FAQ’s on Transitional Provisions
Q 1.How will a manufacturer/ service provider carry forward the CENVAT credit in his electronic credit ledger?
A: As per section 167, The amount of CENVAT credit in the return relating to the period ending on the day immediately preceding the appointed day shall be allowed to be carried forward as credit in the electronic credit ledger under the GST, provided the said credit is admissible as input credit under GST law.
Q 2. How will a registered tax payer under VAT [and Entry Tax] carry forward the input credit in his electronic credit ledger?
A: The amount of input tax credit in the return relating to the period ending on the day immediately preceding the appointed day shall be carried forward as credit in the electronic credit ledger under the GST, provided the said credit is admissible as input credit under GST law.
Q 3. Is a registered tax payer opting to pay tax under composite scheme under GST eligible for Input Tax Credit?
A: The amount of input tax credit in the return relating to the period ending on the day immediately preceding the appointed day shall lapse and will not be allowed to be carried forward as input tax credit to a person opting to pay tax under composite scheme.
Q 4. Will a person registered in a State say Maharashtra be eligible to claim credit if he does not take registration in that State under GST for any reason say closure of operations etc.?
A: The credit claimed in the return of a particular State will ordinarily be eligible to be carried forward only in terms of the SGST law of that State, in the instant case, Maharashtra and cannot be availed as credit under any other State GST Law.
Q 5. How can Entry tax credit be claimed as eligible input Credit under the GST law?
A: The respective States have different provisions for claiming credit of Entry Tax. Hence, in the State where input credit for entry tax is permitted, such credits, can be carried forward as SGST credit in that State under SGST Law.
Q 6. What is the treatment of various components of CENVAT Credit (such as service tax, excise duty, cess, etc.) under the GST transition?
A: All components of CENVAT Credit in the last return would merge into one single input tax credit under the CGST credit ledger. The taxes being subsumed lose their individual identity under the GST law.
Q 7. If the amount of duty, tax or cess carried forward as per the accounts is greater than the return, which amount will be allowed to be carried forward?
A: The amount of duty, tax or cess carried forward as per the accounts will be immaterial. The input tax credit carried forward as per the last return under the earlier law for the period ending with the day preceding the day when the GST becomes applicable, will only be taken into account.
Q 8. Will the CENVAT/ITC carried forward in the last return prior to GST under earlier law be available as ITC under GST?
A: Yes, as per section 167, the registered taxable person shall be entitled to such credit and it will get credited to his electronic credit ledger.
Q 9. A registered taxable person say, purchases capital goods in the last quarter of 2016-17. Though the invoice is received within 31st March but the capital goods are received on 5th April, 2017 (i.e. in GST regime). Will such a person get full credit of CENVAT in 2017-18?
A: Yes, he will be entitled to full credit in 2017-18 - explanation to section 168.
Q 10. VAT credit was not available on items 'X' & 'Y' as capital goods in the earlier law. Since they are covered in GST, can the registered taxable person claim it now?
A: He shall be entitled to credit only when ITC on such goods were admissible under the earlier law and is also admissible in GST. Since on the two items credit was not available under the earlier law, the said person cannot claim it in GST – proviso to section 168.
Q 11. What are the conditions for claiming CENVAT credit on-
- Input and Input services
- Capital goods
For instance - Goods were received before 1st April, 2016 but no CENVAT Credit or partial CENVAT Credit was availed till the year 2016-17 (Assume applicability of GST
from 1st April, 2017)?
A: Credit on inputs and input services already availed under the earlier law is eligible for automatic carry forward under the GST law. However, credit of input and input service which is not availed until the last return is not available as credit under the GST law, except in some circumstances.
As per Rule 4(2) (b) of the CENVAT Credit Rules, the CENVAT Credit on capital goods which has not been availed in the first year will be available in any financial year subsequent to the financial year in which it was purchased. The CENVAT Credit Rules does not prescribe any time limit for availment of CENVAT Credit on Capital Goods. Therefore, credit on capital goods can be claimed to the extent of unavailed portion, if
it is admissible as credit under the GST law.
