GST TRANSITIONAL PROVISIONS

GST on Input or Input Service During Transit as per Revised Model GST Law,

GST Issue Series -1 : Credit of Taxes paid on Capital Goods received on or after Appointed Date ?

 There is possibility that capital goods purchased before the appointed day are received by the assessee on or after the appointed day. In such cases, there will be excise duty/VAT credit available on such capital goods but there is no provision in revised GST law for enabling assessees to avail the credit of capital goods in transit.Section 171 (refer below ) deals only with  credit availment for inputs/input services that are in transit on the appointed day.

[ “Capital goods” means goods, the value of which is capitalised in the books of accounts of the person claiming the credit and which are used or intended to be used in the course or furtherance of business; Section 2 (19) of Revised Model GST Law]

Care to be taken to avoid this Issue :-

The assessees should ensure that they receive the capital goods before the appointed day if ordered before the appointed day or place order for capital goods only after implementation of GST so that there is no issue regarding availment of credit of excise duty/VAT.

SECTION 171 OF Revised Model GST Law,  – CREDIT OF ELIGIBLE DUTIES AND TAXES IN RESPECT OF INPUTS OR INPUT SERVICES DURING TRANSIT

This is a new provision that has been incorporated in the revised GST law which provides for credit availment for inputs/input services during transit. Where the goods have been removed prior to the appointed day on payment of excise/VAT but are received after the appointed day, then the question of availment of cenvat of excise and VAT against CGST/SGST will arise. To resolve this situation, following has been provided in

CGST Law 

(1) A registered taxable person shall be entitled to take, in his electronic credit ledger, credit of eligible duties and taxes in respect of inputs or input services received on or after the appointed day but the duty or tax in respect of which has been paid before the appointed day, subject to the condition that the invoice or any other duty/tax paying document of the same was recorded in the books of accounts of such person within a period of thirty days from the appointed day:

PROVIDED that the aforesaid period of thirty days may, on sufficient cause being shown, be extended by the competent authority for a further period not exceeding thirty days.

(2) The said registered taxable person shall furnish a statement, in such  manner as may be prescribed, in respect of credit that has been taken under sub-section (1).

SGST Law

(1) A registered taxable person shall be entitled to take, in his electronic credit ledger, credit of Value Added Tax [and entry tax] in respect of inputs received on or after the appointed day but the tax in respect of which has been paid before the appointed day, subject to the condition that the invoice or any other tax paying document of the same was either received or recorded in the books of accounts of such person within a period of thirty days from the appointed day:

PROVIDED that the aforesaid period of thirty days may, on sufficient cause being shown, be extended by the competent authority for a further period not exceeding thirty days.

(2) The said registered taxable person shall furnish a statement, in such manner as may be prescribed, in respect of credit that has been taken under sub-section (1).

Analysis of above provision of Section 171 of Revised Model GST Law,:-

Section 171 of Revised Model GST Law, enable credit availment for inputs/input services that are in transit on the appointed day. The example of input services in transit can be the services of transportation of goods by road/rail.

At this point, it is pertinent to note the provisions contained in section 188 of the Revised GST law which states that tax in respect of taxable services shall be payable under earlier law to the extent the point of taxation in respect of such services arose before the appointed day. Say for example, if the transportation of goods by road service has been booked in advance for which invoice has been issued before the appointed day and payment is also made before the appointed day, the point of taxation shall be the date of receipt of advance and service tax will be payable on the said taxable service under earlier law. Now, the question that arises is the credit admissibility of service tax paid on such service which is received after the appointed day. The above provisions allow credit of tax on input services received after the appointed day but tax for which has been paid before the appointed day.

The above provision also specifies that the credit will be allowed only if

i)  The Invoice is booked in the accounts within 30 days of the appointed day. ( which can be further extended for next 30 days on reasonable cause)

ii) The Assessee is also required to file a statement with the authorities to substantiate the credit taken on the goods in transit.