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There is a lot of apprehension among normal taxpayers regarding what will happen during the period of transition to the proposed GST. This article has made an attempt to create awareness about the transitional provisions enshrined in the proposed GST Act in a simplified and easy to understand manner. The main transitional provisions are as under:

1. A registered taxable person (other than composition dealer) is entitled to a cenvat credit carried forward in his last return for the period ending just before the appointed day provided the amount is admissible as input tax credit under the GST Act.
2. Similarly in respect of the state VAT and Entry Tax the registered taxable person (other than composition dealer)is entitled to a credit carried forward in his last return for the period ending just before the appointed day provided the amount is admissible as input tax credit under the GST Act. However in case of state laws the return has to be filed within 90 days of the appointed unlike in respect of central law where no timeline has been mentioned.
3. It is worth mentioning here any credit admissible under CST Act, 1956 and rules framed there under, such as in case of interstate state sales, branch transfers, exports etc. will not be eligible for input tax credit under GST Act but will be eligible for refund under old law subject to submission of necessary documents as prescribed there under.
4. A registered taxable person (other than composition dealer) is entitled to a unavailed cenvat credit/credit in respect of capital goods under old law not carried forward in his return, for the period immediately preceding the appointed day, furnished under earlier law provided the credit is eligible both under the old law and new proposed GST. For example the appointed day is, say 01.07.2017. In that case even if the assessee has not carried credit on capital goods in the last return under the old law for the period ended on 30.06.2017 he will still be eligible for credit on capital goods to the extent unavailed and subject to fulfilment of other conditions. Unavailed credit means total eligible credit minus credit availed under the old law.
5. A registered taxable person, who was not required to be registered under earlier law or manufacturing exempted goods or providing exempted services or a first or second stage dealer or registered importer is eligible for credit of excise duty or service tax in respect of input held in stock or contained in semi-finished goods or finished goods held in stock subject to certain conditions such as using inputs/goods for making taxable supplies under GST Act, passing the benefit of reduced prices to the recipients and providing prescribed documents. Similar benefits available in respect of state VAT subject to certain conditions.
6. A registered taxable person is eligible for credit of excise duty, service tax, vat or entry tax in respect of goods or services received on or after the appointed day provided duty/tax has been paid before the appointed day subject to receipt of invoice/tax paying documents being received or recorded in accounts within 30 days of the appointed day.
7. The assessee who was registered under composition scheme of excise or vat law has an option to switch to normal provisions and in such cases he is eligible for credit of duties/taxes in respect of inputs held in stock or contained in semi-finished goods or finished goods held in stock subject to certain conditions such as using inputs/goods for making taxable supplies under GST Act, such person has in his possession documents showing payment of tax/duty under earlier law which is not more than 12 months old on the appointed day.
8. In case of goods exempt under excise law/vat law sold within 6 months before the appointed day and returned within 6 months after the appointed day no duty/tax is payable provided goods are identifiable to the proper officers’ satisfaction and in case of goods returned after 6 months tax will be payable if the goods are taxable under GST otherwise no tax is payable. However if the person returning goods is an unregistered person than no tax payable.
9. In case of duty/tax paid goods sold within 6 months before the appointed day to the unregistered buyer are returned within 6 months after the appointed day than the seller will be entitled to a refund of duty/tax paid under the earlier law. In case the person returning goods is a registered person than it will be treated as a supply.
10. In case of inputs sent to job worker before the appointed day no tax would be payable if the same are returned after completion of job work or otherwise within six months of the appointed day to the place of principal’s business. The period may further be extended by up to 2 months. Any delay beyond the aforesaid period will result input tax credit being collected from the taxable person as arrear of tax and input tax credit will not be available against such tax paid. Both principal and the job worker are required to declare details of stock held by the job worker on the appointed in the prescribed form.
11.
Similar provisions to those discussed in point 10 above are there for semi-finished goods to job worker.
12. Where in pursuance of any contract entered prior to the appointed day the price of any goods/ service are increased than the seller is required to issue supplementary invoice or debit note within 30 days of price revision and the output GST is payable in respect of differential price.
13. Where in pursuance of any contract entered prior to the appointed day the price of any goods/ service are reduced than the seller is required to issue supplementary invoice or credit note within 30 days of price revision and the seller will be entitled to reduce his output tax liability if the buyer reduces his input tax credit.
b Where any tax/duty is refundable under the earlier law the same will be dealt with under the earlier law. If the tax payer has carried forward any input credit to GST than no refund will given under the earlier law and claim for refund rejected under the earlier law will lapse.
15. Where any tax return filed under earlier law is revised after the appointed day and as result tax found payable or credit claimed is found inadmissible than the amount involved will be recovered under the GST Act and no input tax credit is available in respect of the amount. If as result of revision any refund is payable than the same will be paid under the earlier law.
16. The goods/services supplied on or after the appointed day in pursuance of a prior contract are taxable under the GST Act.
17. Where tax is paid on supply of goods/service under the earlier law and part/full consideration is received before the appointed day no tax under GST Act even in case of supply of goods/service on or after the appointed day.
18. It has been provided that in respect of taxable services where point of taxation under the earlier law falls before the appointed day than in that case that portion of service will not be taxed under this law and the balance portion will be taxed under this law. Similar provision also made in respect of goods.
19. The credit is available in respect of service received by input service distributor prior to appointed day even if the bill received on or after appointed day.
20. In respect of State Goods and Service Tax (SGST) where the goods belonging to principal are with agent on the appointed day the agent may take credit of the tax paid on such goods if the agent is registered under the act, both the agent and principal make prescribed declarations in respect of the goods, invoice is not older than 12 months prior to appointed day and principal has reversed /not availed the credit. Similar provisions for capital goods lying with the agents.
21. Where input tax credit on branch transfer are reversed before the appointed day they shall not be admissible under the SGST Act.
22. In case of SGST where goods are sold on approval basis within 6 months prior to the appointed day and returned within 6 months after the appointed day no GST applicable. If the goods post 6 months after the appointed day both the sender and receiver will be liable to pay the SGST.
23. Where Cenvat Credit in respect of input services has been reversed for non -payment of consideration within 3 months the same may be reclaimed under the GST provided the payment is made within 3 months of the appointed day.
24. In case of inter- state supply or import of goods/service the same shall be taxable under the provisions of IGST Act. If however in respect of interstate supply of goods if tax has been paid fully under the earlier law than no IGST. Similarly in case of import of services where part of tax paid under earlier law than IGST applicable only on the balance amount.

