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GST Update No. 02/2017/KMS
Flow chart on tax treatment on services or goods where Tax has been payable under the earlier law & Service
Tax credit distributed by ISD [Sec: 188, 189 & 190 of Revised Model GST Law (MGL)]
Graphical presentation showing transfer of unutilized CENVAT credit in case of centralized registration [Sec:
191 of Revised Model GST Law (MGL)]
Graphical presentation on allowance of Tax credit on goods lying with agent [Sec: 192 & 193 of Revised
Model GST Law (MGL)]
Graphical presentation on branch transfer [Sec: 194 of Revised Model GST Law (MGL)]
Flow chart on tax treatment on goods sent on approval basis returned on or after the appointed day &
deduction if tax source [Sec: 195 & 196 of Revised Model GST Law(MGL)]
Flow chart on transitional CENVAT credit reversed due to non-payment of consideration [Sec: 197 of Revised
Model GST Law(MGL)]
Practical issues
Corresponding sections under earlier Model GST Law (MGL)
GST THIS WEEK 27th Feb–5th Mar, 2017
IN THIS UPDATE
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Tax treatment on services or goods where Tax has been payable under the earlier law
Notwithstanding anything contained in Sec:
12, 13 & 14 of The GST Act; in case of supply
of service and goods in certain cases where
Whether the Point of
Taxation in respect of
said services or goods
has been arose before
appointed day?
YES
To the extent of Point of
Taxation in respect of those
services or goods arose before
the appointed day, Tax shall be
payable under the earlier law.
NO
Where the Point of Taxation in
respect of those services or
goods do not arose before the
appointed day, Tax shall be
payable under the GST Act.
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Credit distribution of Service Tax by ISD (Only CGST Act)
Notwithstanding anything contrary
contained in GST Act, credit of Service
Tax shall be distributed by ISD as under
Whether the
service has been
received prior to
the appointed day?
YES
Whether the
invoice has been
received prior to
the appointed day?
NO
As the service has been received
on or after the appointed day;
the credit will be distributed as
per the provisions of the GST Act.
YES
As the service as well as invoice
has been received before the
appointed day, the credit will
be distributed as per the
provisions of the GST Act.
Even though the invoice relating
to such service is received on or
after the appointed day, ISD shall
be distributed under the GST Act.
NO
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Transfer of credit in case of centralized registration under the earlier law (Only CGST Act)
PROVISIONS AS PER SEC : 191
Provision for transfer of unutilized CENVAT credit in case of centralized registration
Taxable person having centralized registration under the earlier law and has obtained the registration under the GST Act, then such person shall be allowed to take the credit of the CENVAT credit carried forward in the last return for the period ending with the day immediately preceding the appointed day into electronic credit ledger subject to the fulfillment of below conditions.
Conditions to be fulfilled
Such taxable person has filed valid return under the earlier regime before the appointed day which contains the balance of un-utilized CENVAT credit to be carried forward into GST regime.
If the said return has not been filed before the appointed day, then he can file the return for the period ending with the day immediately preceding the appointed day within 3 months of the appointed day, then such credit shall be allowed to the condition that the said return is either an original return or a revised return where credit has been reduced from that claimed earlier.
The amount of the credit shall be admissible as ITC under the GST Act.
On fulfillment of conditions
Taxable person can transfer such credit to any of the registered premise having the same PAN under the GST regime for which the centralized registration was obtained under the earlier law.
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Allowance of Tax credit in respect of goods lying with agent (Only SGST Act)
Provisions as per Sec: 192 & 193
Provision for allowing credit for the goods lying with agent
The agent shall be entitled to take the credit of the tax paid on the goods including capital goods where such goods including capital goods belonging to principal are lying at the premises of the agent on the appointed day subject to the fulfillment of the following conditions.
It means the tax paid on inputs where such inputs are used for output goods / capital goods by the principal will be available as ITC to the agent subject to fulfillment of the specified conditions. Under the GST regime agent will charge GST on sale of such goods / capital goods lying with him on the appointed day and where agent is allowed to take the ITC on inputs used by principal for the said goods / capital goods by virtue of the said provision.
