TRANSITIONAL PROVISIONS AND MIGRATION ISSUES in GST By- CA Umesh Sharma

TRANSITION IS ………………..

Taxes Subsumed and their credit in GST Sr. no. Taxes Subsumed Credit in GST 1 Excise duty Yes 2 Service Tax 3 VAT 4 Luxury tax 5 Entry Tax 6 CST No 7 Entertainment Tax 8 Countervailing duty 9 Additional Customs Duty

Input credit Logically the credit of Taxes subsumed is to be given…. But it would be interesting to note that tax paid on inter state sale in current regime (CST) is not allowed as credit under GST.

Goods not covered in GST Alcoholic liquor for human consumption. Petroleum crude High speed diesel Motor spirit Natural gas Aviation turbine fuel

TRANSITIONAL ARRANGEMENTS FOR INPUT TAX CREDIT.

Section 140 (1) - Transitional arrangements for ITC Amount of CENVAT Credit carried forward in a return to be allowed as ITC A registered person Other than a person opting to pay tax under section 10, shall be entitled to take, in his Electronic Credit Ledger, the amount of CENVAT credit carried forward in the return relating to the period ending with the day immediately preceding the appointed day, Furnished by him under the existing law in such manner as may be prescribed No Credit in the following Circumstances Where the credit not admissible as ITC under this Act Where not furnished the return for period of 6 months under existing Law immediately preceding the appointed day Where said credit relates to goods manufactured and cleared under exemption notifications

Section 140 (2) - Transitional arrangements for ITC Unavailed CENVAT Credit on Capital goods not carried forward in a return, to be allowed in certain situations A registered person Other than a person opting to pay tax under section 10, shall be entitled to take, in his Electronic Credit Ledger, credit of the unavailed CENVAT credit in respect of capital goods, not carried forward in a return, furnished under the existing law by him, for the period ending with the day immediately preceding the appointed day in such manner as may be prescribed No Credit unless-Where the credit admissible under the existing law and also under this Act

Credit of eligible duties and taxes on input held in stock 140 (3) Person eligible for input tax credit Person not liable to be registered under the earlier law Person engaged in manufacture/ sale of exempted goods, provision of exempted services Person providing works contract service and availing abatement under notification no. 26/2012 First/ Second stage dealer, importer Credit available on Inputs held in stock and inputs contained in semi-finished goods or finished goods held in stock as on appointed day Above benefit not available for input services Such credit can be taken in the electronic credit ledger Conditions Goods must be used or intended to be used for taxable supply Eligible to take the credit under GST law Such person should be in possession of invoice or other prescribed document Invoice or other document should be within 12 months from the appointed day Excess claims will be recovered as arrears of tax under GST law

where a registered person, other than a manufacturer or a supplier of services, not in possession of - an invoice or - any other documents evidencing payment of duty

ITC on inputs for which documents are not available A registered person, holding stock of goods which have suffered tax at the first point of their sale in the State and the subsequent sales of which are not subject to tax in the State availing credit in accordance with the proviso to sub-section (3) of section 140 shall be allowed to avail input tax credit on goods held in stock on the appointed day in respect of which he is not in possession of any document evidencing payment of value added tax.

9% or more CGST– Credit allowed @ 60% Less than 9% CGST – Credit allowed @ 40% Such credit shall be credited after the central tax payable on such supply has been paid. Provided, where IGST is paid Credit shall be 30% and 20% respectively.

Credit Transfer Document Who Can Issue :- Manufacturer who was registered under Central Excise Act Issue to whom :- Person not registered under Central Excise but is registered under GST For which goods? :- Goods cleared before appointed date and he is satisfied that goods are in possession with person to whom CTD is been issued. Conditions :- Value of such goods is Minimum Rs. 25,000/- per piece Goods bears the brand name of issuer and identifiable distinct no. Records of clearance and duty payment are maintained with Issuer Goods are in same form in which it was cleared by manufacturer. Copies of all invoices is maintained by dealer who is availing credit by CTD.

What details are required in credit transfer document? Serially numbered Central excise registration no. Address of concerned excise division Name, address and GSTIN of person to whom it is issued Description Classification Invoice no with date of Removal Mode of transport Vehicle Registration No Rate of Duty Quantity Value Duty Amt

Time limit for issuing CTD Issued Within 30 days Of the appointed day Corresponding invoices shall be enclosed with CTD

Take a note :- CTD shall not be issued to the person to whom invoice was issued for same goods before appointed date.