Q 12. What will happen if the inputs, which are intended for use for making taxable supplies, are ultimately used for exempt supplies?
A: If the inputs in stock in respect of which credit was allowed, are ultimately used for exempt supplies instead of taxable supplies, then the credit on such inputs as is used for exempt supplies will be disallowed in the electronic credit ledger. If no credit is remaining as per the electronic credit ledger, then the same will have to be paid in cash by the taxable person.
Q 13. Under what circumstances the exempted person are eligible to claim credit?
A: As per section 169, the aforesaid persons can claim credit on fulfillment of the following conditions-
- such inputs are used or intended to be used for making taxable supplies under this Act;
- the said taxable person passes on the benefit of such credit by way of reduced prices to the recipient;
- the said taxable person is eligible for input tax credit on such inputs under the GST Law;
- the said taxable person is in possession of invoice and/or other prescribed documents evidencing payment of duty under the earlier law;
- such invoices and /or other prescribed documents were issued not earlier than twelve months immediately preceding the appointed day;
- the supplier of services is not eligible for any abatement under the Act.
Q 14. Can a trader (other than a First stage dealer or a second stage dealer) claim CENVAT credit?
A: No, a trader who is not a first stage dealer or second stage dealer cannot claim CENVAT Credit.
Q 15. Will Central Sales Tax (CST) paid under the earlier law be available as credit under GST?
A: No, the transitional provisions do not permit credit of Central Sales Tax paid, even though such component may be present in inputs in stock or inputs contained in Semi-finished goods or finished goods.
Q 16. Can stock held for more than one year be eligible for GST credit?
A: No. The provision contains a condition that only stock in respect of which the duty paying document is issued within one year from the appointed day is eligible for credit under GST.
Q 17. If a taxable person under GST law was engaged in the provision of exempt services which becomes taxable under GST, will the taxable person under GST be allowed the credit in respect of the inputs in his stock?
A: Yes, such a taxable person would be eligible for credit on inputs in stock or contained in semi-finished goods or finished goods and such inputs are actually used or intended to be used for provision of taxable supplies under the GST law.
Q 18. Will ITC be allowed to a service provider on VAT paid inputs held as stock on the appointed day?
A: No, VAT does not cover services. Under it, only goods are covered.
Q 19. Can credit be claimed in respect of CENVAT, Entry tax and VAT paid on goods under present law which is in transit as on the transition date?
A: Yes, credit can be claimed subject to the following prerequisites-
- The registered taxable person should record the duty paid in his books of accounts within 30 days or such extended time which may be prescribed and
- A statement should be furnished in the prescribed form.
Q 20. Will the credit be available if the Invoice is made on or before 31st March, 2017 but is received by the supplier on or after 1st April, 2017 assuming the applicability of GST from 1st April, 2017?
A: Section 171 envisages such a situation wherein Invoice is raised prior to the appointed day and received after the appointed day and credit would be permissible provided the purchase is recorded by the receiver within 30 days in his books of accounts.
Q 21. A registered taxable person has Rs 1000 ITC credited to his electronic credit ledger from the last return under the earlier law. Now, he switches over to composition scheme in GST, will he get refund of that ITC?
A: No. He shall have to pay an amount equivalent to the credit of input tax on inputs held in stock on the day immediately preceding the date of switchover. The amount can be paid either through the electronic credit ledger or the electronic cash ledger. Where payment is made through the electronic credit ledger, excess ITC balance lying, if any, will lapse. The relevant section is section 172.
Q 22. What is the implication of GST in respect of exempted goods removed before the appointed day and returned after the appointed day?
A: As per section 173, if any exempted goods sold/removed under the earlier law are returned within six months of the appointed day, no tax is chargeable under the GST law. In case goods are returned after six months from the appointed day, tax is payable by the person returning the goods under the GST law.
