Transitional Provisions Under GST Act, 2017 by CA Dhaval Doshi


Whenever a new levy or new scheme / Law of taxation is introduced, it may completely overwrite the existing tax laws and rewrite rules of the game. That's what will happen when GST is introduced. Entire scheme of Indirect Taxation will undergo radical overhaul. So to cope up with that change, transitional provisions are created in new law to ensure smooth and hassle-free adoption of new scheme of taxation to safeguard interests of existing taxpayers. In this article explain the Section 139 and 140(1) to 140(9).

Section

Particulars

139

Migration of Existing Tax payers

 

140(1)

Amount of Cenvat Credit (CGST) and VAT and Entry Tax Credit (SGST ) to be allowed as Input Tax Credit

140(2)

Amount of Cenvat Credit on Capital Goods

140(3)

Amount of Eligible duties and Taxes in Respect of Input held in Stock            

(a)   Possession of Invoice held in Stock

(b)  NOT Possession of Invoice held in Stock

140(4)

Manufacture engaged in Taxable as well as Exempt goods and services

140(5)

Duties and taxes in respect of input and input services during Transit

140(6)

Input Tax Credit to person switching from Composition Scheme

140(7)

Credit Distribution by Input Service Distributors

140(8)

ITC in case of Centralised Registration

140(9)

Reversal of ITC under existing Law

Section 139: Migration of Existing Taxpayers

Migration for every

  1. Registered Tax Payer
  2. Having PAN

Shall issue a certificate of registration of provisional basis

Any provisional registration granted under this section may be cancelled if such person fails to furnish the prescribed information within such time as may be specified

Provisional Registration certificate shall be deemed to have not been issued if th said registration is cancelled pursuance of an application filed by a person that he was not liable to registration u/s 22 or u/s 24

**Same provision applicable in SGST Act

Section 140 (1): Amount Of CENVAT CREDIT Carried Forward In A Return to be allowed As Input Tax Credit

A Registered Taxable Person (except person opting for composition scheme) shall be entitled to take credit, in his electronic credit ledger, The amount of CENVAT credit carried forward in the return relating to the period ending with the day appointing preceding the appointed day furnish by him as may be prescribe in the existing law.

Provided that A Registered Person shall not be allowed to take credit in following circumstance,

1

Where the said amount of credit shall not admissible as input tax credit under this act,  

2

Where he has not furnished all the return required under existing law for the period of Last SIX Month immediately preceding the appointed date

3

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

Section 140 (2): Amount of Cenvat Credit on Capital Goods

A Registered Taxable Person (except person opting for composition scheme) shall be allowed to take the Unaviled amount of CENVAT Credit on capital goods not carried forward in the return. However, the said credit should be admissible under the existing law as well as under the provisions of the Act. 

Under Existing Law

Under GST

Whether Input Eligible

Unavailable

Available

Not Admissible

Available

Unavailable

Not Admissible

Available

Available

Available

Unavailed Amount of CENVAT = Total Eligible Credit - Credit availed under earlier law

Section 140 (3): Amount of Eligible duties and Taxes in Respect of Input held in Stock

{A} In Possession of an invoice or any other documents evidencing payment of

       duty in respect of inputs,

A Registered Taxable Person who,

1

Not Registered under existing law

2

Engaged in Manufacturer of exempted goods or Provision of exempted services

3

Providing Work contract services availed benefit of notification 26/2012 dated 20.06.2012

4

1st Stage Dealer

5

2nd Stage Dealer

6

Registered Importer

7

Depot of manufacturer

shall be entitled to take 100%, in his electronic credit ledger, credit of eligible duties in respect of inputs held in stock or inputs contained in semi-finished goods or finished goods held in stock on the appointed day.

Subject to the following conditions:

1

Such goods used or intended to be used for making taxable supply

2

Credit allowed if admissible in GST Law

3

Possession of invoice and other related documents evidencing payment of duty

4

Such Invoices are not Older Than 12 Month preceding the appointed day

5

supplier of services is not eligible for any abatement under the Act

{B} NOT in Possession of an invoice or any other documents evidencing payment of duty in respect of inputs,

Availability of Credit to TRADERS (I.e. Other than Manufacturer or Supplier of Services) who is not in possession of invoice evidencing payment of Central Excise Duty

Condition for Credit (CGST)

1

Such Scheme is available for 6 Tax Period ( i.e. Six Month)

2

Central Tax Payable on Supply of such goods has been paid

3

Such goods are not wholly exempt from excise duty or NIL rated

4

the registered person is in possession of documents relating to procurement of goods

5

The stock of goods on which the credit is availed must be stored in a way that it can be easily identified.

6

Benefit of Such Credit Should be passed to the recipient by way of Reduced Price

7

The Registered Person availing this scheme and having furnished the details of stock held by him in accordance with clause (b) of sub rule (2) submit statement in Form GST TRANS 2 at the end of each of SIX Tax Period ( every month end) during which scheme is operation.

