FAQ on Trasitional provisions

[CA Akash Phophalia]

Introduction

Effective convergence from existing regime to the new regime is the call of an hour. In order to ensure happy acceptance of GST law by all the sectors government has come out with transitional provisions in the model draft GST law which are detailed in FAQ manner as under.

FAQ’s

Q. 1 What will be the effect on Existing Officers if GST will come into existence?

Ans.  All the existing officers shall continue to hold their office and shall be deemed to be have been appointed as GST officers/competent authorities under the respective provisions of the act.

Q.2 What will happen to existing registrations?

Ans.  In GST Act, a provisional certificate of registration will be issued to every assessee who was registered under any of the earlier laws.

Q.3 Whether certificate of provisional registration issued in GST act is Final Registration?

Ans. No, the certificate of provisional registration issued in GST act is valid for a period of six months.

Q.4  Is the time of six period will be extended?

Ans. Yes, the Central/State Govt. may extend the time period of six months. However, such extension could be done with the recommendation of the Council.

Q.5 What procedure to be followed for registration after issue of provisional registration?

Ans. Every assessee/person to whom provisional certificate of registration is issued, shall furnish such information as may be prescribed within the period specified. After furnishing such information, the certificate of registration shall be issued by Central / State Government. The process of furnishing of information may or may not be different from normal registration process.

Q.6 What consequences will arise if process of registration is not followed?

Ans. If the procedure is not followed by any person to whom provisional certificate is issued, then the certificate of registration issued to such person may be cancelled.

Q.7 When it is  deemed that the application is cancelled?

Ans. If the person to whom provisional registration certificate is issued files an application that it is liable to be registered under this act, then it shall be deemed that the certificate of registration have not been issued.

Q.8 What will happen if the CENVAT Credit shown in return?

Ans. If any registered person shows CENVAT Credit in return furnished by him under the earlier law, then he shall be entitled to take CENVAT Credit if amount of CENVAT Credit is admissible under earlier law as well as GST Act.

Q.9 What will happen if the CENVAT Credit on capital goods not shown in the return?

Ans. If any registered person has not shown the amount of CENVAT Credit on capital goods in his return furnished under the earlier law, then he shall be entitled to take the amount of unavailed CENVAT Credit in this act provided the amount is admissible under earlier law as well as under this act. Here, unavailed CENVAT Credit means the amount that remains after subtracting the amount of CENVAT Credit already availed of in respect of capital goods.

Q.10 Whether CENVAT Credit available to person which are registered under this act but not registered under earlier laws?

Ans. Yes, any person who is not liable to registered under earlier laws but liable to tax under this tax due to exempted goods become taxable and any other reason, shall be entitled to take CENVAT Credit of eligible duties and taxes paid in respect of inputs held in stock ,inputs contained in semi-finished or finished goods held in stock.

Q.10A What are the conditions for availment of CENVAT Credit?

Ans. Following conditions are required to be fulfilled by such person:-

(i) Such inputs and / or goods are used or intended to be used for making taxable supplies under this act.

(ii) Such person was eligible for CENVAT Credit on receipt of such inputs under earlier law but for his not being liable for registration or the goods remaining exempt under the said law.

(iii) Such person is eligible for input tax Credit under this act.

(iv) Invoice and other documents relating to payment of duty of inputs are in the possession of such person.

(v) Such invoices and other documents were issued not earlier than twelve months immediately preceding the appointed day.

Q.10B How the amount of CENVAT Credit is calculated?

Ans. The amount of CENVAT Credit is calculated on the basis of Generally Accepted Accounting Principles.

Q.10C What will happen if amount of CENVAT Credit is wrongly allowed?

Ans. If the amount of CENVAT Credit is wrongly allowed then the same shall be recovered from such person.

Q.14 What do you mean by "Eligible duties and taxes"?

Ans. For the purpose of GST act "Eligible duties and taxes " means:-

(i) The duty of excise specified in the First Schedule to the Central Excise Tariff Act, 1985;

(ii) The duty of excise specified in the second schedule to the Central Excise Tariff Act, 1985;

(iii) The additional duty of excise leviable under section 3 of the Additional Duties of Excise Act, 1978;

(iv) The additional duty of excise leviable under section 3 of the Additional Duties of Excise Act,1957;

(v) The National Calamity Contingent Duty leviable under section 136 of the Finance Act, 2001;

(vi) The additional duty leviable under sub section (1) of section 3 of the Customs Tariff Act, 1975;

(vii) The additional duty leviable under sub section (5) of section 3 of the Customs Tariff Act,1975; and

(viii) The service tax leviable under section 66B of the Finance Act, 1994:-

in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the appointed day.