Q 23. What are the implications of GST in respect of duty paid goods removed within six months prior to the appointed day and returned after the appointed day?
A: As per section 174, in case goods are being returned by registered taxable person general provisions of supply under GST will apply and the person receiving the goods can also claim the input tax credit under the general provisions. However, where the goods are returned by a person other than the registered taxable person then the original supplier shall be eligible for refund of the duty paid under earlier law provided the goods are returned within six months from the appointed day and such goods are identifiable to the
satisfaction of the proper officer.
Q 24. Sales return under CST (i.e. Central Sales Tax Act) is allowable as deduction from the turnover within 6 months? If, say, goods are returned in GST by a buyer after 6 months of sales, will it become taxable in CST or GST?
A: First, find out whether the goods are taxable in GST or not. Secondly check whether the goods were returned after 6 months from the appointed day. If the answer to both happens to be ‘yes’ then the person returning the goods will have to pay tax in GST. However, where the goods are returned within 6 months from the appointed day, no tax will be payable by the person returning them if the goods are identifiable and tax was paid under the earlier law at the time of its sale, made not earlier than 6 months from the appointed day. The relevant section is section 174.
Q 25. Shall a manufacturer or a job worker become liable to pay tax if the inputs or semi-finished goods sent for job work under the earlier law are returned after completion of job work after the appointed day?
A: No tax shall be payable by the manufacturer or the job worker under the following circumstances:
- Inputs/ semi-finished goods are sent to the job worker in accordance with the provisions of the earlier law before the appointed day.
- The job worker returns the same within six months from the appointed day (or extended period of 02 months).
- Both the manufacturer and the job worker declare the details of inputs held in stock by the job worker on the appointed day in the prescribed form.
The relevant sections being section 175 and section 176.
Q 26. What happens if the job worker does not return the goods within the specified time?
A: Tax would be payable by the job worker. Further, the manufacturer will also be liable to pay tax on expiry of the specified time limit – section 175 & section 176.
Q 27. Can a manufacturer transfer finished goods sent for testing purpose to the premises of any other taxable person?
A: Yes, a manufacturer can as per the provisions of the earlier law transfer the said goods to the premises of any registered taxable person on payment of tax or without payment of tax for exports within 6 months or extended period from the appointed day – section 177.
Q 28. If finished goods removed from a factory for carrying out certain processes under earlier law are returned on or after the appointed day, whether GST would be payable?
A: No tax will be payable in GST by the manufacturer or by the Job worker where the goods removed prior to the appointed day for carrying out process not amounting to manufacture are returned within 6 months from the appointed day (or extended period of 02 months) – section 177.
Q 29. When tax shall become payable in GST on manufactured goods sent to a Job worker under the earlier law?
A: The person returning the goods shall become liable to pay tax if the said goods are liable to tax in GST and are returned after 6 months from the appointed day – proviso to section 177.
Q 30. Is extension of two months as discussed in section 175, section 176 and section 177 automatic?
A: No, it is not automatic. It shall be extended by the competent authority only on sufficient cause being shown.
Q 31. What are the implications in respect of upward price revision for goods removed or services provided prior to the appointed day?
A: As per section 178, the supplier shall issue a supplementary invoice/ debit note within 30 days of the price revision and charge GST on such supplementary invoice/ debit note. The rate as per the GST schedule may apply; however, this is a contentious matter.
Q 32. What are the implications in respect of downward price revision for goods removed or services provided prior to the appointed day?
A: As per section 178, the supplier shall issue a credit note within 30 days of the price revision and mention the value of GST on such credit note. The original supplier will be allowed to reduce his tax liability subject to the recipient reducing his input tax credit to such extent.
Q 33. What will be the fate of pending refund of tax/ interest under the earlier law?
