Transitional Issues & Arrangements Under GST: From 1st July 2017, entire Nation is going to see a shift in the Taxation under Indirect Taxes with the implementation of GST. All the existing Registered Persons under the Present law have to get migrated themselves to GST as required under Section 22 of CGST Act, 2017. Some of the Key challenges to be concerned about with appropriate Tax planning requirement under GST is in the following areas:
Transitional Issues & Arrangements Under GST
- Price Effect & other compliance requirement required for examining the Existing contracts committed for execution vis-à-vis Contracts in semi-completion stage
- Availability of Exemption under present laws vis-à-vis the GST provision towards the Taxability or continuity of exemption
- Ensuring for missed out Input Tax credits if any under the Present law, for proper carry forward of the same on the basis of eligibility
- Relevance of the existing business model to suit the tax requirement under GST
- Scope of Advances received under the present mechanism of taxation vis-à-vis their treatment under GST
- Pending legal disputes or assessments vis-à-vis the exposure of the same on open issues if any
- Refund mechanism for the existing transactions and documentation or filing procedure of the same under GST
- Export incentives & pending compliance issues under Present law vis-à-vis the impact on Input Tax credit mechanism if any
Transitional provisions are dealt diligently to address the above challenges under Section139 to 142 of CGST Act,2017. Along with the above provisions one has to refer to the Transitional Rules formulated for the details to be disclosed with the specific format or form and within the specified time limit provided there of
Section139: Migration of Existing Tax payers
All the Registered Persons under the present law and holding their Registration or Licence sanction under the present law on the date prior to the appointed day are required to compulsorily migrate to GST.
- 1) Registered Person are provided with temporary username & password as per the existing law in a particular state, who are required to migrate to GST using the credentials provided
- 2) Currently state specific only one registration details are provided under VAT/CE/Service Tax, on the basis of PAN registered
- 3) Once the user migrates to GST successfully by providing all relevant information asked for they shall be granted with a Certificate of Registration on Provisional basis subject to the conditions & rules framed. Concerned office, shall call on for further details required if any for satisfying himself towards the validity of documents & information furnished
- 4) On scrutiny of the relevant information furnished electronically using the migration credentials, the registered user shall be granted a final registration certificate
- 5) A registered person under existing law after migration to GST has a choice to seek for cancellation of the Registration provided under GST by mentioning the valid reason which he/she thinks reasonable to opt out of GST. Accordingly, the Registration certificate allotted on Provisional Basis shall be cancelled by the proper officer
Section 140: Transitional arrangement for Input tax credit
Eligibility for carry forward of unutilized Cenvat credit Section 140(1):
1. All the registered persons under present law shall be entitled to carry forward the Cenvat credit carry forward in the return filed to the period ending prior to the appointed day to the Electronic Credit ledger under GST other than the Person opting to pay GST under Composition, asper the rules prescribed in this regard
2. The above balance shall be allowed to be carry forward on satisfaction of the following conditions:
- a. The said balance of Cenvat credit is admissible as Input tax credit under this GST Act
- b. The registered person shall not default in filing returns continuously for six months, prior to the appointed day
- c. The amount of Cenvat credit to be carry forward shall not be pertaining to goods manufactured and cleared under exemption Notifications Eligibility of unavailed Credit in respect of Capital goods, Section 140(2):
1) Every Registered Person, other than the person opting to pay tax under Composition scheme shall be eligible to take in his Electronic Credit Ledger, credit of unavailed Cenvat credit in respect of Capital goods, not carried forward in a return furnished under existing law. Certain details to be furnished in Form GST TRAN-1 in respect of each capital goods are as below:
- a. 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
- b. 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
2) Registered person shall not be allowed to avail the credit unless the same is allowed as Cenvat credit under existing law and also allowed as Input Tax under GST provisions.
Other Transitional provisions, shall be dealt in the forthcoming article.
Disclaimer: The views expressed are personal interpretational in nature and readers are suggested to go through the relevant provisions of GST to have more clarity.