Q.15 Whether CENVAT Credit of eligible duties and taxes allowed to a taxable person switching over from composition scheme?

Ans. Yes, the credit of eligible duties and taxes shall be allowed to the person availing of the benefit of composition scheme under the earlier laws.

Q.16 How much amount payable in the event of a taxable person switching over to composition scheme?

Ans. The amount payable by the taxable person is equivalent to the credit of input tax in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the day immediately preceding the date of such switch over by debiting the input credit or in cash. Provided that after payment of such amount , the balance of input tax credit , if any lying in his credit ledger shall lapse.

Q.17 What will happen if exempted goods are returned to the place of business on or after the appointed day?

Ans. If any goods on which duty has been exempted under the earlier law and such goods are returned within six months from the appointed day, then no liability will arise but if goods returned goods are liable to tax under this act and are returned after a period of six months from the appointed day then the amount of tax shall be payable by the person returning the said goods.

Q.18 What happened if duty paid good returned to the place of business on or after the appointed day?

Ans. If any goods on which duty has been paid under the earlier law not being earlier than six months prior to the appointed day, are returned to the place of business within a period of six months from the appointed day, then there is no liability of tax arises on such goods. However, if such goods are returned after six months from the appointed day, then tax shall be payable by the taxable person.

Q.19 What will happened if inputs were removed for job work and returned on or after the appointed day?

Ans.  If any good removed before the appointed day to the job worker for further processing, testing , repair, reconditioning or any other purpose, are returned to such factory on or after the appointed day but within six months from the appointed  day then no tax shall be payable. The period of six months may be extended by the competent authority for a further period of two months. However, if the job worker returns goods after a period of six months and such extended time, and the goods are liable to tax, then the tax will be payable by the job worker. In order to avail of the benefit of this provision the job worker and the manufacturer have to declare the details of input held in stock

Q.20 What will happen if semi-finished goods were removed for job work and returned on or after the appointed day?

Ans. .  If any good removed before the appointed day to the job worker for carrying out certain manufacturing processes, are returned to such factory on or after the appointed day but within six months from the appointed  day then no tax shall be payable. The period of six months may be extended by the competent authority for a further period of two months. However, if the job worker returns goods after a period of six months and such extended time, and the goods are liable to tax, then the tax will be payable by the job worker. In order to avail of the benefit of this provision the job worker and the manufacturer have to declare the details of semi-finished goods held in stock.

Q.21 What will happen if finished goods were removed for carrying out certain processes and returned on or after the appointed day?

Ans. .  If any excisable goods  removed from the factory  for carrying out tests and other processes not amounting to manufacture before the appointed day , are returned to such factory on or after the appointed day but within six months from the appointed  day then no tax shall be payable. The period of six months may be extended by the competent authority for a further period of two months.

Q.22 Whether supplementary  invoices can be issued in the case of price is revised in pursuance of a contract?

Ans. Upward revision - Yes, if any contract takes place before the appointed day and the price of goods / services is revised upwards on or after the appointed day, then in this case the taxable person may issue a supplementary invoice or debit note within thirty days of such prices revision.

Downward revision - If any contract takes place before the appointed day and the price of goods / services is revised downwards on or after the appointed day, then in this case the taxable person may issue a supplementary invoice or debit note within thirty days of such prices revision.

Input credit - The taxable person shall be allowed to reduce his tax liability only if the recipient of the invoice or credit note has reduced its input credit corresponding to such reduction of tax liability.

Q.23 Effect on pending refund claims?

Ans.  If any duty / tax and interest on tax / duty or any other amount paid by any taxable person and refund claimed by such person on such duty/ tax amount, then the amount claimed by taxable person shall be disposed of in accordance with the provisions of earlier law and any amount eventually accruing to him shall be paid in cash.

Q.24 Effecto on claim of Cenvat credit under the earlier law?

