Transition Issues – Post GST Rollout - H&R Block| Blog
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Transition Issues – Post GST Rollout

GST will consolidate multiple indirect taxes into one and hence having proper transitional provisions is essential to ensure a smooth transition. This will also ensure that the ITC (Input Tax Credit)/benefits earned in the existing regime are not lost.

GST TRAN 1 and GST TRAN 2 are notified by the government for insertion of details of Input Tax Credit in transition case which shall be filed on or before ninety days from the appointed date.

Form TRAN 1 Form TRAN 2
1. The Form TRAN-1 needs to be filed by every person having closing stock registered under GST, regardless of whether they were registered under the pre-GST regime or not. 1.Person is not registered under any pre-GST regime
2.Holds closing stock on 1st July
3.Does not hold any document to evidence payment of taxes on purchase of its closing stock
4.Is not a manufacturer under Central Excise Act
5.Is not a service provider under Service Tax laws

 

The transition provisions can be categorised under three heads:

  1. Relating to Input Tax Credit
  2. Continuance of existing procedures such as job work for a reasonable period without any adverse consequence under GST law
  3. All claims (pending as well as future) pertaining to existing laws filed before, on or after the appointed day.

 

1. Transition arrangements for ITC

The existing law has elaborate provisions to carry forward the ITC earned under the existing law.

ITC of various taxes under the existing laws (CENVAT credit, VAT etc.) would be carried forward as under:

Particulars Treatment
Closing Balance of credits in the last return Can be taken as credit in electronic credit ledger subject to certain conditions and restrictions as may be prescribed
Un-availed credit on capital goods Can be taken by filing the requisite declaration (in GST TRAN 1)
Credit on duty paid stock (for regd. Persons other than manufacturers and service providers) Credit of the duty/tax paid earlier would be admissible as credit. Such credit can be taken subject to such conditions and restrictions as may be prescribed.
Also there exist provisions regarding credit on duty paid stock when registered person does not possess the document evidencing payment of excise duty/VAT; with certain conditions as may be prescribed
Credit relating to exempted goods now taxable under GST Credit can be taken
Credit relating to input or input services are received on or after the appointed day but the duty or tax on the same was paid by the supplier under the existing law Credit of eligible duties and taxes can be taken
Credit for supplies relating to Composition (existing laws) to Normal Scheme (GST) Taxpayers Can claim credit on their input stock, semi-finished and finished stock on the appointed date, subject to such conditions and restrictions as may be prescribed
Credit in respect of goods or capital goods belonging to the principal are lying at the premises of the agent on the appointed date Credit can be taken by the agent subject such conditions and restrictions as may be prescribed

 

2. Transition provisions relating to job work, goods returned/sent on approval etc.

Particulars Treatment
Job Work Inputs, semi-finished goods or finished goods were sent to the job worker or any other premises without payment of duty/VAT under the existing law. When such goods are returned by the job worker within six months after the appointed day then no GST is payable by him.

The period can be extended by the Commissioner, GST by another two months.

If not returned within the prescribed period, then ITC shall be liable to be recovered from the principal and the job worker will have to pay the GST on such supplies.

Goods removed before 6 months of the appointed day but returned within 6 months from the appointed day You can claim the refund of the duty/VAT paid under the existing law, if such goods are returned by an unregistered person. If returned by a Registered Person, then the return of goods shall be treated as supply of goods (ITC can be claimed).
Goods sent on approval basis before 6 months of the appointed day but re-turned within 6 months from the appointed day No tax is payable by the person returning the goods. Commissioner may extend the period by 2 months. If returned after that, tax is payable if the supply is taxable under GST (by the recipient). Tax is payable by the person who sent the goods on approval basis, if not returned.


3. Proceeding under existing laws

GST law would become operational w.e.f. the appointed day and existing laws would be repealed. Elaborate provisions have been made to save the pending as well future claims relating to existing law made before, on or after the appointed day. Such proceedings may pertain to refund claims of CENVAT credit/VAT or export related rebate or service tax, and the proceedings may either result in recovery of tax or refund.

All such cases would be disposed of under the existing law. If any claim for refund of CENVAT credit is fully or partially rejected, the amount so rejected shall lapse. Refund of CENVAT credit shall be paid in cash. There will be no refund of CENVAT if already carry forwarded. If any amount becomes recoverable, the same shall be recovered as arrear of tax under GST Act.

Importance of Content for Taxpayers:

As the government, through transition provisions, has made it sure that there should not be any loss to the taxpayer on account of Input Tax credit, refunds/drawback under the existing regime; now the businesses have to make it sure that they have systems in place which will make sure that the credit accumulated in the books has properly been reported and carried forward to the GST regime, to make transition smooth and hassle free.

HRBlockIndia
HRBlockIndia
H&R Block India strives to blend tax expertise with a strong focus on continually improving the client experience to provide all its clients with an unparalleled value proposition for filing their Income Tax Online.

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