Transitional Provisions

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Migration of existing assessees

On and from the appointed day, every person registered under any of the existing laws and having a valid Permanent Account Number shall be issued a certificate of registration on provisional basis.

Person not liable to tax under GST can request cancellation

The Provisional certificate of registration issued to a person 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.

Transitional provisions for Input tax Credit

  • Carry forward balance of closing Credit BalancesA registered person 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. However, a person opting to pay tax under Composition levy shall not be allowed to carry forward his Credit.

  • Restrictions on carry forwardThe registered person shall not be allowed to take credit in the following circumstances, namely:
    1. where the said amount of credit is not admissible as input tax credit under this Act; or
    2. where he has not furnished all the returns required under the existing law for the period of six months immediately preceding the appointed date; or
    3. where the said amount of credit relates to goods manufactured and cleared under such exemption notifications as are notified by the Government
  • Availment of unavailed Credit on Capital Goods 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. The expression “unavailed Cebvat credit” means the amount that remains after subtracting the amount of cenvat credit already availed availed in respect of capital goods by the taxable person under the existing law from the aggregate amount of CENVAT credit to which the said person was entitled in respect of the said capital goods under the existing law.

    However, the registered person shall not be allowed to take credit unless the said credit was admissible as CENVAT credit under the existing law and is also admissible as input tax credit under this Act.

 Benefit of Credit on opening stock to an unregistered person

The following registered persons shall be entitled to take, in his electronic credit ledger, 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 subject to the following conditions:

  • who was not liable to be registered under the existing law,
  • who was engaged in the manufacture of exempted goods or provision of exempted services,
  • who was providing works contract service and was availing of the benefit of Notification No. 26/2012, Service Tax, dated the 20th June, 2012
  • a first stage dealer or a second stage dealer
  • a registered importer
  • a depot of a manufacturer.

Restriction on availability of Credit

Benefit of Credit shall not be available unless following conditions are satisfied:

  • such inputs or goods are used or intended to be used for making taxable supplies under this Act;
  • the said registered person is eligible for input tax credit on such inputs under this Act;
  • the said registered person is in possession of invoice or other prescribed documents evidencing payment of duty under the existing law in respect of such inputs;
  • such invoices or other prescribed documents were issued not earlier than twelve months immediately preceding the appointed day; and
  • the supplier of services is not eligible for any abatement under this Act.

Benefit available to a trader who is not in possession of a duty paid document:

A Trader has been allowed benefit of input tax credit on goods (on which the duty of central excise or, as the case may be, additional duties of customs under sub-section (1) of section 3 of the Customs Tariff Act, 1975, is leviable) held in stock on the appointed day in respect of which he is not in possession of any document evidencing payment of central excise duty to the extent as under:

  • at the rate of sixty per cent. on such goods which attract central tax at the rate of nine per cent. or more (Sale value of supply of such goods x rate of CGST x 60%)
  • forty per cent. for other goods of the central tax applicable on supply of such goods after the appointed date (Sale value of supply of such goods x rate of CGST x 60%)

Also, such amount shall be credited after the central tax payable on such supply has been paid. Where integrated tax is paid on such goods, the amount of credit shall be allowed at the rate of thirty per cent. and twenty per cent. respectively of the said tax. The scheme shall be available for six tax periods from the appointed date.

Conditions for allowing such credit:

  • such goods were not unconditionally exempt from the whole of the duty of excise specified in the First Schedule to the Central Excise Tariff Act, 1985 or were not nil rated in the said Schedule.
  • the document for procurement of such goods is available with the registered person.
  • the registered person availing of this scheme and having furnished the details of stock held by him in accordance with the provisions of clause (b) of sub-rule (2) of rule 1, submits a statement in FORM GST TRAN 2 at the end of each of the six tax periods during which the scheme is in operation indicating therein the details of supplies of such goods effected during the tax period.
  • the amount of credit allowed shall be credited to the electronic credit ledger of the applicant maintained in FORM GST PMT-2 on the Common Portal.
  • the stock of goods on which the credit is availed is so stored that it can be easily identified by the registered person.

Benefit of Excise Duty on opening stock to trader in absence of excisable invoice

Where a registered person, other than a manufacturer or a supplier of services, is not in possession of an invoice or any other documents evidencing payment of duty in respect of inputs, then, such registered person shall, subject to such conditions, limitations and safeguards as may be prescribed, be allowed to take credit at such rate and in such manner as may be prescribed.

