Provisions under GST TRANSITIONAL PROVISIONS By:- Puneet Agrawal B. Com (H), CA, LLB Partner Athena Law Associates
CONTENTS This presentation covers- Migration of existing taxpayers in GST Amount of CENVAT Credit carried forward in a return to be allowed as input tax credit CENVAT Credit on Capital goods Credit of eligible duties and taxes in respect of inputs held in stock Credit to person switching over from Composition Scheme Amount payable in the event of a taxable person switching over to composition scheme Exempted goods returned to the place of business on or after the appointed day Duty paid goods returned to the place of business on or after the appointed day Inputs removed for job work and returned on or after the appointed day Semi-finished goods removed for job work and returned on or after the appointed day Finished goods removed for carrying out certain processes and returned on or after the appointed day Issuance of supplementary invoices, debit or credit notes where price is revised in pursuance of a contract Pending refund claims to be disposed of under earlier law Claim of Cenvat Credit to be disposed of under the earlier law Finalization of proceedings relating to output duty liability Treatment of the amount recovered or refunded in pursuance of assessment or adjudication proceedings Treatment of the amount recovered or refunded pursuant to revision of returns Treatment of long term construction/works contracts Progressive or periodic supply of goods or service Treatment of retention payments Miscellaneous
MIGRATION OF EXISTING TAXPAYERS IN GST [Sec. 142] A certificate of registration on a provisional basis is first issued to every person registered under earlier law, and such certificate shall be valid for six months from the date of the issue. This may be extended for such a period as the central/state governments may specify. It further provides that every such person to whom a certificate of registration has been issued will be required to furnish such information as may be prescribed, and on doing so, the provisional certificate granted under section 142(1) shall be granted on a final basis by the Central/State Government. Any provisional registration granted under this section may be cancelled if such person fails to furnish the prescribed information within such time as may be specified.
Amount of CENVAT Credit carried forward in a return to be allowed as input tax credit [Section 143] (CGST LAW) This section provides that a registered taxable person shall be entitled to take, in his electronic ledger, credit of the CENVAT credit carried forward in a return, furnished under earlier law by him, in respect of the period ending with the day immediately preceding the appointed in the manner prescribed. It further provides that the amount taken as credit above, shall be recovered as arrear of tax under this Act from the taxable person if the said amount is found to recoverable as a result of any proceeding instituted before or after such person. (SGST LAW) A registered taxable person under SGST law shall be allowed to take credit in his electronic ledger of the credit of the amount of value added tax carried forward in a return furnished under the earlier law provided the credit proposed to be carried forward is admissible under the earlier as well as the proposed law. Provisions of recovery under the CGST law apply mutatis mutandis to the proposed SGST law.
CENVAT Credit on Capital goods [Section 144] A registered taxable person shall be entitled to take in, in his electronic ledger, credit of the unavailed cenvat credit in respect of capital goods, not carried forward in a return furnished under the law in a prescribed manner. This, however, is subject to the condition that the credit shall be allowed when such credit was admissible as cenvat credit and is admissible as input tax credit under this Act. The amount taken as credit under this provision shall be recovered as an area of tax from the taxable person if the said amount is found to be recoverable as a result of any proceeding instituted before or after the appointed day against such person under the earlier law. The above mechanism applicable for availing credit of unavailed credit in respect of capital goods under the CGST law shall also apply mutatis mutandis for the credit of capital goods under SGST law.
Credit of eligible duties and taxes in respect of inputs held in stock [S. 145] CGST LAW This provision allows a registered taxable person, who was not liable to be registered under the earlier law or who was engaged in the manufacture of exempted goods under the earlier law but which are liable to tax under this Act, to take, in his electronic ledger, credit of eligible duties and taxes in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock, subject to several conditions like: such inputs/goods are used or intended to be used for making taxable supplies under this Act, and such taxable person was eligible for cenvat credit on receipt of such inputs and/or goods under the earlier law but for his not being liable for registration or the goods remaining exempt under the said law Invoice of goods is available Invoice date is not earlier than 12 months preceding the appointed day SGST LAW These provisions apply mutatis mutandis to credit of VAT under the State VAT laws
Credit to person switching over from Composition Scheme [S. 146] A registered taxable person who was either paying tax at a fixed rate or paying a fixed amount in lieu of the tax payable under the earlier law, shall be entitled to take, in his electronic credit ledger, credit of eligible duties and taxes in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock, subject to the following conditions:- Such inputs and/or goods are used or intended to be used for making taxable supplies under this Act; The said person is not paying tax under Section 8; The said taxable person was eligible cenvat credit on receipt of such inputs and/or goods under the earlier law for his being a composition under the said law. The said taxable person is eligible for input tax credit under this Act; The said taxable person is in possession of invoice and/or other prescribed documents evidencing payment of duty/tax under the earlier law in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the appointed day; and Such invoices and/or other prescribed documents were issued not later than twelve months immediately preceding the appointed day. The above provisions under the CGST law shall apply mutatis mutandis in respect of value added tax relating to inputs held in stock and inputs contained in semi-finished or finished goods held in stock under the SGST law.
