Transitional Provisions – Advanced Tax Laws and Practice

Question 1.
The transitional provisions enable the existing tax payers to migrate to GST in transparent and smooth manner under the GST Act, 2017 on and from the appointed day being 1.7.2017. Explain?
1. Migration of registration:
As per CGST Act, on and from the appointed day, 22-6-2017 in cases of registration and composition and 01.07.2017 in other cases), 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 subject to specified conditions.

Migration of CENVAT Credit or VAT Credit:
Provisions have been made in the Central Goods and Services Tax (CGST) Act, 2017 to ensure that CENVAT Credit or VAT Credit balance lying in books and other eligible credits are migrated to GST.
(i) ITC allowed is equal to BED is ₹62,500 as CGST credit and VAT of ₹28,125 as SGST credit.
(ii) In accordance with the provisions of Transition Rules, he can claim credit to the extent of 60% of CGST paid, i.e., ₹30,240 (₹50,400 @60%) as CGST credit.

Act, 2017 to clarify how will they be dealt with i.e., whether they would be liable to old taxes or GST and how will refunds/credits, etc. will be default. Similarly, provisions have been made in case of goods were sent for job-work prior to GST.

Question 2.
Mr. X has cleared goods from his factory on 20th May, 2017 for sale to Mr. Y for ₹5,00,000. Effective rate of Excise Duty (ED) @ 12.5%. However ED ₹62,500 has been paid on 6th June, 2017. The consignment received by Mr. Y on 5th July, 2017.
Find the following:
(i) Is Mr. Y eligible for ITC if so, what amount?
(ii) Time limit within which receipt of inputs should be recorded in the books of account of Mr. Y.
(iii) Mr. Y recorded receipt of inputs in the books of account on 15.08.2017, if so can he avail the ITC
(a) Yes. Mr. Y is eligible to avail the ITC of ₹62,500 provided he deals with taxable supplies being registered person.
(b) Inputs or Input Services recorded in the books of account in less than or equal to 30 days from 1-7-2017. Therefore, Mr. Y should account for by 30th July, 2017.
(c) Since, period of 30 days may, on sufficient cause being shown, be extended by the Commissioner for a further period not exceeding 30 days. In the given case Mr. Y can take credit on inputs on 15th Aug 2017, provided permission granted by the Commissioner for extension not exceeded 30 days.

Question 3.
Mr. Gopal is a taxable person under GST (who is a wholesaler), is having a stock worth of ₹5,00,000 as on 01-07-2017. Such person has supplied these goods for ₹5,60,000 and on which he has paid CGST @ 9% and SGST @9%. How much ITC is allowed under Sec. 140(3) of GST in the following independent cases:
(i) If he is in possession of duty paid document for the stock (namely BED is ₹62,500 and VAT ₹28,125).
(ii) If he is not in possession of duty paid document for the stock, but has invoice evidencing purchase of goods.

In accordance with the provisions of Transition Rules, he can claim credit to the extent of 60% of SGST paid, i.e., ₹30,240 (₹ 50,400 @ 60%) as SGST credit.

Note: CGST payable is 9% of ₹5,60,000 = ₹50,400 SGST payable is 9% of ₹5,60,000 = ₹50,400

Author’s comment

These provisions were important at inception of GST law as tax payers under existing laws like VAT, Excise, Service Tax, etc. had to be shifted to GST smoothly. In today’s context it may be important as scrutiny of that period may be is yet to be done by GST officials in case of some tax payers. However, the possibility of Examiner testing students on this topic is very low.

Transitional Provisions Notes

  • Sections involved: 139 to 142 of CGST Act.
  • Migration of existing taxpayers i.e. from VAT, Excise, Service Tax, and other laws to GST regime.
  • Transitional arrangements for input tax credit i.e. how the balance of Input Tax credit will be transferred from the existing laws to GST. (E.g.: How Input Tax Credit under VAT will be transferred as Input Tax Credit under GST).
  • Transitional provisions relating to Job work.
  • Miscellaneous Transitional provisions.

CS Professional Advance Tax Law Notes