Benefit of Credit on portion of stock relating to exempted goods / services in earler regime

A registered person, who was engaged in the manufacture of taxable as well as exempted goods under the Central Excise Act, 1944 (1 of 1944) or provision of taxable as well as exempted services under Chapter V of the Finance Act, 1994 (32 of 1994), but which are liable to tax under this Act, shall be entitled to take, in his electronic credit ledger,

  • the amount of CENVAT credit carried forward in a return furnished under the existing law by him in accordance with the provisions of sub-section (1); and
  • 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, relating to such exempted goods or services, in accordance with the provisions of sub-section (3).

Benefit of Credit of invoices relating to earlier period received after appointed date

A registered person shall be entitled to take credit of eligible duties and taxes in respect of inputs or input services received on or after the appointed day but the duty or tax in respect of which has been paid by the supplier under the existing law, subject to the condition that the invoice or any other duty or tax paying document of the same was recorded in the books of account of such person within a period of thirty days (or extended period whe allowed) from the appointed day.

Benefit of Credit in case of Composition dealers under earlier regime

A registered person, who was either paying tax at a fixed rate or paying a fixed amount in lieu of the tax payable under the existing law shall be entitled to take 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.

Restriction on availability of Credit

Benefit of Credit shall not be available unless following conditions are satisfied:

  • such inputs or goods are used or intended to be used for making taxable supplies under this Act;
  • the said registered person is not paying tax under section 10;
  • the said registered person is eligible for input tax credit on such inputs under this Act;
  • the said registered person is in possession of invoice or other prescribed documents evidencing payment of duty under the existing law in respect of inputs; and
  • such invoices or other prescribed documents were issued not earlier than twelve months immediately preceding the appointed day.

Benefit of Credit of earlier regime to an Input Services Distributor

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 relating to such services are received on or after the appointed day.

Benefit of Credit distribution to person having centralized registration

Any registered person was having centralised registration under the earlier regime who has obtained a registration under this Act shall be allowed to take credit of the amount of CENVAT credit carried forward in the last due and filed return under the existing law by him. Thus, Cenvat credit can be taken in any of the registration at any location obtained by the person earlier registered under Centralalised registration.

Benefit to reclaim Credit reversed under earlier law

Where any CENVAT credit availed for the input services provided under the existing law has been reversed due to non-payment of the consideration within a period of three months, such credit can be reclaimed subject to the condition that the registered person has made the payment of the consideration for that supply of services within a period of three months from the appointed day.

Transitional Provisions for Job Work

  • Tax on input returned from Job Worker

Where any inputs received at a place of business had been removed as such or removed after being partially processed to a job worker for further processing, testing, repair, reconditioning or any other purpose in accordance with the provisions of existing law prior to the appointed day and such inputs are returned to the said place on or after the appointed day, no tax shall be payable if such inputs, after completion of the job work or otherwise, are returned to the said place within six months from the appointed day.

If such inputs are not returned within the period specified in this sub-section, the input tax credit shall be liable to be recovered

  • Tax on semifinished / finished goods returned from Job Worker

Where any semi-finished goods / finished had been removed from the place of business to any other premises for carrying out certain manufacturing processes or testing etc in accordance with the provisions of existing law prior to the appointed day and such goods are returned to the said place on or after the appointed day, no tax shall be payable, if the said goods, after undergoing manufacturing processes or otherwise, are returned to the said place within six months (extendable upto two more months) from the appointed day.

Goods can also be cleared on payment of tax

The manufacturer may, in accordance with the provisions of the existing law, transfer the said goods to the premises of any registered person for the purpose of supplying therefrom on payment of tax in India or without payment of tax for exports within the period specified in this sub-section.

  • Tax on return of dutiable goods

Where any goods on which duty, if any, had been paid under the existing law at the time of removal thereof, not being earlier than six months prior to the appointed day, are returned to any place of business on or after the appointed day, 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 and such goods are identifiable to the satisfaction of the proper officer.

However, if the said goods are returned by a registered person, the return of such goods shall be deemed to be a supply.

