After introduction of GST, various Central and State Level taxes have been subsumed in GST. There are no. of on going transaction which continue on or after appointed day (i.e. 01-07-2017) and they have already charged to tax under earlier taxation law. The GST Transitional Provisions provides provision to Switch from Existing Law to new regime. One of the major concerns for assessee is the availability and eligibility for claiming Input Tax Credit/Cenvat Credit when the current indirect tax regime changes to GST Regime.

GST Transitional Provisions at Glance

Following are the statutory provision provided under the CGST Act, 2017:

Section 139 : Migration of Existing Taxpayers.
Section 140 : Transitional arrangements for Input Tax Credit.
Section 141 : Transitional provisions relating to Job Work.
Section 142 : Miscellaneous Transitional Provisions.

Apart from above, the central government has notified GST Transitional Provisions Rules vide Notification No. 10 / 2017 – Central Tax dated 28-06-2017 (The Central Goods and Services Tax Rules 2017):

Rule 117 : Tax or duty credit carried forward under any existing law or on goods held in stock on the appointed day
Rule 118 : Declaration to be made under clause (c) of sub-section (11) of section 142
Rule 119 : Declaration of stock held by a principal and job-worker
Rule 120 : Details of goods sent on approval basis
Rule 121 : Recovery of credit wrongly availed

Migration of Existing Taxpayers in GST Law

W.e.f. 01-07-2017, every person registered under any of the existing laws and having a valid Permanent Account Number (PAN) shall be issued a certificate of registration on provisional basis which unless replaced by a final certificate of registration shall be liable to be cancelled if the conditions so prescribed are not complied with.

The final certificate of registration shall be granted in such form and manner and subject to such conditions as may be prescribed.

GST Transitional Arrangements for Input Tax Credit

A registered person, other than a person opting to pay tax under Composition Levy Scheme, shall be entitled to carried forward the available Input Tax Credit/Cenvat Credit upto period 30-06-2017 in his GST Electronic Ledger subject to fulfil following conditions:

(a)  If same is admissible both under earlier law and GST law

(b)  Credit is lying in balance in return for the period ending the day before appointed date under earlier law.

(c)  The claimant makes prescribed application within 60 days from 01-07-2017, giving details of stock held on 01-07-2017 and in case of capital goods of amount of tax or duty availed & utilized and to be availed & utilized.

Treatment of credit Balance in last return under earlier law

Balance of ITC or Cenvat Credit up to 30-06-2017 Treatment Under GST
 Excise  Shall be carried forward as Central Tax
 Service Tax  Shall be carried forward as Central Tax
 VAT  Shall be carried forward as State Tax
 Entry Tax  Shall be carried forward as State Tax
 Centralized Registration
  • Shall be carried forward as Central Tax
  • May transfer to any of registered taxable person having same PAN
 ISD  Shall be carried forward as Central Tax
 Unavailed credit of capital goods  Credit which have not been availed fully in present law shall be available

Transitional Provisions relating to Job Work

(1) Where any inputs received at a place of business had been removed as such or removed after being Partially Processed to a job worker for further processing, testing, repair, reconditioning or any other purpose in accordance with the provisions of existing law prior to 01-07-2017 and such inputs are returned to the said place on or after 01-07-2017, no tax shall be payable if such inputs, after completion of the job work or otherwise, are returned to the said place within 6 months from 01-07-2017.

(2) Where any Semi-Finished Goods had been removed from the place of business to any other premises for carrying out certain manufacturing processes in accordance with the provisions of existing law prior to 01-07-2017 and such goods (hereafter in this section referred to as “the said goods”) are returned to the said place on or after 01-07-2017, no tax shall be payable, if the said goods, after undergoing manufacturing processes or otherwise, are returned to the said place within 6 months from 01-07-2017.

(3) Where any Excisable Goods manufactured at a place of business had been removed without payment of duty for carrying out tests or any other process not amounting to manufacture, to any other premises, whether registered or not, in accordance with the provisions of existing law prior to 01-07-2017 and such goods, are returned to the said place on or after 01-07-2017, no tax shall be payable if the said goods, after undergoing tests or any other process, are returned to the said place within 6 months from 01-07-2017.

