GST Law has consolidated multiple Central/State Taxes into one. GST Law has made elaborate provisions to ensure smooth and hassle-free transition to GST so that no Input Tax Credit (ITC) earned under the existing laws is not lost.
The provisions are broadly categorized into three heads:
- Input Tax Credit
- Continuance of existing provisions such as job-work, return of goods (defective/approval) for a reasonable period; and
- All claims (pending and future) pertaining to existing laws filed before, on or after the appointed day.
A registered person can carry forward the ITC (Cenvat Credit, VAT) earned under the then existing laws subject to fulfilment of certain conditions. A person opting for Composition Scheme is not eligible to carry forward the ITC earned under the existing law.
The closing balance of Cenvat/VAT reflected in the last return can be taken as credit in Electronic Credit Register.
Such credit is admissible only when the returns for the last six months have been filed under the existing law. For claiming such credit, a declaration in Form GST TRAN-1 is required to be furnished on the GST Common Portal within 90 days from 01.07.17.
The balance credit of capital goods (50% to be taken in the subsequent financial years) can also be taken by filing the requisite declaration in Form GST TRAN-1.
Traders who have duty paid goods in stock as on 01.07.17 are entitled to avail credit of duty/tax paid earlier subject to fulfilment of following conditions. This provision is made so that tax is not paid twice on the same goods:
- Credit (Cenvat/Vat) to be availed on the basis of duty paying documents;
- Duty paying documents should be less than one- year old. (Credit cannot be availed on the invoices issued prior to 01.07.16); and
- Stock is declared on the GST Common Portal within the prescribed time period;
A scheme is introduced to enable traders who do not possess duty paying documents evidencing payment of Excise/VAT. Salient features of the scheme are as under:
- The scheme operative only for six months from 01.07.17.
- Credit equivalent to 60% on goods which attract GST @ 18% and more and 40% on other goods of GST paid on the stock cleared after 01.07.17 is allowed.
- Credit is not admissible if such goods are unconditionally exempted or taxed at Nil rate under the existing law.
- Credit equivalent to 30% & 20% of the GST paid is allowed if integrated tax is paid on such goods.
- Credit is allowed only after GST is paid on such goods subject to the condition that the benefit of such credit is passed on to the customer by way of reduced prices.
- The statement of supply of such goods in each of the six tax periods has to be submitted.
- Stock stored should be easily identifiable.
ITC of Cenvat/VAT paid in respect of inputs, semi-finished and finished goods in stock attributable to exempted goods or services under the existing law but now taxable can be taken in the same manner.
Credit of duty or tax paid by the supplier under the existing law on inputs or input services received on or after 01.07.17 is allowed provided the invoice has been recorded in the books within 30 days from the appointed day. The period can be extended by 30 days by the Commissioner. A statement is required to be furnished. ISD can distribute the credit.
Tax-payers who paid duty or tax paid at fixed rate or fixed amount in lieu of tax payable under existing law but now working under normal GST can claim credit of inputs, semi-finished and finished stock as on 01.07.17 subject to following conditions:
- Such input stock is used for taxable supply under GST Law;
- Registered person is not covered under Composition Scheme;
- Registered person is eligible for ITC under GST Law;
- Registered person is eligible for ITC under the GST Law;
- Duty paying documents not older than 12 months on the appointed day (01.07.17).
Person holding Centralized Registration under Service Tax Law can take credit carried forward in the return furnished under the existing law if the original/revised return is filed within three months. Such credit can be transferred to any of the registered persons having the same PAN for which Centralized Registration was obtained.
Service Tax Credit reversed on account of non-payment of consideration within three months can be reclaimed if the payment is made to the supplier of service within three months from 01.07.17
Where goods or capital goods belonging to the principal are lying at the premises of the agent as on 01.07.17, agent can take credit subject to the fulfilment of following conditions:
- The agent is a registered taxable person;
- Both the principal and agent declare the details of stock;
- Duty paying documents are not older than 12 months;
- The Principal has either reversed or not availed ITC on such goods.
No GST is payable by the job-worker where the inputs, semi-finished goods or finished goods sent to him without payment of duty/VAT under the existing law, if such goods are returned within six months from 01.07.17. This period can be extended by another two months by the Commissioner.
If the goods are not returned in the prescribed period, the job-worker would have to pay GST on such supplies and the ITC would be recovered from the Principal.
In case of semi-finished goods, the manufacturer may transfer the goods to premises of registered person without payment of tax within the prescribed period.
In case of finished goods, the manufacturer may transfer the goods on payment of tax for clear for export within the prescribed period.
Where goods removed before six months of the appointed day (01.07.17) and returned within six months of the appointed day –
- By an unregistered person, refund of duty/VAT paid under the existing law can be claimed.
- By an registered person, the return of goods shall be treated as supply of goods (ITC can be claimed)
Where goods sent on approval basis before six months of the appointed day but returned within six months of the appointed day, no GST is payable. The period can be extended by two months by the Commissioner.
If such goods are returned after the prescribed period, tax is payable if supply is taxable under GST by the recipient.
If not returned within the prescribed period, tax is payable by the person who sent the goods on approval basis.
Where there is upward price revision in respect of existing contracts, a registered person has to issue a supplementary invoice or debit notes within 30 days from the date of revision. Such revision is treated as supply under GST Law & GST would be payable.
Where there is downward price revision in respect of existing contracts, a registered person has to issue credit note within 30 days from such revision. Such credit note is deemed to be issued under GST Law. A registered person can reduce his tax liability for such credit note, subject to reversal of credit by the recipient.
Lastly, provisions are made for proceedings under the existing law.Such proceedings may pertain to refund of Cenvat/VAT/Service Tax, export rebate. Such proceedings may result in refund/recovery of tax or duty.
All such cases would be disposed of under the existing laws. If any claim for refund is rejected fully or partially, the amount rejected would lapse. Refund of Cenvat credit would be made in cash. No refund of credit if the credit is already carried forward. If any amount is recoverable, it would be recovered as arrears under GST Law.