GST Transitional Provisions and Journey So Far

GOODS AND SERVICES TAX TRANSITIONAL PROVISIONS

Journey so far CGST/ IGST/ UTGST/ SGST Acts finalized and 7 final rules and draft formats released GST Compensation Cess rates and Chapter wise rate wise GST schedule decided Tax slabs for other items and services to be decided Fitment of more than 1200 items in various tax slabs 19% of items taxed over 18% GST tax slab

Item fitment in tax slabs (%) (Exempted) 7 % ( 2 8 % TaxSlab) 1 9 % ( 5 % TaxSlab) 1 4 % ( 1 2 % TaxSlab) 1 7 % ( 1 8 % TaxSlab) 4 3 %

Migration of existing tax payers- Sec 139 Every person holding a validPAN FinalRC Provisional RC Existing Regime GSTRegime Note: The enrolment window will reopen at a later date for taxpayers who could not enrol themselves as well as those who enroled but did not sign the enrolment form.

Conditions to carry forward input tax credit- Sec 140(1) ITC/CENVAT CREDITC/F ELECTRONIC CREDITLEDGER Carry forward only eligible ITC/CENVAT Credits; All returns for preceding 6 months filed; ITC/CENVAT Credit not related to Exemptedgoods Credit admissible as ITC under GST; Admissible CENVAT Credit to be reflected in the last return filed Application in Form GST TRAN 1 within 90 days ExistingRegime GSTRegime

Restriction on carry forward of input tax credit- sec 140(1) Particulars Amount (INR) Amount (INR) ITC Balance as per last VATReturn Input credit attributable to the value of claims u/s 3, 5(3), 6, 6A and 8(8) of Central Sales Tax Act, 1956 (CST Act) 1,000 500 Less: Input credit attributable to the value of declarations received in Form C/F/E/H/I specified in Rule 12 of CST Act Input credit attributable to the value of claim u/s 3, 5(3), 6, 6A and 8(8) of CST Act for which declarations are pending as on the appointed day. (Note: Will be refunded post submission of forms) Total ITC allowed to be carried forward as per the provisions (300) (200) 800

Carry forward of Unavailed Cenvat credit on capital goods- sec 140(2) UNAVAILED CENVAT CREDIT ON CAPITALGOODS ELECTRONIC CREDITLEDGER Credit admissible as CENVAT credit under the existing law; Not paying tax under composition levy; Credit admissible as ITC under GST; Form GST TRAN1: Specify amount availed/utilised and yet to be availed/utilised for everyitem Unavailed CENVAT credit in respect of capital goods is not carried forward in the return ExistingRegime GSTRegime

Credit of inputs held in stock on the appointed day- sec 140(3) CREDIT OF INPUTS HELD IN STOCK ON THE APPOINTED DAY 1) 2) 3) 4) Unregistered person under existing law Manufacturer of exempted goods Provider of exemptedservices Provider of Works Contract servicesand availing benefits of Not. No. 26/012-ST First stagedealer Second stagedealer Registered importer Depot of a manufacturer Now Registered Person 5) 6) 7) 8) ExistingRegime GSTRegime

Inputs held in stock on the appointed day conditions attached- Sec 140(3) Inputs/goods used or intended to be used for making taxable supplies under GST Availability of invoices evidencing payment of tax or duty ITC available on such inputs under GST Supplier of services not eligible for abatement under GST Invoices issued not earlier than 12 months prior to appointed day

Inputs held in stock on the appointed day A scheme for traders-Sec 140(3) A registered person other than a manufacturer or supplier of services i.e. a trader can claim such credit at the rate of 60 per cent of central tax/ state tax applicable on supply of such goods within 6 tax periods from the appointed day even though he is not in possession of invoice evidencing payment of duty or tax, if he passes on the benefit of such credit by way of reduced prices to the recipient. This can be understood by studying the following tables: Particulars Amount Particulars Amount Net Selling Price 200 Value of stockheld 100 Add: C/SGST at12% 24 Add: Excise Dutypaid 12.5 Total Commercial value 224 Add: VATpaid 12.5 Less: Eligible credit at 60% of24 (14.4) Total Value (Cost to Supplier) 125 Gross SellingPrice 209.6 ExistingRegime GSTRegime

Credit of eligible duties on supply of taxable and exempted goods -Sec 140(4) EXEMPT GOODS / SERVICES CENVAT Credit carried forward in the return as per provision of section 140(1) Taxable goods/services Manufacturer or supplier of services Credit of input held in stock as per provision of Section 140(3) Exempted goods/services ExistingRegime GSTRegime