Ans. The amount of CENVAT Credit claimed by the person under the earlier law shall be disposed of in accordance with the provisions of earlier law and if any amount of credit found to be admissible to the claimant shall be refunded to him in cash. If any amount of credit becomes recoverable as a result of appeal, revision, review or reference, the same will be recovered from such person.

Q.25 How finalization of proceedings relating to output duty liability will be carried out?

Ans. Every proceeding relating to output duty shall be disposed of in accordance with the earlier law and if any amount recoverable or refundable as a result of appeal, revision , review or reference, the same will be recovered or refunded from or to such person.

Q.26 How the amount recovered or refunded in pursuance of assessment or adjudication proceedings be treated?

Ans. In pursuance of an assessment or adjudication proceedings , whether before or after the appointed day, under the earlier law if any amount of tax, interest , fine or penalty recoverable or refundable from or to the person , the same will be recovered or refunded.

Q.27 How the amount recovered or refunded in pursuance to revision of returns be treated?

Ans. If any return furnished under the earlier law is revised and as a result of such revision any amount is found to be recoverable or refundable from or to the taxable person, the same will be recovered or refunded.

Q.28 What treatment will be done for long term construction/works contracts?

Ans. The goods or services supplied on or after the appointed day in pursuance of a contract entered prior to the appointed day will be taxed under the new provisions

Q.29 What consequences will arise when supply of goods is on progressive or periodic?

Ans. If supply of goods or services is made after the appointed day but consideration for such goods or services is already received before the appointed day and the duty and tax payable thereon has already been paid under the earlier law then no liability of tax arises on such goods or services.

Q.30 What treatment will be done for retention payments?

Ans. If supply of goods or services is made on or after the appointed day but a part consideration for such goods or services is already received before the appointed day and the duty and tax payable thereon has already been paid under the earlier law then no liability of tax arises on such goods or services.

Q.31 Effect on credit distribution of service tax by Input Service Distributor?

Ans. 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 invoice(s) relating to such services is received on or after the appointed day.

Q32. Whether CENVAT Credit is allowed for tax paid on goods lying with agents?

Ans. Yes,  Where any goods belongs to the principal but are lying at the premises of the agent on the appointed day, the agent shall be entitled to take credit of tax paid on such goods subject to fulfilment of the following conditions:-

(i) The agent is registered taxable person under this act.

(ii) Both the principal and agent declare the details of stock of goods lying with such agent

(iii) The invoices for such goods had been issued not earlier than twelve months immediately preceding the appointed day.

(iv) The principal has either reversed or not availed of the input tax credit in respect of such goods.

Q.33  Whether CENVAT Credit is allowed for tax paid on capital goods lying with agents?

Ans. Yes,  Where any capital goods belonging to the principal are lying at the premises of the agent on the appointed day, the agent shall be entitled to take credit to tax paid on such capital goods subject to fulfilment of the following conditions:-

(i) The agent is registered taxable person under this act.

(ii) Both the principal and agent declare the details of stock of goods lying with such agent

(iii) The invoices for such goods had been issued not earlier than twelve months immediately preceding the appointed day.

(iv) The principal has either reversed or not availed of the input tax credit in respect of such goods.

Q.34 Treatment for branch transfers?

Ans. Any amount of input tax credit reversed prior to the appointed day shall not be admissible as credit of input tax under this act.

Q.35 What treatment for goods sent on approval basis returned on or after the appointed day?

Ans. If any goods are sent on approval basis not earlier than six months from the appointed day and the goods are rejected or returned by the buyer then no tax liability arises if such goods are returned within a period of six months from the appointed day. Further, this period of six months may be extended by the competent authority for a further period of two months.

However, goods are returned after a period of six months and such extended time, and the goods are liable to tax, then tax will be payable by the such returning person.

Moreover, if such goods are sent on approval basis and such goods are not returned within a period of six months and also such goods are liable to tax under this act then the tax shall be payable by such person who has sent the goods.

Q.36 Effect on Deduction of tax source?

Ans. Where any invoice was issued by the supplier before the appointed day on which tax was required to be deducted at source under the earlier law and invoice is issued for the same before the appointed day then there is no requirement of deduction of tax at source.

Conclusion

Model GST law has made efforts to being into its purview all the transitional situations that may come into picture at the time of conversion from the existing laws to the new GST law. However, there could be many situations and instances which are not yet answered under this model law.

This is just for your reference. It does not constitute our professional advice or recommendation.