Take a note :- Person availing credit on basis of CTD shall mention such CDT Number in invoice while making supply of such goods

Details of CTD received Submitting details Manufacturer Details of CTD issued Within 60 days In Table 1 of TRANS 3 Dealer Details of CTD received In Table 2 of TRANS 3

NOTE Credit on basis of CTD is available for Excise paid inputs BUT what about CVD SVD components in the inputs held by a Dealer?

Credit of eligible duties and taxes in case of exempted goods as well as taxable goods-140(4) A registered person, who was engaged in the manufacture of taxable + exempted goods/Services, but which are liable to tax under this Act, shall be entitled to take : The amount of CENVAT credit carried forward in a return furnished under the existing law by him accordance with the provisions of sub-section (1); The 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,

Credit of eligible duties and taxes in input and input services- Sec 140(5) A registered person shall get •credit of eligible duties and taxes •paid by him under earlier Law •In his Electronic Credit Ledger •on inputs or input services •received on or after appointed day •This period can be further extended more 30 days on sufficient cause being shown •He has to furnish a statement prescribed manner in respect of credits taken under this sub-section extended to being statement in credits Provided he has to recorded invoice or other duty or tax paid documents in his books of account within 30 days from appointed day

Section 140 (6) - Transitional arrangements for ITC Credit of eligible duties in case tax was paid at fix rate or as a fix amount under existing law A registered Person Paying tax at fix rate or paying a fix amount Shall be entitled to take in Electronic Credit Ledger, Eligible credits on inputs, inputs in semi-finished and in finished goods held in stock on the appointed day subject to the following conditions, namely -

Such stock to be used for making Taxable supplies Such person eligible to take ITC on inputs under this Act The said person must be in possession of invoice or prescribed documents Such invoices or documents were issued not earlier than 12 months He is not paying tax u/ 10 i.e. Composition Levy

Section 140 (7) Transitional arrangements for ITC Distribution of Credit under this Act by Input Service Distributor Notwithstanding anything to the contrary contained in this Act,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 are received on or after the appointed day.

Section 140 (8) - Transitional arrangements for ITC Carry forward of credit where person has centralized registration under existing law Taxable person has centralised registration under earlier law Obtained registration under GST law Allowed to take credit of Cenvat c/f in return furnished under earlier law in electronic credit ledger For the period ending with the immediately preceding the appointed day If the taxable person files an original/ revised return within 3 months of the appointed day Credit will be allowed if credit amount is reduced from that claimed earlier Note: Only those credits which are admissible under GST laws will be allowed. Credit may be transferred to any registered taxable person having the same PAN for which centralised registration was obtained under earlier law

Section 140 (9) - Transitional arrangements for ITC Eligibility of credit under this Act in case CENVAT was reversed under existing law due to non-payment If CENVAT credit availed for input services provided under the existing law has been reversed due to non-payment of the consideration within 3 months Such credit can be reclaimed if He has made the payment within 3 months from the appointed day

Section 141- Transitional provisions relating to Job Work

GOODS removed for Job work and returned on or after the appointed day Tax not payable when Goods were removed/ dispatched as such or after partial processing for job work under the earlier law prior to appointed day; Such goods are returned within six months or within the extended period (2 months) from the appointed day to the said factory/to the said place of business Tax payable when and by whom Goods are liable for payment of taxes under GST; and Such goods are returned after six month from the appointed day; Tax shall be payable by job worker, if goods are returned after six months or after the extended period; Tax shall be payable by manufacturer , if goods are not returned within six months or within the extended period Applicability of the exemption Manufacturer and Job worker should declare details of inputs held in stock by the job worker on behalf of the manufacturer on the appointed day

Section 142 Miscellaneous transition Provision

142(1)-Goods returned after the appointed date Not earlier than 6 monrhs of the appointed date Where any goods on which duty, if any, had been paid under the existing law at the time of removal are returned to any place of business on or after the appointed day

refund of the duty paid under the existing law The registered person Shall be eligible for refund of the duty paid under the existing law where such goods are returned by a person other than a registered person, to the said place of business within a period of six months from the appointed day Such goods must be identifiable to the satisfaction of the officer Provided that if the said goods are returned by a registered person, the return of such goods shall be deemed to be a supply.

WHERE PRICE IS REVISED IN PURSUANCE OF A CONTRACT 142(2) Contract entered prior to the appointed day and price of goods and / or services is revised on or after the appointed day Upward revision in the price Issue of supplementary invoice or debit note within 30 days from such revision Downward revision in the price Issue of supplementary invoice or credit note within 30 days from such revision Note - Taxable person shall be allowed to reduce his tax liability, if the recipient of invoice or credit note has reduced his input tax credit corresponding to such reduction of tax liability.