Credit of input for services received after the appointed day-Sec 140(5) Duties or taxes paid under existing law Inputs or Inputs Services received June 25,2017 July 05,2017 July 01,2017 July 31,2017 Appointe d Day Invoice issued and inputs dispatched Inputs received with invoice Invoice is recorded in books within 30 days from appointed date, unless additional 30 days granted ExistingRegime GSTRegime

Credit of input tax credit in case of composition dealers-Sec 140(6) ELECTRONIC CREDIT LEDGER ITC/CENVAT CREDITC/F Inputs As such Conditions as per 140(3) Semi Finished ABC- Composition Scheme Finished Goods ExistingRegime GSTRegime

Credit of input tax credit carried forward in a return by person having centralized registration or ISD-Sec 140(7) and (8) ELECTRONIC CREDIT LEDGER ITC/CENVAT CREDITC/F BranchA Delhi Last return filed within 3 months from appointed day Branch B Bangalore ABC Limited Centralised Registration inMumbai Branch C Gujarat ExistingRegime GSTRegime

Material removed for job work/ other process -Sec 141 Inputs, Semi- Finished goodsor Finishedgoods sent to Job worker for further processing, testing,repairing, etc. No tax payable by person returning the goods In suchcases Conditions: Goods returned within 6 months by Job worker from Appointed day (Unless, additional 2 months granted) Manufacturer and Job worker both must declare such goods in FORM GST TRAN-1 July 01,2017 Appointed Day Before If not returned, ITC availed by the manufacturer on inputs liable to be recovered u/s 142(8)(a)

Goods sold by manufacturer in the existing regime and returned within 6 months from the appointed day -Sec 142(1) If supplies were sent to an unregistered dealer Manufacturer can claim refund of duty paid If supplies were sent to a registered dealer Termed as outward supply in the hands of dealer Manufacturer can claim ITC Jan 1,2017 July 1,2017 Dec 31,2017 Sold by manufacturer prior to appointedday Returned by dealer postappointed day ExistingRegime GSTRegime

Section142: MiscellaneousTransitionProvision Goods cleared not before six months from the appointed day if returned by unregistered person within 6 months from the appointed day - Refund of tax paid under earlierlaw Goods returned by registered person DeemedSupply Goods or services where price increases after the appointed day - Additional tax to be paid by issue of debit note or supplementary invoice to be issued within 30days Goods or services where price decreases after the appointed day Credit note be issued within 30 days upon which taxpayer shall be allowed to reduce the taxliability 17 Gaurav Shah & Co, Chartered Accountants

Section142: MiscellaneousTransitionProvision Refund under the existing laws to be disposed as per provision of existinglaw Refund of tax paid under existing law to be paid under the provisions of earlier law even if application is made after the appointedday Refund of tax of services not provided but tax paid under the existing law to be refunded under the provisions of existing law Appeal, Review or reference relating to claim of CENVAT credit or output duty liability shall be disposed of under earlierlaw 18 Gaurav Shah & Co, Chartered Accountants

Section142 : MiscellaneousTransition Provision Arrears to be recovered, including that of CENVAT, due to any assessment, adjudication or revision of return be recovered as an arrear of GST, unless recovered under the existinglaw. Goods or services supplied after the appointed day will be taxed under GST even if contract is entered prior to appointed day ( except where point of taxation has occurred in the existinglaw) Goods sent, not before six months from the appointed day, on approval basis are returned back in 6 months - NoGST If tax was deducted under earlier law and invoice also issued, no further TDS even if payment is made after the appointedday. 19 Gaurav Shah & Co, Chartered Accountants

12-Point Impact on manufacturers Multiple CE registration can be avoided in same state Level playing field for Organized and unorganized sector Single point of compliance - VAT + CST + Excise under existing regime Reduction in cascading effect but Working Capital increase- CST Purchases

12-Point Impact on manufacturers Job worker charges liable to GST Input Tax Credit Reversal- Non-Payment Distinct Person Concept Area-based exemption to discontinue

12-Point Impact on manufacturers Matching Concept Robust ERP Software required for B2B reporting including invoice-wise, HSN-wise reporting Unregistered dealer procurements liable to GST under reverse charge Advances liable to GST Vs. excise/sale applicable only on removal of goods from plant or at the time of inovice

+91 9731510198 gaurav@gs-ca.in