Must Read: CBEC FAQs on GST Transitional Provisions

Miscellaneous GST Transitional Provisions

(1) Where any goods on which duty, if any, had been paid under the existing law at the time of removal thereof, not being earlier than 6 months prior to 01-07-2017, are returned to any place of business on or after 01-07-2017, the registered person shall be eligible for refund of the duty paid under the existing law where such goods are returned by a person, other than a registered person, to the said place of business within a period of 6 months from 01-07-2017 and such goods are identifiable to the satisfaction of the proper officer.

Note: However if the said goods are returned by a registered person, the return of such goods shall be deemed to be a supply.

(2) (a) where, in pursuance of a contract entered into prior to 01-07-2017, the price of any goods or services or both is revised upwards on or after 01-07-2017, the registered person who had removed or provided such goods or services or both shall issue to the recipient a supplementary invoice or debit note, containing such particulars as may be prescribed, within thirty days of such price revision and for the purposes of this Act such supplementary invoice or debit note shall be deemed to have been issued in respect of an outward supply made under this Act;

(b) where, in pursuance of a contract entered into prior to 01-07-2017, the price of any goods or services or both is revised downwards on or after 01-07-2017, the registered person who had removed or provided such goods or services or both may issue to the recipient a credit note, containing such particulars as may be prescribed, within thirty days of such price revision and for the purposes of this Act such credit note shall be deemed to have been issued in respect of an outward supply made under this Act.

Note: The registered person shall be allowed to reduce his tax liability on account of issue of the credit note only if the recipient of the credit note has reduced his input tax credit corresponding to such reduction of tax liability.

(3) Every claim for refund filed by any person before, on or after 01-07-2017, for refund of any amount of CENVAT credit, duty, tax, interest or any other amount paid under the existing law, shall be disposed of in accordance with the provisions of existing law and any amount eventually accruing to him shall be paid in cash, notwithstanding anything to the contrary contained under the provisions of existing law other than the provisions of sub-section (2) of section 11B of the Central Excise Act, 1944.

Note:

  • Where any claim for refund of CENVAT credit is fully or partially rejected, the amount so rejected shall lapse:
  • No refund shall be allowed of any amount of CENVAT credit where the balance of the said amount as on 01-07-2017 has been carried forward under this Act.

(4) Every claim for refund filed after 01-07-2017 for refund of any duty or tax paid under existing law in respect of the goods or services exported before or after 01-07-2017, shall be disposed of in accordance with the provisions of the existing law.

Note:

  • Where any claim for refund of CENVAT credit is fully or partially rejected, the amount so rejected shall lapse:
  • No refund shall be allowed of any amount of CENVAT credit where the balance of the said amount as on 01-07-2017 has been carried forward under this Act.

(5) Every claim filed by a person after 01-07-2017 for refund of tax paid under the existing law in respect of services not provided shall be disposed of in accordance with the provisions of existing law and any amount eventually accruing to him shall be paid in cash, notwithstanding anything to the contrary contained under the provisions of existing law other than the provisions of sub-section (2) of section 11B of the Central Excise Act, 1944.

(6) (a) every proceeding of appeal, review or reference relating to a claim for CENVAT credit initiated whether before, on or after 01-07-2017 under the existing law shall be disposed of in accordance with the provisions of existing law, and any amount of credit found to be admissible to the claimant shall be refunded to him in cash, notwithstanding anything to the contrary contained under the provisions of existing law other than the provisions of sub-section (2) of section 1 1B of the Central Excise Act, 1944 and the amount rejected, if any, shall not be admissible as input tax credit under this Act:

Note: No refund shall be allowed of any amount of CENVAT credit where the balance of the said amount as on 01-07-2017 has been carried forward under this Act;

(b) every proceeding of appeal, review or reference relating to recovery of CENVAT credit initiated whether before, on or after 01-07-2017 under the existing law shall be disposed of in accordance with the provisions of existing law and if any amount of credit becomes recoverable as a result of such appeal, review or reference, the same shall, unless recovered under the existing law, be recovered as an arrear of tax under this Act and the amount so recovered shall not be admissible as input tax credit under this Act.

