TRANSITIONAL CHALLENGES IN GST – CREDIT AND CARRY FORWARDS Presentation: K. A . UMA, Deputy Commissioner of Commercial Taxes, Audit 1.4, DVO – 1 , Bengaluru.

Chapter XXVII – Transitional Provisions Section 165 to 197 Challenges Based on the Model GST Law issued by the GST Council Secretariat November 2016 Chapter XXVII – Transitional Provisions Section 165 to 197 Challenges

SECTIONS GENERAL PROVISIONS [s.165] MIGRATION OF EXISTING TAX PAYERS [s. 166] CENVAT/VAT CREDIT CENVAT/VAT Credit c/f in a return to be allowed as ITC [s.167] Un-availed CENVAT/VAT Credit on capital goods, not c/f in a return, to be allowed in certain situations [s.168] INPUT CREDIT ON STOCK Of Inputs used for manufacture of goods exempted earlier but taxable now [ s.169] Of Inputs used for manufacture of goods non-exempted as well as exempted.[s.170] Of inputs or input services during transit .[s.171] Of inputs held by a person switching over from composition scheme [s. 172]

Sections GOODS RETURN IN RESPECT OF EXEMPTED/DUTY PAID GOODS Return of goods exempt earlier [s.173] Return of goods on which duty/tax paid under earlier law [s. 174] JOB WORK Inputs/semi – finished/Finished removed earlier for job work returned after the appointed day [ s. 175 -177] PRICE REVISION….issue of supplementary invoices/debit & credit notes [s.178] RECOVERY/REFUND [PENDING CLAIMS, CLAIM OF CENVAT/INPUT TAX, PROCEEDINGS RELATING TO OUTPUT DUTY LIABILITY, UPON ASSESSMENT/REVISION OF RETURNS] [s. 179 – s.185]

Sections MISCELLANEOUS [ s.186 – 197] Works Contract [S.186] Progressive/Periodic Supply [S.187] Taxability of services / goods in certain cases(Retention payments)[s.188-189] Credit distribution by ISD [S.190] Unutilized credit under Centralised registration [s.191] Goods/Capital goods lying with the agents [s.192-193] Branch transfers [s.194] Goods sent on approval basis returned [s.195] Deduction of tax at source [s.196] Transitional provisions for availing Cenvat credit in certain cases [s.197]

GENERAL PROVISION [S.165] Government(State/Central) Officials discharging functions under the State/Central Act relating to taxes on Goods /Services to be subsumed in GST& continuing in Office on the appointed day Will be Deemed to be appointed as GST Officers/Competent authorities under the respective provisions of the act & Government (State/Central) are empowered to issue orders/make rules for smooth transition to GST so long such matters are not in conflict with the purposes of the Act

MIGRATION OF EXISTING TAX PAYERS’ TO GST [S.166] Taxable Person furnishes required information within 6 months FINAL REGISTRATION CERTIFICATE IS GRANTED Issue of Provisional Certificate with validity of 6 months Taxable Person does not furnish required information within 6 months Provisional Certificate may be Cancelled Provisional Certificate is cancelled upon dealer’s application [Not Liable under GST] Provisional Certificate is DEEMED NOT TO HAVE BEEN ISSUED

CENVAT/VAT CREDIT[s.167 - 172] C/F IN THE LAST RETURN, UNAVAILED CREDIT ON CAPITAL GOODS INPUT CREDIT ON STOCK OFMANUFACTURED GOODS EXEMPT EARLIER - TAXABLE NOW PRE GST CENVAT/ VAT CREDIT INPUT ON STOCK OF MANUFACTURED GOODS WHICH ARE NON-EXEMPT AND ALSO EXEMPT EARLIER - TAXABLE NOW INPUT/ INPUT SERVICES DURING TRANSIT ENJOYED COMPOSITION PRE GST, NOW UNDER NORMAL SCHEME