Condition for Credit (SGST)         

A Registered Person holding stock of goods which have suffered tax at First point of their sale in the state and subsequent sales of which are not subject to tax in the State.

Shall be allowed to take Input tax credit on goods held in stock on the appointed day in respect of which he is not in possession of any documents evidencing of payment of value added tax.

1

Such Scheme is available for 6 Tax Period ( i.e. Six Month)

2

All other condition given in CSGT Rules are same in this SGST Rules

3

The Registered Person availing this scheme and having furnished the details of stock held by him in accordance with clause (b) of sub rule (2) submit statement in Form GST TRANS 2 at the end of each of SIX Tax Period ( every month end) during which scheme is operation.

Chart of Input Tax Credit Available

If GST Rate on Such Goods

Intra State Supply and CGST Paid

Inter State Suppy is made and IGST Paid

9 % or More

60%

30%

Other I.e Less than 9 %

40%

20%


** Eligible duties defined to means all duties on which CENVAT Credit is 
available under Rule 3 of CENVAT Credit Rule 2004 except Service Tax and cesses

Section 140(4): Registered Person engaged in Manufacturer of Taxable and exempted goods / or services now liable for GST.

This provision is applicable only for inputs (not capital goods) held in stock or in respect of inputs contained in semi-finished goods or finished goods held in stock on the appointed day on ‘ELIGIBLE DUTIES and the amount of CENVAT credit carried forward in a return furnished under the existing law by him.

The details of credit availment are as follows:

Credit to be carried forward

 

1.     Amount of CENVAT credit carried forward in a return furnished under earlier law in terms of section 140(1).

 

2.     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 exempted goods or services, in terms of section 140(3).

Section 140(5): Amount of Eligible duties and Taxes in Respect of Inputs or input Services during Transit

A Registered Person shall entitled to take credit of

1

eligible duties and taxes in respect of input and input services received on or after Appointment Day

2

Duties and Taxes in respect of which has been paid by supplier under existing law.

3

Such Invoice and Duty paid documents was recorded in the books of accounts of such person within period of (thirty) 30 Days from the Appointment Day.

4

PROVIDED may, on sufficient cause being shown, be extended by the commissioner for a further period not exceeding thirty days.

5

Registered Person furnish statement in respect of credit taken

Section 140(6): Credit of eligible duties and taxes on inputs held in stock to be allowed to a taxable person switching over from composition scheme

A registered person,

  • Paying Tax at a fixed rate
  • Paying a fixed amount in lieu of tax payable

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,

Condition:

1

such inputs or goods are used or intended to be used for making taxable supplies under this Act;

2

the said registered person is not paying tax under Composition Scheme

3

the said registered person is eligible for input tax credit on such inputs under this law

4

Registered person is in possession of invoice or other prescribed documents evidencing payment of duty under the existing law in respect of inputs;

5

Such Invoices or other prescribed documents were issued not earlier than twelve month immediately preceding the appointed day.

6

Same Provision Apply in SGST Acts

Section 140(7): Credit distribution of service tax by Input Service 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.

Condition:

1

The services are received by the Input Service Distributor before the date of

applicability of GST

2

Tax on such services have not yet been distributed by the Input Service

Distributor on the date of applicability of GST.

3

Invoices relating to such services are received on or after appointed date.

4

Such services will be eligible for distribution as credit under the GST law.


Section 140(8) : Provision for transfer of unutilized Cenvat Credit by taxable
person having centralized registration under the earlier law

Where centralized registration is obtained and credit is lying in balance:

1

Credit May be taken and Carried forward in GST

2

Returns Shall be filed within 3 Months

3

Credit Carried Forward shall be eligible under GST law

4

Credit may be transferred to any registered taxable person having the same PAN for

which centralised registration was obtained under existing law

5

This section does not prevent upward revision of credits. However, in respect of

downward revision of credits such lower credits alone shall be permitted.

6

The application in FORM TRAN-1 shall specify separately the details of stock held on the appointed day up to 6 tax periods indicating the details of supplies effected during each tax period.

Section 140(9): Reclaiming CENVAT credit reversed due to non-payment of Consideration

It provides that where the below conditions are fulfilled, the credit shall be allowed as CGST credit.

1

The CENVAT credit had been reversed by the manufacturer or the service provider in terms of second proviso to Rule 4(7) of the CENVAT Credit Rules, 2004.

2

Such payment is then made after the appointed day.

3

Such payment is then made after the appointed day.

4

The registered person files an original/revised return within 3 months of the appointed day.


As per the Goods and Service Tax (GST) Act 2017 every person who take benefit/ Credit under this provisions of section 140(1) to 140(9) shall have file Form GST TRANS - 1 within
90 days from the 1st July 2017 (I.e. on or before 28th September 2017) online.

 

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