GST Transition – Important Provisions under GST Act

Ashish M. Shaji

21 Oct, 2020

In this article, we will discuss some important topics in relation to the GST transition process. GST is the new indirect tax regime introduced by the government. It will be implemented from 1^st July 2017. There has been a lot of hype about how it will revolutionize the taxation system in India and is garnering a lot of praise and attention from all sectors.

However, a large section of society is still finding it difficult to understand as to how this will impact them and how the GST transition process from old laws to this new law will take place. We have covered some basic topics here, understanding of which is important to ensure a smooth transition.

Migration and Registration under GST

The very first step in the transition process will be the migration and registration of the taxpayer. The most important thing to understand here is that migration and registration are two different procedures.

Migration:

Taxpayers currently registered under any existing indirect tax law which is to be replaced by the GST law is required to complete their GST Migration. Under the migration procedure, a provisional ID is generated, which is to be used by the taxpayer to log into the GST common portal. Migration is only the first step of the registration procedure. To complete the registration procedure, the taxpayer is required to submit the required documents and information under the law.

New Registration:

Taxpayers not registered under the old law, who are now required to register under GST, are supposed to apply for fresh registration on the GST Common portal. The reason for such a new GST Registration can be:

• In GST regime, businesses that have turnover of more than 40 lakhs rupees should register as a normal taxable person.
• Person covered under mandatory registration criteria, like e-commerce traders, inter-state traders, etc.
• Voluntary registrations

Point of Taxation

In order to understand if a transfer of goods or service is to be taxed under existing laws or under GST, we have to determine the point of taxation, i.e. the time when the taxable event occurred.

• If the taxable event occurred and an invoice is issued before GST implementation, then tax will be collected as per existing laws.
• If a taxable event occurred after the implementation of GST, then tax will be collected as per GST laws^[1].
• And if any portion of the supply whose point of taxation occurred after GST implementation, then it will be taxed as per GST.

GST Transition of Input Tax Credit

The Input Tax Credit as per the last return under the existing laws can be carried forward as ITC under GST and transferred to the taxpayer’s electronic credit ledger. However, no credit will be allowed if such credit is allowed under GST and the supplier has furnished returns of the last 6 months as required under the existing law.

For this purpose, the registered taxpayer is required to submit a declaration within 90 days of the appointed date in Form GST TRAN-1.

Any person who is not registered under any existing laws can claim the following percentage of the credit:

• If the taxpayer is in possession of proof of payment of such Excise/ VAT or any other addition duty, 100% of the credit can be availed.
• If the taxpayer is not in possession of proof of payment of such Excise/ VAT or any other addition duty, and the goods attract central tax @ 9%, the credit allowed will be 60%. In case of any other goods, the credit allowed will be 40% of the said amount.

However, if such goods attract Integrated Tax @18%, then credit allowed will be 30% and 20% respectively.

In case the goods are received on or after the appointed date, but the tax or duty applicable on it was already paid before the appointed date, ITC can be claimed if such transaction is recorded in the books of accounts within 30 days of the GST implementation.

Treatment of Returned Goods

Treatment of returned goods is covered under sub-section (1) of Section 142 of the CGST Act, 2017. If goods are returned within 6 months after the GST implementation date, then their treatment is segregated into two categories:

• If goods are returned by a registered person then it will be considered as deemed supply. Hence the buyer can claim ITC as per the existing laws and can even carry it forward.
• If goods are returned by an unregistered person then the seller can claim a refund of tax on such returned goods.

However, if the goods were sent on and before the appointed date on an approval basis and are returned within 6 months of GST implementation, then such goods won’t be charged under GST.

Conclusion

Provisions have been made for smooth transition to GST laws. Understanding of these laws can assist you in smooth transition. In case of any query, contact Enterslice.

Read our article: GST on Legal Services in India: A Complete Outlook