India: Transitional Provisions Under GST Law

Last Updated: 8 September 2017
Article by Sachin Vasudeva

The new indirect tax regime i.e. GST has come into effect from 1st July 2017. There have been mixed responses from various stakeholders uptill now. The Government in order to educate people has issued many clarifications in the form of FAQ's. While issuing FAQ's is a welcome step but there are still some grey areas in the law for which answers are yet not available. We hope that the Government clarifies all such issues quickly so as to enable a smoother implementation of law.

I hope you find the contents of this newsletter useful. We would be happy to receive your comments/suggestions on this initiative and the contents of this newsletter. You may e-mail your views at info@scvasudeva.com.

This newsletter analyses the transitional provisions, given under the Goods and Services Tax Law (hereinafter known as the GST Law), which enables a registered person under the GST Law to avail the benefit of taxes and duties pertaining to the erstwhile laws.

Transitional Provisions under GST Law

1. Amount of CENVAT credit carried forward in the return allowed as input tax credit

Section 140(1): 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. Provided that the registered person shall not be allowed to take credit in the following circumstances, namely:—

(i) where the said amount of credit is not admissible as input tax credit under this Act; or

(ii) 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

(iii) where the said amount of credit relates to goods manufactured and cleared under such exemption notifications as are notified by the Government

Analysis

As per the above provision, a registered person under the GST Law can carry forward the amount of unutilized input tax credit under the erstwhile tax regime to the GST regime, subject to the fulfilment of following conditions:

(a) The registered person has not opted for composition scheme under GST

(b) The amount of said credit is admissible as input tax credit under GST

(c) The registered person has furnished all the returns required under the erstwhile law for last 6 months immediately preceding the appointed date

(d) The said input tax credit does not relate to goods manufactured and cleared under exemption notification as are notified by the Government Further, as per the rules relating to transitional provisions, for carrying forward the abovementioned input tax credit, a declaration is required to be submitted electronically in Form GST TRAN-1, within 90 days from the appointed day, duly signed, on the common portal specifying therein, separately, the amount of tax or duty to the credit of which the registered person is entitled.

With regard to carry forward of input tax credit under the Central Goods and Services Tax Act (hereinafter known as the CGST Act), where the inputs have been received from an Export Oriented Unit or a unit located in Electronic Hardware Technology Park, the credit shall be allowed to the extent as provided in sub-rule (7) of rule 3 of the CENVAT Credit Rules, 2004 i.e., credit of CVD, SAD and Education Cess and Secondary & Higher Education Cess levied on such CVD & SAD shall be available.

With regard to carry forward of input tax credit under the State Goods and Services Tax Act (hereinafter known as the SGST Act), Form GST TRAN-1 shall specify separately—

(i) the value of claims under section 3 i.e., Form-C, sub-section (3) of section 5 i.e., Form-H, sections 6 and 6A i.e., Form-E & F and sub-section (8) of section 8 of the Central Sales Tax Act 1956 i.e., Form-I & J made by the applicant and

(ii) the serial number and value of declarations in Forms C and/or F and Certificates in Forms E and/or H or Form I specified in rule 12 of the Central Sales Tax (Registration and Turnover) Rules, 1957 submitted by the applicant in support of the claims referred to in sub-clause (i) above.

2. Credit of unavailed CENVAT credit in respect of capital goods not carried forward in a return under existing law

Section 140(2): 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:

Provided that 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:

Explanation- For the purposes of this section, the expression "unavailed cenvat credit" means the amount that remains after subtracting the amount of CENVAT credit already 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.

DOWNLOAD: SCV Newsletter Indirect Tax June 2017

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