CREDIT WILL BE AVAILABLE IN GST Subject to the following Conditions : CENVAT/VAT CREDIT [s.167 - 168] CENVAT/VAT CREDIT CARRIED FORWARD CREDIT WILL BE AVAILABLE IN GST UNAVAILED CENVAT/VAT CREDIT ON CAPITAL GOODS NOT CARRIED FORWARD Subject to the following Conditions : The amount has to be admissible as CENVAT/VAT credit under the earlier law & as ITC under the GST Law The amount will be recoverable as an arrear of tax under GST if it is recoverable due to any proceeding instituted against the taxable person under the earlier law whether before or after the appointed day

INPUT CREDIT ON STOCK OF GOODS HELD [s.169 - 172] Earlier Exempted but Taxable under GST/ Combination of both non-exempted and exempted goods / input or input services during transit Earlier in Composition but under Normal scheme in GST SHALL BE ENTITLED for Credit of eligible duties/taxes/VAT on Inputs held in stock on the appointed day Inputs contained in semi-finished /finished goods held in stock on the appointed day PROVIDED

INPUT CREDIT ON STOCK OF GOODS HELD [s.169 – 172] Inputs are used for making taxable supplies The said taxable person passes on the benefit of such credit by way of reduced prices to the receipent The said taxable person is eligible for ITC on such inputs under this Act The inputs were not specified in Schedule / notification of the earlier law as inputs on which credit was not admissible under earlier law Is in possession of valid invoice, etc which were issued not earlier than 12 months from the appointed day The amount will be recoverable as an arrear of tax under GST if it is recoverable due to any proceeding instituted under the earlier law

GOODS RETURN [s.173 - 174] When, Goods were removed/sold within 6 months prior to the appointed day & Returned within 6 months from the appointed day Proper Officer can satisfactorily identify the goods, then for Goods on which Duty/Tax paid under the earlier law Goods which were Earlier Exempted but Taxable under GST No Tax is payable by the person returning the Goods No Tax is payable by the person returning the Goods, if returned within 6 months Taxable Person receiving such goods within 6 from URD then eligible for refund; from RD deemed to be supply

#Provided goods are taxable under the GST Law JOB WORK [s.175 - 177] (Inputs/Semi-finished/Finished goods sent for job – work) Conditions: Removal/Dispatch to the job worker prior to the appointed day& Returned within six months from the appointed day/extended period (not more than 2 months) Manufacturer & Job Worker both declare the details of Inputs/Semi-finished/Finished Goods held in stock by the Job Worker on the appointed date No Tax is payable Manufacturer can transfer finished goods to the premises of any regd. Taxable person for Export – without tax Input tax Credit recoverable in terms of section 184 Not Returned within six months /extended period #Provided goods are taxable under the GST Law

For Upward Revision For Downward Revision PRICE REVISION [s.178] Price is REVISED after the appointed day in respect of a previous contract Documents that may be issued by the supplier Supplementary Invoice/Debit Note For Upward Revision Supplementary Invoice/Credit Note For Downward Revision conditional Documents shall be deemed to have been issued in respect of an outward supply made under GST

RECOVERY/REFUND[s. 179 – s.185] Pending refund claims to be disposed of under earlier law [s.179] Claims after appointed day for goods cleared or services provided before appointed day and exported before or after the appointed day.[s.180] Claims after appointed day for payments received and tax deposited before appointed day for services not provided. [s.181] Proceedings initiated to claim of ITC before / after appointed day [s.182] Proceedings relating to output tax liability before / after appointed day [s.183] Treatment of the amount recovered or refunded in pursuance of the assessment or adjudication proceedings [s.184] Treatment of the amount recovered or refunded in pursuance to revision of returns [s.185]

REFUND/RECOVERY [s.179 - 185] Refund/ Recovery CENVAT/VAT Credit as per Earlier Law Assessment/Adjudication Proceeding as per Earlier Laws(any tax/penalty/interest) Proceeding of appeal, revision, review or reference initiated before the appointed day to be disposed of as per the earlier law Refund/ Recovery Liability of Output Duty/ Tax as per Earlier Law Revision of return as per Earlier Law PENDING REFUND CLAIMS FILED BEFORE THE APPOINTED DAY to be disposed of as per the provisions of earlier law