A: The pending refund claims shall be disposed of in accordance with the provisions of the earlier law – section 179.
Q 34. What happens to taxes deposited under earlier law if the services are not provided even after the appointed day?
A: As per section 181,refund can be claimed in cash in respect of such taxes even after the appointed day in respect of taxes collected but services not provided; however, the claim shall be filed within one year from the relevant date as per the provisions of section 11B of Central Excise Act.
Q 35. What will be fate of any appeal or revision relating to a claim of CENVAT/ITC which is pending under the earlier law? If say, it relates to output liability then?
A: It shall be disposed of in accordance with the provisions of the earlier law only in both the cases –section 182/183.
Q 36. If the appellate or revisional order goes in favour of the assessee, whether refund will be made in GST? What will happen if the decision goes against the assessee?
A: The refund shall be made in accordance with the provisions of the earlier law only. In case any recovery is to be made then it will be made as an arrear of tax under GST.
Q 37. How shall the refund arising from revision of return(s) furnished under the earlier law be dealt in GST?
A: The same shall be refunded in accordance with the provisions of the earlier law – section 185.
Q 38. If any goods or services are supplied in GST, in pursuance of contract entered under earlier law, which tax will be payable?
A: All supplies after the appointed day shall be liable to tax under the CGST/SGST Act. – section 186.
Q 39. If consideration for a particular supply of services was received under the earlier law and tax on it was paid, will GST also become payable where such supply is made in GST regime?
A: No tax shall be payable on supply of goods/services on or after the appointed day if the consideration for it has been received prior to the appointed day and the duty/ tax thereon has already been paid under the earlier law – section 187.
Q 40. Section 188 specifies that the supply shall be taxed under the earlier laws if the point of taxation arises prior to the appointed day. To check the point of taxation, should reference be made to the Point of Taxation Rules, 2011 or the GST laws?
A: To check point of taxation, one needs to refer to the Point of Taxation Rules, 2011.
Q 41. What is the scope of the Explanation to Section 188?
A: The Explanation clarifies that the tax in respect of services shall be payable under the GST law if the point of taxation of the supply is after the appointed day.
Q 42. If services are received by ISD under the earlier law, can the ITC relating to it be distributed in GST
A: Yes, irrespective of whether the invoice(s) relating to such services is received on or after the appointed day – section 190.
Q 43. Where goods (including capital goods) belonging to the principal are lying with the agents on the appointed day, will the agent be able to take ITC on the same?
A: As per section 192/193, the agent can take such credit on fulfillment of the following conditions:-
- The agent is a registered taxable person in GST;
- Both the principal and the agents declare the details of stock lying with the agents on the date immediately preceding the appointed day;
- The invoices for such goods had been issued not earlier than 12 months immediately preceding the appointed day;
- The principal has either reversed or not availed of the ITC in respect of such goods. This provision is applicable to SGST law only.
Q 44. Can an assessee take credit of input tax reversed on goods transferred prior to the appointed day?
A: No. Credit of input tax reversed on goods prior to appointed day, on account of branch transfers cannot be re-claimed under GST.
Q 45. Goods were sent on approval before the appointed day but are returned to the seller after 6 months from the appointed day, will tax be payable in GST?
A: Yes, if such goods are liable to tax in GST and the person who rejected or not approved the goods returns it after 6 months (may be extended by 2 months) from the appointed day. This provision is applicable to SG - Section 195.
Q 46. Where any CENVAT credit is reversed under the earlier law on account of nonpayment to the supplier of service, what is the period allowed to re-claim the credit in the earlier law and what are the changes in the new law?
A: Under the earlier law, credit shall be required to be reversed, if payment is not made within 3 months to the supplier of service and such credit may be re-claimed on payment to the supplier as and when the payment is made. Under Section 197 of the GST law, credit reversed under the earlier law due to nonpayment to the supplier of service, shall be allowed to be reclaimed on payment to the supplier within 3 months from the appointed day.