Credit to be allowed when document evidencing payment is not in the possession

As per Rule 1(3)(a) of draft GST Transitional Provision Rules a registered person, who was not registered under the existing law, availing credit in accordance with the proviso to sub-section (3) of Section 140 shall be allowed to avail input tax credit on goods held in stock on the appointed day in respect of which he is not in possession of any document evidencing payment of central excise duty.

Such credit shall be allowed at the rate of [forty per cent.] of the central tax applicable on supply of such goods after the appointed date and shall be credited after the central tax payable on such supply has been paid.

The scheme shall be available for six tax periods from the appointed date

Issues

• 40% is too small a sum considering the tax paid under existing law and central tax to be paid under GST.

• 6 months’ time for supply of the stock and payment of the CGST will be a short period. In the event of not happening the supply, the eligible credit would lapse. Also, this time period conflicts with the time allowed under Section 140(8) of CGST Act.

Suggestions

It is suggested that:

• percentage of 40% be suitably increased to 60%, to enable the taxable person to compete with the persons who are acquiring goods under new regime.

• time period of six tax periods from the appointed date be reviewed in cases where supply doesn’t take place eventually leading to loss of credit. The words “six tax periods” be replaced with the words ‘next tax period but not later than due date of filing return for September 2018 or annual return ,whichever is earlier’.

Source ICAI Suggestions on GST Rules Submitted to Govt of India