With introduction and implementation of GST, our Indian tax structure for goods and services has become a comprehensive one. Under GST, multiple taxes are amalgamated into one. Transition from traditional tax structure to GST needs careful exercise. Hence, it is vital to have rules ensuring smooth transition to GST in place.
The ease of transition to GST largely depends upon the effectiveness of the GST transitional provisions followed.
The main purpose of the GST transitional provisions is to help a registered taxable person through a smooth transition from the existing laws to the GST regime without compromising on any benefits.
Quick Note: Any input credit under Central Excise and Service Tax Act will be carried forward as CGST / IGST as applicable and input credit under state VAT Acts will be carried forward as SGST.
In case, the supply contract is agreed on a piecemeal basis, the pro-rata treatment is applied.
Case-Intra State Supply
|Interest rate||Percentage of ITC|
|More than 18%||60% Intra State credit to CGST|
|Less than 18%||40% Intra State credit to CGST|
Case-Inter State Supply
|Interest rate||Percentage of ITC|
|More than 18%||30% Intra State credit to CGST|
|Less than 18%||20% Intra State credit to CGST|
Quick Note: The credit is not applicable on either exempted goods manufactured or sold or exempted services provided. Further, only the amounts of taxes are being carried forward. It implies that the cess amounts paid under the pre- GST law shall lapse.
A registered taxable person is allowed to claim ITC on goods in transit provided the invoice is recorded in the books of accounts within 30 days of GST implementation
Every person who is
The following conditions must be fulfilled –
The total value of the contract invoiced after 1st July 2017 shall be subject to tax under GST and value invoiced prior to 1st July 2017 would be subject to tax under previous laws. Here, the tax paid under previous tax laws can be claimed as an ITC under GST.
The annual maintenance contracts are invoiced and settled on a monthly basis on the last day of each month. Accordingly, the invoice raised on 30th June 2017 for the month of June will be settled on 10th July 2017 and invoice raised on 31st July 2017 for the month of July will be settled on 11th August 2017.
In this scenario, the invoice raised for the month of June 2017, the taxes will be discharged under the laws of Service Tax Act since GST was not implemented till then. Similarly, the invoice raised for the month of July 2017 will be taxed under GST regime.
The annual maintenance contracts are invoiced and settled on a quarterly basis on the last day of each quarter. 40% of the amounts are settled within a week of invoice date and the balance 60% is settled on the last day of the quarter.
Accordingly, the billed amount of INR 1,000 raised on 22nd June 2017 for the month of June will be partially settled on 29th June 2017 with INR 400 and the balance INR 600 would be settled on 30th September 2017 (end of quarter).
In this scenario, the invoice amount raised in the month of June 2017 of INR 400, the taxes will be discharged under the laws of Service Tax Act since GST was not implemented till then. Similarly, the invoice of INR 600 settled on 30th September 2017 (in the quarter of July to September) will be taxed under GST regime.
In case, prior to 1st July 2017, if any raw materials, semi-finished goods or finished goods is sent for further processing to the job worker, there shall be no tax to be paid on the same. However, the following conditions need to be satisfied:
If the contract is finalised prior to 1st July 2017 but the goods and/or services are provided on or after 1st July 2017, GST would be applicable and payable.
If goods are sold between the period of 1st January 2017 and 30th June 2017 and on which tax was paid under the pre GST laws and the buyer returns these goods, the treatments will be as follows:
|Transaction will be treated as||Impact on Buyer||Impact on Seller|
|Within 31st Dec 2017||After 31st Dec 2017||Within 31st Dec 2017||After 31st Dec 2017||Within 31st Dec 2017||After 31st Dec 2017|
|Unregistered person under GST||Returns||Supply||NA||NA||Refund of tax paid under the pre GST laws||Pay GST on the value of goods returned under reverse charge mechanism and claim input of such tax paid|
|Registered Person under GST||Supply||Supply||GST to be paid by the buyer on the value of goods returned||Input credit of GST paid by the buyer|
As mentioned in the above scenario, sometimes goods are returned by the buyer. In case, goods are sent by the supplier on approval basis and buyer returns it on account of disapproval, the same will be treated as below:
Sometimes after the approval and acceptance of contracts, there can be either upward or downward price revisions. If such revisions take place after 1st July 2017 and the contract is finalised prior to 1st July 2017, within the 30 days of such revisions, the supplier of such goods and/or services shall issue a debit note for upward revisions and credit note for downward revisions stating the difference amount and impact on GST.
ITC available to ISD as on 1st July 2017 can be distributed as CGST and IGST to the recipient in the same state and the different state respectively. If goods and/or services were delivered prior to 1st July 2017 but invoice was received by the buyer on or after 1st July 2017, input credit to be carried forward CGST (in the same state) or IGST (in different state).
CENVAT credit can be carried forward by a registered person based on the returns filed, for the period ending 30th June 2017, with the respective authorities. The below are the conditions to claim input credit.