Section – 142 (3) Misc. Transitional Provisions Claim for refund filed before on or after the appointed day of any amount paid under the existing Law Any refund claim filed before, on or after the appointed for refund of any amount of CENVAT credit, duty tax, interest or any other amount paid under the existing law, shall be Disposed of in accordance with the provisions of in accordance with the provisions of earlier law Refund is allowed or partially allowed The portion allowed will be paid in cash subject to doctrine of unjust enrichment Refund is rejected or partially rejected The portion rejected will lapse No refund shall be allowed of any amount of CENVAT credit where the balance of the said amount as on the appointed day has been carried forward under this Act.

Section – 142 (4) Misc. Transitional Provisions Claim for refund filed before on or after the appointed day of any amount paid under the existing Law Any refund claim filed after the appointed day in respect of the goods or services exported before or after the appointed day, shall be Disposed of in accordance with the provisions of in accordance with the provisions of earlier law Refund is allowed or partially allowed The portion allowed will be paid in cash Refund is rejected or partially rejected The portion rejected will lapse No refund shall be allowed of any amount of CENVAT credit where the balance of the said amount as on the appointed day has been carried forward under this Act.

Section 142 (5) - Misc. Transitional Provisions Claim for refund file after the appointed day for refund of tax paid under existing law in respect of services not provided Every claim filed by a person after the appointed day for refund of tax paid under the existing law in respect of services not provided shall be disposed of in accordance with the provisions of existing law and any amount eventually accruing to him shall be paid in cash

Section 142 (9) - Misc. Transitional Provisions Return furnished under Old Law, revised after appointed day

Section 142 (10) –contract entered prior to the appointed date Contract entered into prior to appointed day and Goods/Services supplied after the appointed day Goods/Services or both supplied on or after the appointed day in pursuance of a contract entered into prior to the appointed day shall be liable to tax under this Act

Section 142 (10) - Misc. Transitional Provisions Tax not to be paid under this Act if paid under existing law No Tax shall be payable on Goods under this Act to the extent-the tax was leviable -on the said goods under Value Added Tax The tax was leviable on the said Services under Finance Act, 1994 Section 142 (11) - Misc. Transitional Provisions The taxable person shall be entitled to take credit of VAT and ST paid under existing Law To the extent of supplies made after the appointed day Tax Shall be leviable under this Act AND

Tax paid when and by whom GOODS SENT ON APPROVAL BASIS RETURNED ON OR AFTER THE APPOINTED DAY Section 142 (12) Tax not payable when Goods sent on approval basis under earlier law prior to six months from the appointed day; Such goods are returned within six months or within the extended period from the appointed date (extended period 2 months) Tax paid when and by whom Goods are liable for payment of taxes under GST; and Such goods are returned after six month or within the extended period from the appointed day Tax shall be payable by person returning the goods, if the goods are returned after a period of six months or extended period of time from the appointed day Tax shall be payable by person who has sent goods on approval basis, if the goods are not returned within the six months or extended period of time from the appointed day

Now we move to cross the rules……

As per Transition Rules (1) A registered person who wants to take credit of Input tax u/s 140 needs to file GST TRANS-1 within a period of 90 days of the appointed date. Commissioner may extend the period by further 90 days

As per Transition Rules Every claim u/s 140(2) in relation to credit of tax paid on capital goods. Should specify separately Amount of tax or duty Availed/Utilized till the appointed date under the existing law Amount of tax or duty YET to be Availed/Utilized till the appointed date under the existing law

As per Transition Rules 2(b) Separately give details of stock Where earlier goods were exempt and now they are taxable Or Moving form paying tax @ fix rate to general rates or Moving from composition scheme

As per Transition Rules 2(c) Give details separately like Name of supplier Description of goods Invoice number Qty Value Eligible taxes Date of entry in books Where tax has been paid in the earlier tax regime but supply made after appointed date and credit is to be claimed u/s 140(5)

Stock in hand under GST – Treatment of CENVAT Credit and VAT Credit

(I) Manufacturer registered under Excise, VAT and Service Tax (a) Return filed under Excise, VAT or Service Tax shows outstanding/ excess/ unutilised balance of input tax credit Carry forward the excess input tax credit reflected in the return filed for period ended 30th June 2017. The details should be reflected in your TRAN 1 form Fill the GST TRAN 1 .