Amount payable in the event of a taxable person switching over to composition scheme [Section 147] Where a taxable person carries forward credit under the law, and switches over to composition scheme under the Act, he shall pay by way of debit in the electronic credit ledger or electronic cash ledger, an amount equivalent to the credit of input tax in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock. Importantly, after the payment of such amount, the balance of input tax credit in the ledger shall lapse. Above provision shall apply mutatis mutandis in respect of eligible VAT credit under the SGST law.
Exempted goods returned to the place of business on or after the appointed day[section 148] Where any goods on which duty had been exempt under the earlier law at the time of removal, not being earlier than six months prior to the appointed day, are returned to any place of business after the appointed day, no tax shall be payable thereon if: such goods are returned to the said place of business within a period of six months, and such goods are identifiable to the satisfaction of the proper officer. These provisions shall apply mutatis mutandis to goods that had been exempt at the time of their sale, subject to the conditions set out in the SGST law.
Duty paid goods returned to the place of business on or after the appointed day[section 149] Where goods on which duty had been paid under the earlier law at the time of removal, not being earlier than six months prior to the appointed day are returned to the place of business on or after the appointed day, no tax shall be payable thereon if: such goods are returned to the said place of business within a period of six months from the appointed day, and such goods are identifiable to the satisfaction of the proper officer. If returned after 6 months: person returning the goods to pay the tax Every person who receives such goods within a period of six months shall be entitled to take credit of the duty paid earlier at the time of removal. The above provision shall apply mutatis mutandis to goods on which duty had been paid at time of its sale, and returned to the supplier on or after the appointed day.
Inputs removed for job work and returned on or after the appointed day [Section 150] Inputs received in a factory had been removed which are removed as such or removed after being partially processed to a job worker for further processing, testing, repair, reconditioning or any other purpose in accordance with the provisions of earlier law prior to the appointed day and such inputs, after completion of the job work, and are returned to the said factory, no tax shall be payable if such inputs are returned to the said factory within six months from the appointed day. This period of six months can be extended by the competent authority for a further period not exceeding months by a competent authority. This section further provides that tax shall be payable by the job worker if such inputs are liable to tax under this Act, and are returned after a period of six months. Also, tax shall be payable by the manufacturer if such inputs are liable to tax under this Act, and are not returned within a period of six months. These provisions shall apply mutatis mutandis under the SGST law where such inputs are received at the place of the business and are dispatched as such or dispatched after being partially being processed to a job worker.
Semi-finished goods removed for job work and returned on or after the appointed day [Section 151] In cases where any semi-finished goods had been removed from the factory to any premises for carrying out certain manufacturing processes in accordance with the provisions of earlier law and such goods are returned after undergoing manufacturing processes after the appointed day, no tax shall be payable if the goods are returned to the factory within six months. This period could be extended on sufficient cause being shown for a further period not exceeding two months. Further, tax is payable by the person returning the said goods when such goods are liable to tax under this Act and are returned after six months. Tax is also payable by the manufacturer if such goods are liable to tax under this Act, and are not returned within a period of six months. The provisions under the sub-section shall apply mutatis mutandis under SGST law where the goods had been dispatched from the place of business to any other premises for carrying out certain manufacturing processes.
Finished goods removed for carrying out certain processes and returned on or after the appointed day [Section 152] Where any excisable goods manufactured in a factory had been removed without payment of duty for carrying out tests or any other process and not amounting to manufacture to any other premises in accordance with the provisions of earlier law and such goods are returned to the said factory within six months, no tax shall be payable. This period may be extended for a further period of two months. This section further stipulates that the person returning the goods shall also be liable to pay tax if such goods are liable to tax under this Act and returned after a period of six months or the extended period. Also, this section provides that the manufacturer may, in accordance with the provisions of the earlier law, transfer the said goods from the said other premises on payment of tax in India or without payment of tax for exports within six months or the extended period. The above provisions shall apply mutatis mutandis in respect of goods removed the place of business without payment of tax for carrying out tests or any other process to any other premises under the SGST law.
Issuance of supplementary invoices, debit or credit notes where price is revised in pursuance of a contract [Section 153] This section permits the taxable person who removes goods/provides such goods and/or services to issue to the recipient a supplementary invoice or debit note with particulars containing as such may be described and for the purposes of this Act such supplementary invoice or debit issued shall be deemed to have been issued in respect of an outward supply made under this Act. The above provision shall apply mutatis mutandis to an invoice raised under the similar circumstances under the SGST law. Further, in cases the price of goods/and or services is revised downwards on or after the appointed day, the taxable goods had removed/provided such goods, and/or services may issue to the recipient a supplementary invoice or credit note with such particulars as may be prescribed and such supplementary invoice or credit note shall be deemed to have been issued in respect of an outward supply made under this Act. The same provision shall apply mutatis mutandis to an invoice issued under similar circumstances under the SGST law.
