration no., address of concerned department, name, address and GSTIN no. of dealer, description, classification, invoice no., rate, quantity, duty and other specified details.
6. Liability of a person issuing CTD–
a. to maintain records of every piece or item of such goods for which CTD is issued and such record shall be made available to Excise Officer for verification on demand.
b. to ensure that the dealer to whom CTD issued is in possession of such goods in the form in which those goods were cleared.
c. shall be jointly and severally responsible for excess credit availed by the dealer and shall be liable for recovery of such credit, interest and penalty under CCR Rules, 2004
7. Time limit of issuance-
CTD shall be issued upto 30th July, 2017 and copy of invoice shall also be enclosed with CTD.
8. Liability of the dealer-
a. Shall maintain copies of all invoices relating to buying and selling, even if made through intermediate dealer.
b. The dealer availing of credit using CTD shall not be eligible to avail of credit under rule 1(4) of Transition Rules on identical goods manufactured by same manufacturer available in the stock.
9.The person issuing CTD and person availing of credit using CTD shall submit details in table 1 and table 2 of Form – TRANS 3, respectively, within 60 days from the appointed date.
Conclusion
The GST provisions cannot be implemented in an isolated manner till the time the re-configuration of accounting system and proper customisation of the IT system has not been done. Infact the taxable person has to be conscientious enough while taking any decision under eth GST regime as the new taxation structure demands a clear transparency in the business transactions and thereby promoting the maintenance of proper documentation and authentic records.
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About the author
HIMANSHU TIWARI
CHARTERED ACCOUNTANT
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