 (The author practices as a Chartered Accountant under the name and style of Rishabh Kumar Barmecha and Associates and is an expert in auditing, financial investigation, direct and indirect taxation. The author can be reached at rishabhkumarbarmecha@gmail.com or 91 9007909221 or Twitter @CARKBarmecha.)

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8 thoughts on “Transitional provisions under GST act

  1. HIMAL SHANKARI says:

    Sir,
    A govt Contractor is tendering before implementation of GST and he recd work contract on Nov 2016 and they complite the work and the Contractor is to received the payment after GST application .
    1. Can he pay the GST
    2. when the tendering he is not calculate the GST amount at the time of tendering the VAT is applicable .
    3. If he pay the GST amount @ 12% then how he adjust the excess amount which is pay the (Service Tax 3% – GST @12%)

  2. Ashok Joshi says:

    If a manufacturer has stock on 30th June of Goods which were under compounded levy scheme can he claim ITC and How?

  3. Chitan Mehta says:

    Taxes paid only on stock of Finished Goods,Semi-finished goods or raw materials being carried forward in GST regime. Service which you provided to your customer or or before 30-06-2017, will not be carried over to GST regime, so, Service Tax credit will not be eligible to you.

    1. Jyothy says:

      Thank you for your reply

  4. Jyothy says:

    We pay service tax on freight inward & outward, Manpower bills under RCM and take the credit in Central Excise.
    For example, if we pay service tax in April ’17, we take credit while paying central excise for the month of May 2017. Likewise we paid service tax for June 2017, we have to take credit in July 2017.
    But GST is applicable for July 2017, how can we take that service tax paid in June 2017? Can we carry forward this service tax in GST through transitional rules?
    Kindly advice, we have paid huge amount in service tax.

  5. MANOJ PUSALKAR says:

    We have raised all pending invoices dated 30th June 2017 for service jobs completed in June. Hard copies of such invoices have been received by client sometime in first week of July 2017. Some client have accepted our invoices while some clients have refused to accept our invoices. What is transitional provision as per GST law applicable in this matter ? Our understanding is that June dated invoices can be accepted in July 2017.

    1. Mehulrajsingh says:

      It should be accepted.
      Why?
      A registered taxable person is eligible for credit of excise duty, service tax, vat or entry tax in respect of goods or services received on or after the appointed day provided duty/tax has been paid before the appointed day subject to receipt of invoice/tax paying documents being received or recorded in accounts within 30 days of the appointed day

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