Excess CENVAT Credit (shown in Excise and Service Tax Return) Will be c/f as CGST Excess VAT Credit (shown in VAT Return) SGST

The balance is not allowed to be carried forward in following cases: Credit not admissible under GST law All 6 month returns not filed Credit relates to goods manufactured and cleared under exemption notifications. VAT Credit attributable to claims related to sales under Form C, F, E1, E2, H etc. not to be allowed unless the forms are duly made available

(b) Return filed under Excise, VAT and Service Tax does not show outstanding balance of input tax credit  No credit shall be carried forward under GST  No requirement to file any detail with respect to the stock in GST FORM TRAN-1

(II) Manufacturer registered under VAT only This will cover SSI dealers opting out of excise. This will also cover manufacturers exempt from excise and not registered under excise. Return filed under VAT shows outstanding/ excess/ unutilised balance of input tax credit File TRAN 1 form . The excess input tax credit in the return filed for period ended 30th June 2017 would be allowed to C/f. Excess VAT Credit (shown in VAT Return) shall be carried forward as SGST

Balance not allowed to c/f if The Credit is not admissible in the GST Law All returns for 6 months have not been duly filed under the VAT Law Credit attributable to claims related to sales under Form C, F, E1, E2, H etc. not to be allowed unless the forms are duly made available

Return filed under VAT does not show excess balance of input tax credit  No credit shall be carried forward under GST in respect of VA

Trader registered under VAT Return filed under VAT shows outstanding/ excess/ unutilized balance of input tax Credit The excess input tax credit reflected in the return to be carried forward under GST GST FORM TRAN-1 to be filed. The GST FORM TRAN-1 to contain details about the credit to be carried forward Excess VAT Credit (shown in VAT Return) shall be carried forward as SGST Return filed under VAT does not show excess balance of input tax credit -No credit shall be carried forward under GST in respect of VAT The balance is not allowed to be carried forward in following cases: The Credit is not admissible in the GST Law All returns for 6 months have not been duly filed under the VAT law Credit attributable to claims related to sales under Form C, F, E1, E2, H etc. not to be allowed unless the forms are duly made available

Service provider registered under Service Tax paying tax at normal rate Return filed under Service Tax shows outstanding/ excess/ unutilised balance of input tax credit The excess input tax credit reflected in the return filed for the period ended 30th June 2017 to be carried forward under GST GST FORM TRAN-1 to be filed. The GST FORM TRAN-1 to contain details about the credit to be carried forward Excess CENVAT Credit (shown in Service Tax Return) shall be carried forward as CGST The balance is not allowed to be carried forward in following cases: The Credit is not admissible in the GST Law All returns for 6 months have not been duly filed under the Service Tax Law Return filed under Service Tax does not show excess balance of input tax credit No credit shall be carried forward under GST in respect of Service Tax

Manufacture/Service provider not registered in earlier law but now registered under gst Excise duty, Additional Excise Duty, CVD and SAD in respect of raw materials, finished/ semi- finished stock held on 30th June 2017 Credit of Excise and other related duties allowed Inputs/ goods should be used to make taxable GST supplies ITC in respect of the inputs should be eligible under GST Duty paying documents/ invoices are essential Date of issue of such invoice has to be on or after 1st July 2016 GST FORM TRAN-1 to be filed. The GST FORM TRAN-1 to contain details about the credit claimed The GST FORM TRAN-1 to contain details about the stock held on 30th June 2017 Credit shall be carried forward as CGST

Trader not registered under any of current laws now registered under GST VAT in respect of raw materials, finished/ semi-finished stock held on 30th June 2017 Credit of VAT allowed Inputs/ goods should be used to make taxable GST supplies ITC in respect of the inputs should be eligible under GST Duty paying documents/ invoices are essential Date of issue of such invoice must be on or after 1st July 2016 GST FORM TRAN-1 to be filed. The GST FORM TRAN-1 to contain details about the credit claimed The GST FORM TRAN-1 to contain details about the stock held on 30th June 2017 Credit shall be carried forward as SGST

lets look into………..GST TRANS-1

GST TRANS-1 Details required Amount of tax credit carried forward in the return filed under existing laws

SOME ISSUES……….

BUILDER

In case of builders issues Refer: MVAT Amendment to Composition Scheme on 29th May and relevant trade circular 18T of 2017. Ongoing contracts of Builders With relation to transitional provisions is issue relating to ongoing contracts For example, service tax liability is discharged based on completion of services method i.e. as and when milestones become due. Whereas, full VAT is paid based on agreement value or market value. Accordingly, in case of ongoing contracts, a situation may occur wherein full VAT is discharged but only part service tax is paid on the same flat.