Tax impact on revision of prices

  • Tax impact on upward revision of prices

Where, in pursuance of a contract entered into prior to the appointed day, the price of any goods or services or both is revised upwards on or after the appointed day, the registered person who had removed or provided such goods or services or both shall issue to the recipient a supplementary invoice or debit note, containing such particulars as may be prescribed, within thirty days of such price revision and for the purposes of this Act such supplementary invoice or debit note shall be deemed to have been issued in respect of an outward supply made under this Act.

  • Tax impact on downward revision of prices

Where, in pursuance of a contract entered into prior to the appointed day, the price of any goods or services or both is revised downwards on or after the appointed day, the registered person who had removed or provided such goods or services or both may issue to the recipient a credit note, containing such particulars as may be prescribed, within thirty days of such price revision and for the purposes of this Act such credit note shall be deemed to have been issued in respect of an outward supply made under this Act. However, the registered person shall be allowed to reduce his tax liability on account of issue of the credit note only if the recipient of the credit note has reduced his input tax credit corresponding to such reduction of tax liability.

Refund claims relating to earlier period

Every approved claim for refund filed by any person before, on or after the appointed day, 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 existing law and any amount eventually accruing to him shall be paid in cash. In case of rejection, the claim shall lapse.

Claim for refund of exports filed after the appointed date

Every claim for refund filed after the appointed day for refund of any duty or tax paid under existing law in respect of the goods or services exported before or after the appointed day, shall be disposed of in accordance with the provisions of the existing law.

Pending proceedings relating to Cenvat credit under the earlier laws

Every proceeding of appeal, review or reference relating to a claim for CENVAT credit initiated whether before, on or after the appointed day under the existing law shall be disposed of in accordance with the provisions of existing law, and any amount of credit found to be admissible to the claimant shall be refunded to him in cash.

In case of any proceedings for recovery which is upheld, such amounts shall be recovered from such person and no credit of such amount shall be available to the recipient. Similar provisions are available for demand of output duties and taxes.

Revision of return and impact thereof relating to earlier period

  • Cenvat found to be inadmissible pursuant to Revision of return

Where any return, furnished under the existing law, is revised after the appointed day and if, pursuant to such revision, any amount is found to be recoverable or any amount of CENVAT credit is found to be inadmissible, the same shall, unless recovered under the existing law, be recovered as an arrear of tax under this Act and the amount so recovered shall not be admissible as input tax credit under this Act

  • Cenvat found to be refundable pursuant to Revision of return

Where any return, furnished under the existing law, is revised after the appointed day but within the time limit specified for such revision under the existing law and if, pursuant to such revision, any amount is found to be refundable or CENVAT credit is found to be admissible to any taxable person, the same shall be refunded to him in cash under the existing law.

All supplies post appointed date to be exigible to GST

The goods or 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 the provisions of this Act

Benefit of tax already paid under earlier law

No tax shall be payable on goods / services under this Act to the extent the tax was leviable on the said goods under the Value Added Tax Act of the State / Service Tax. Thus, it is merely leviable and it is not necessary if actual payment of such tax was made by the Tax payer or not.

Tax paid on composite supplies like works contract, restaurant etc

Where tax was paid on any supply both under the Value Added Tax Act and under Chapter V of the Finance Act, 1994 (32 of 1994), tax shall be leviable under this Act and the taxable person shall be entitled to take credit of value added tax or service tax paid under the existing law to the extent of supplies made after the appointed day and such credit shall be calculated in such manner as may be prescribed.

Goods sent on approval basis

Where any goods sent on approval basis, not earlier than six months before the appointed day, are rejected or not approved by the buyer and returned to the seller on or after the appointed day, no tax shall be payable thereon if such goods are returned within six months (extendable upto two more months) from the appointed day. In case they are not returned within six months, tax shall be paid by the person who had sent such goods under the provisions of this Act. In case it is returned after six months, tax shall be paid by person returning such goods.

 Import of services made on or after the appointed day

Import of services made on or after the appointed day shall be liable to tax under the provisions of this Act regardless of whether the transactions for such import of services had been initiated before the appointed day. A transaction shall be deemed to have been initiated before the appointed day if either the invoice relating to such supply or payment, either in full or in part, has been received or made before the appointed day. However, if the tax on such import of services had been paid in full under the earlier law, no tax shall be payable on such import under IGST Act. Also, if the tax on such import of services had been paid in part under the existing law, the balance amount of tax shall be payable on such import under this Act.

 

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