(7) (a) every proceeding of appeal, review or reference relating to any output duty or tax liability initiated whether before, on or after 01-07-2017 under the existing law, shall be disposed of in accordance with the provisions of the existing law, and if any amount becomes recoverable as a result of such appeal, review or reference, the same shall, unless recovered under the existing law, be recovered as an arrear of duty or tax under this Act and the amount so recovered shall not be admissible as input tax credit under this Act.

(b) every proceeding of appeal, review or reference relating to any output duty or tax liability initiated whether before, on or after 01-07-2017 under the existing law, shall be disposed of in accordance with the provisions of the existing law, and any amount found to be admissible to the claimant shall be refunded to him in cash, notwithstanding anything to the contrary contained under the provisions of existing law other than the provisions of sub-section (2) of section 11B of the Central Excise Act, 1944 and the amount rejected, if any, shall not be admissible as input tax credit under this Act.

(8) (a) where in pursuance of an assessment or adjudication proceedings instituted, whether before, on or after 01-07-2017, under the existing law, any amount of tax, interest, fine or penalty becomes recoverable from the person, the same shall, unless recovered under the existing law, be recovered as an arrear of tax under this Act and the amount so recovered shall not be admissible as input tax credit under this Act;

(b) where in pursuance of an assessment or adjudication proceedings instituted, whether before, on or after 01-07-2017, under the existing law, any amount of tax, interest, fine or penalty becomes refundable to the taxable person, the same shall be refunded to him in cash under the said law, notwithstanding anything to the contrary contained in the said law other than the provisions of sub-section (2) of section 11B of the Central Excise Act, 1944 and the amount rejected, if any, shall not be admissible as input tax credit under this Act.

(9) (a) where any return, furnished under the existing law, is revised after 01-07-2017 and if, pursuant to such revision, any amount is found to be recoverable or any amount of CENVAT credit is found to be inadmissible, the same shall, unless recovered under the existing law, be recovered as an arrear of tax under this Act and the amount so recovered shall not be admissible as input tax credit under this Act;

(b) where any return, furnished under the existing law, is revised after 01-07-2017 but within the time limit specified for such revision under the existing law and if, pursuant to such revision, any amount is found to be refundable or CENVAT credit is found to be admissible to any taxable person, the same shall be refunded to him in cash under the existing law, notwithstanding anything to the contrary contained in the said law other than the provisions of sub-section (2) of section 11B of the Central Excise Act, 1944 and the amount rejected, if any, shall not be admissible as input tax credit under this Act.

(10)  Save as otherwise provided in this Chapter, the goods or services or both supplied on or after 01-07-2017 in pursuance of a contract entered into prior to 01-07-2017 shall be liable to tax under the provisions of this Act.

(11)  (a) No tax shall be payable on goods under this Act to the extent the tax was leviable on the said goods under the Value Added Tax Act of the State;

(b)  No tax shall be payable on services under this Act to the extent the tax was leviable on the said services under Chapter V of the Finance Act, 1994;

(c)  where tax was paid on any supply both under the Value Added Tax Act and under Chapter V of the Finance Act, 1994, tax shall be leviable under this Act and the taxable person shall be entitled to take credit of value added tax or service tax paid under the existing law to the extent of supplies made after 01-07-2017 and such credit shall be calculated in such manner as may be prescribed.

(12) Where any goods sent on approval basis, not earlier than 6 months before 01-07-2017, are rejected or not approved by the buyer and returned to the seller on or after 01-07-2017, no tax shall be payable thereon if such goods are returned within 6 months from 01-07-2017:

Note:

  • The said period of 6 months may, on sufficient cause being shown, be extended by the Commissioner for a further period not exceeding two months:
  • The tax shall be payable by the person returning the goods if such goods are liable to tax under this Act, and are returned after a period specified in this sub-section:
  • Tax shall be payable by the person who has sent the goods on approval basis if such goods are liable to tax under this Act, and are not returned within a period specified in this sub-section.

(13)Where a supplier has made any sale of goods in respect of which tax was required to be deducted at source under any law of a State or Union territory relating to Value Added Tax and has also issued an invoice for the same before 01-07-2017, no deduction of tax at source under section 51 shall be made by the deductor under the said section where payment to the said supplier is made on or after 01-07-2017.

Must Read: CBEC FAQs on GST Transitional Provisions

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