Accordingly, issue may arise as to proportion of payment of GST on such flats. Such issue is dealt with in Section 142(11) of the CGST Act/SGST Act wherein it has been provided that proportionate credit of full tax paid earlier may be available. Supply made under existing law is taxed in existing law. Supply made under GST is taxed in GST.

GST In case of under construction flats, complex, etc GST chargeability in case where booking made and part payment made before 1st July. Buyers are requested to make entire payment before 1st July 2017 or They will have to face higher tax incidence for payment made after 1st July 2017 This is against the GST law. The buyers are being compelled

Issue is clarified as: Construction of flats, complex will have lower Tax incidence in GST regime Current tax rate under excise is mostly 12.5% and VAT 12.5 %– 14.5% and also entry tax is levied on it. ITC is not allowed currently under both Service tax and VAT payable under composition scheme. Hence, burden of these taxes on construction material is also passed to buyers, not visible to them Buyers only look at headline rate of 5.5% (4.5% service tax and 1% vat). They do not see the tax embedded in cost

But in GST FULL ITC is available But in GST FULL ITC is available. This Input tax should not form part of cost of flat. But such credit is restricted to headline rate of 12% i.e. overflow of credit is disallowed to builders. Builders are expected to pass on benefit of lower tax to buyers by reducing prices/installment They should not ask buyers to pay higher tax rate on installments to be received after imposition of GST. Despite this clarity on law position, if any builder resorts to such practice, the same can be deemed to be profiteering under section 171 of GST law.

TEXTILE

Closing Stock Currently Taxed Input credit on existing stock as on 30th June allowed to the extent of 60% if GST rate is 18% or more. Input credit on existing stock allowed to extent of 40%, if GST rate less than 18%. Currently Exempt Input credit of old stock as on 30th June,for most part, not allowed under GST

TEXTILE SECTOR Most of the industry to fall under tax net for the first time Readymade below Rs. 1000 and above Rs.1000/- Sarees Industry to fall under the tax net for the first time. Sarees to be classified as fabric and not readymade apparel. Applicable GST rate 5% Sarees Was exempt under service tax. Now taxable at GST rate of 5% Textile Printing & Processing

CA AND GST

CA AND GST A CA having gross receipts less than 50 lakhs has an option to pay service tax on receipt basis…… What would be the scenario where services are provided before the GST regime but receipt of payment is after the appointed date?

A Chartered Accountant who is not Registered i.e URD. Issues a invoice after GST appointed date. And applies for REGISTRATION after appointed date. He would be allowed to issue a REVISED INVOICE for the period in which invoice was issued between the date of application and the date till registration is granted.

Package Scheme Incentive No such scheme in GST… Duty paid scripts What About?? Package Scheme Incentive No such scheme in GST… Duty paid scripts - No such scripts in GST as of now

MIGRATION OF EXISTING TAXPAYERS (S.139)

MIGRATION OF EXISTING TAXPAYERS (S.139) On and from the appointed day every person registered under any of the existing laws having a valid Permanent Account Number subject to such conditions and in such form and manner as may be prescribed Sub Section 1 Shall be issued a certificate of registration on provisional basis

MIGRATION OF EXISTING TAXPAYERS. The final certificate of registration shall be granted in such form and manner and subject to such conditions as may be prescribed. 139 (2) The certificate of registration issued to a person under sub-section (1) shall be deemed to have not been issued if the said registration is cancelled in pursuance of an application filed by such person that he was not liable to registration under section 22 or section 24. 139 (3)

MIGRATION ISSUES PAN Card name – as per CBDT which may not be same as PAN Sol- Check the PAN details on income tax site and then enter in registration form. 2. Date on PAN card- same as above 3. PAN of provisional ID & actual PAN does not match sometimes 4. While uploading DSC problem occurs, but it shows submitted and pending for verification; and next day it shows as provisional ID in saved application

MIGRATION AND TRANSITIONAL PROVISIONS SUMMARY MIGRATION AND TRANSITIONAL PROVISIONS

Transitional Checklist Check your last Returns filed . Make strict follow-up to Collect all the C forms/H Form/ I forms Get Complete your working for Closing Stock for the period 31.3.2017 - 30.6.2017 before GST Implementation date Allocate your such inputs held in stock or inputs contained in semi-finished or finished goods held in stock (HSN wise) Check whether any stock of one year old is lying with you . Classify stock purchased on invoices bearing Duty Payment & non duty payments to get ITC transferred to CGST. Re-configuration of accounting system

I am Sorry by heart for any mistake, error or omission on my part.

Don’t WORRY…..

All the best in GST …..

Thank you