Pending refund claims to be disposed of under earlier law [Section 154] Section 154 provides that every claim of refund of any duty/tax and interest, if any, paid on such duty/tax or any other amount filed before the appointed day shall be disposed of in accordance with earlier law and the amount eventually accruing to him shall be paid cash. It further provides that where a claim is fully or partially rejected, the amount so rejected shall lapse. The SGST law contains a similar provision for disposal of claims under earlier law to be disposed of in accordance with the provisions with earlier law.
Claim of Cenvat Credit to be disposed of under the earlier law[section 155] All proceedings of appeal, revision, review or reference relating to a claim for CENVAT credit under the earlier law shall be disposed of in accordance with the provisions of law and amount of credit found to be admissible to the claimant shall be refunded to him in cash. Further, proceedings relating to appeal, revision or reference relating to recovery of CENVAT credit under the earlier law shall be disposed of in accordance with the provisions of earlier law and where an amount becomes recoverable as a result of any such proceeding, the amount shall be recovered as an arrear under this Act and the amount so received shall not admissible as input tax credit under this Act. The SGST law contains similar provisions relating to claims for disposal of input tax credit under the earlier law and also for recovery of amount due as input tax credit under the earlier law. Amounts found to be admissible to him shall be refunded in cash, and amounts found recoverable shall be treated as arrears under this Act, and be treated as not admissible as input tax credit under this Act.
Finalization of proceedings relating to output duty liability[section 156] Where any proceeding relating to output liability initiated before the appointed day, the same shall be disposed of in accordance with the provisions of earlier law and in cases where an amount becomes recoverable, the same shall be treated as an arrear under this Act and the amount so recovered shall not be admissible as input tax credit under this Act. In any of such proceedings, if the amount is found to be admissible, the same shall be refunded in cash. These provisions shall apply mutatis mutandis under the SGST law.
Treatment of the amount recovered or refunded in pursuance of assessment or adjudication proceedings[section 157] This Section provides that where in pursuance of an assessment or adjudication proceedings instituted under the earlier law, any amount of tax, interest, fine or penalty becomes recoverable, the same shall be recovered as an arrear under this Act and the amount so recovered shall not be admissible as input tax credit under this Act. And, where such amount is refundable to a person, the same shall be refunded to him in cash. Similar provisions for recovery from, and payment to, an assessee pursuant to an assessment or adjudication proceedings instituted under the earlier law are also found under the SGST law.
Treatment of the amount recovered or refunded pursuant to revision of returns[section 158] In case where any return is revised under the earlier law, and when any amount is found to be recoverable, the same shall be recovered as an arrear of tax under this Act, and shall not be admissible under as input tax credit under this Act. And, where an amount is found to be refundable, the same shall be refunded to him in cash. Similar provisions can be found under the SGST law
Treatment of long term construction/works contracts [Section 159] This section specifies that goods and/services supplied on or after the appointed day pursuant to a contract entered into before the appointed day shall be liable to tax under the provisions of this Act. A similar provision explaining treatment of goods/services in like manner pursuant to a contract entered into before the appointed day is found under the SGST law.
Progressive or periodic supply of goods or services [Section 160] In cases where consideration for supply of goods/services made the after the appointed day is received prior to the appointed day, no tax shall be payable under the Act, provided tax has already been under the earlier law. A similar provision is also found under the SGST law.
Treatment of retention payments [Section 161] No tax shall be payable on the supply of goods and or/services made before the appointed day when part consideration is received on the said supply on or after the appointed day, but the full duty or tax payable on such supply has already been paid under the earlier law.
Miscellaneous Section 162:- Credit Distribution of Service Tax by ISD:- This sections states input tax credit received prior to the appointed day shall be eligible as credit under this Act if the invoice(s) relating to such services are received on or after the appointed day. Section 162A:- Tax paid on goods lying with agents to be allowed as credit: - An agent shall be entitled to take credit of the tax paid on the goods belonging to principal and lying at the premises of the, subject to fulfillment certain conditions set out under this Section. Section 162B:- Tax paid on capital goods lying with agents to be allowed as credit:- An agent shall be entitled to take credit of the tax paid on the capital goods belonging to principal and lying at the premises of the, subject to fulfillment certain conditions set out under this Section. Section 162C:- Treatment of Branch transfers: - Under the SGST law, any amount of input tax credit reversed prior to the appointed day shall not be admissible as credit of input tax under this Act. Section 162D:-Goods sent on approval basis on or after the appointed day: - In cases where goods sent on approval basis, not earlier than six months before the appointed day, are rejected/not approved by the buyer on or after the appointed day, no tax shall be payable thereon if such goods are returned within six months from the appointed day. This period of six months could be extended for a further period not exceeding two months on sufficient cause being shown. However, tax shall be payable by the person returning the goods if such goods are liable to tax under this Act, and are returned after a period of six months. Likewise, tax shall also be payable by the person who has sent the goods on approval basis if such goods are liable to tax under this Act, and are not returned within a period of six months or extended period. Section 162E:- Deduction of tax at source: - Where a supplier who deducts TDS in respect of sale of goods made under earlier law and has also issued invoice for the same before the appointed day, no deduction of tax at source under section 37 shall be made by the deductor where the payment to the said supplier is made on or after the appointed day.
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