REFUND/RECOVERY [s.179 - 185] To be generally paid in Cash (CGST) & as per the provisions of earlier law (SGST) REFUND - Pending or accruing from appeal, etc Rejected Claim of Refund to LAPSE RECOVERY resulting from proceedings under the earlier law To be Recovered as an arrear of GST Amount refundable/recoverable shall not be admissible as ITC under GST

MISCELLANEOUS Supply to be taxed under GST Law 1 LONG TERM CONSTRUCTION / WORKS CONTRACT 2 # PROGRESSIVE /PERIODIC SUPPLY 3 Taxability of Supply of goods / services certain cases s. 186 s. 187 s. 188,189 Goods and/or services supplied after the appointed date Contract entered prior to the appointed date Supply to be taxed under GST Law Consideration received prior to the appointed day Duty/tax paid under the earlier law No Tax to be paid under GST Goods and/or services supplied point of taxation arose before the appointed date Part Consideration received on/after the appointed day Full duty/tax paid under the earlier law 1 2 3 # Applicable irrespective of the provisions relating to Time of Supply of Goods & Services in the GST Law

MISCELLANEOUS CREDIT DISTRIBUTION OF SERVICE TAX BY INPUT SERVICE DISTRIBUTORS It is AN OFFICE of the supplier of goods/services which receives tax invoices for the purpose of distribution of credit to a SUPPLIER of taxable goods/services having same PAN INPUT SERVICE DISTRIBUTOR CREDIT of Service Tax RECEIVED - PRE GST will be available for distribution as credit in GST even if the invoices are received on or after the appointed day The provision overrides all the other provisions contrary to it

Centralized Registration --- this provision is specific to CGST Law TRANSFER OF UNUTILISED CENVAT CREDIT BY TAXABLE PERSON HAVING CENTRALISED REGISTRATION UNDER EARLIER LAW[S. 191] Allowed to take input credit provided files returns within 3 months of the appointed day, provided admissible as ITC under this Act. Centralized Registration May be transferred having same PAN for which centralized registration was obtained under the earlier law --- this provision is specific to CGST Law

Agent entitled to take credit of tax paid on such goods MISCELLANEOUS TAX PAID ON GOODS/ CAPITAL GOODS LYING WITH AGENTS TO BE ALLOWED AS CREDIT [s.192 – 193] Goods belonging to Principal lying with the agent on the appointed day Conditions: Agent is registered under GST Principal & Agent both declare the details of stock of Goods lying with the agent immediately preceding the appointed day Invoices were issued not earlier than 12 months prior to the appointed day Principal has either reversed or not availed of the ITC in respect of such goods Agent entitled to take credit of tax paid on such goods --- this provision is specific to SGST Law

MISCELLANEOUS TREATMENT OF BRANCH TRANSFERS [s. 194] Input Tax Credit reversed prior to the appointed day not admissible as Input Tax Credit under the GST Law Branch Transfers NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THE GST ACT --- this provision is specific to SGST Law

--- this provision is specific to SGST Law MISCELLANEOUS GOODS SENT ON APPROVAL BASIS REJECTED/RETURNED [s.195] Goods Sent on approval basis Rejected Goods returned within six months No Tax is payable on returned goods Not earlier than six months prior to the appointed dated Rejected Goods returned after six months/ extended period(Max. 2 months) Goods taxable under GST Tax is payable by the person returning the goods Rejected/Not Approved by the buyer Goods Rejected but not returned within six months/ extended period Goods taxable under GST Tax is payable by the person who sent the goods on approval basis --- this provision is specific to SGST Law

MISCELLANEOUS DEDUCTION OF TAX AT SOURCE [s. 196] Goods sold/invoice issued prior to the appointed day Payment made against such sale, on or after the appointed day Tax was required to be deducted on such sale under earlier law Will not be considered for TDS under GST Law --- this provision is specific to SGST Law

MISCELLANEOUS TRANSITIONAL PROVISIONS FOR AVAILING CENVAT CREDIT IN CERTAIN CASES [s. 197] Reversed due to non-payment of consideration within 3months, credit can be reclaimed Cenvat Credit on input services under earlier law Provided that taxable person has made payment of consideration for that supply within 3months of the appointed day. --- this provision is specific to CGST Law

CHALLENGES IMPLEMENTATION

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