Conditions to be fulfilled
The agent is registered taxable person under the GST Act;
Both the principal & agent declare the details of stock of goods / capital goods lying with such agent on the date immediately preceding the appointed day in such form and manner as may be prescribed in this behalf;
The invoices for such goods / capital goods had been issued not earlier than 12 months immediately preceding the appointed day;
The principal has either reversed or not availed of the input tax credit in respect of the goods or capital goods.
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Treatment of Branch Transfer (Only SGST Act)
Provisions as per Sec: 194
Treatement of branch transfer
Amount of ITC reversed prior to the appointed day due to the branch transfer shall not be admissible as credit of ITC under the GST Act.
It means if the taxpayer has reversed the ITC under the earlier regime as per the respective State VAT Act then, in such a case the same reversed ITC shall not be admissible again in any circumstances as ITC under the GST Act.
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Tax treatment on goods sent on sale or approval basis (Only SGST Act)
* Such period of 6 months can be extended by the competent authority for a further period not exceeding
further 2 months.
Goods sent on sale or approval
basis not earlier than 6 months
before the appointed day
Whether the same
goods are returned to
the seller within 6*
months from the
appointed day?
YES NO
No Tax shall be payable under
the GST Act on such supply
made by buyer to the seller.
Tax shall be payable under
the GST Act on such supply
made by buyer to the seller.
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Deduction of tax source
Sale of goods made by supplier
in respect of which tax was
required to be deducted at
source under the earlier law
Whether the invoice in
respect of such supply
has been issued before
the appointed day?
YES NO
No TDS u/s 46 of The GST
Act is required to be
deducted; even though
payment has been made on
or after the appointed day.
TDS u/s 46 of The GST Act
is required to be deducted;
as the payment & invoice
both are made on or after
the appointed day.
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Transitional CENVAT credit reversed due to non-payment of consideration [Only CGST Act]
Where the CENVAT credit availed for the
input services provided under earlier law
has been reversed due to non-payment
of the consideration within 3 months
Whether taxable person
has made payment of
the consideration within
the period of 3 months
from the appointed day?
YES NO
CENVAT credit reversed
earlier due to the non-
payment of Tax can be
reclaimed again under the
GST Act by applying the
provisions of GST law.
CENVAT credit reversed
earlier due to the non-
payment of Tax can not be
reclaimed again under the GST
Act; even though payment has
been made after 3 months.
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Practical Issues
Mr. A, a service provider who provides the consulting service. He has received the advance receipt of
Rs. 1,00,000 from his client in the month May'17. Assume GST will be effective from 1st July, 2017.
Now, he has raised the invoice against the same advance in the month Aug'17. Whether GST will be
payable on such invoice or not under the GST regime?
Where the point of taxation in respect of service has already been arose in the earlier regime, then one
has to apply the provisions of Sec: 188 of the Revised MGL. Here, Mr. A has received the consideration
in the month of May'17 i.e. in the earlier regime. According to the provision of current tax Service Tax
law one need to discharge Service Tax liability on the advance payment also. It means the Service Tax
has already been paid by Mr. A in the month June'17.
As per the point of taxation, Mr. A has already made Tax payment and hence he is not liable to pay Tax
again under the GST regime by virtue of provisions of Sec: 188 of the Revised MGL.
ABC Limited, a works contractor paying the Service Tax and VAT under the composition scheme
under the current regime. It receives the advance receipt from the customer for Rs. 50,000/- towards
the works contract service in the month May'17. The invoice in respect of the said service has been
raised in the month July'17. Whether the GST will be payable at the time of raising the invoice or
not?
The situation is similar as discussed in the above question. However, the difference is that here ABC
Limited has already paid Service Tax on advance receipt received from customer in the month June'17
by considering the point of taxation rules but he has not paid VAT in the month June'17 as the VAT
payment is to be paid on advance receipt.
As the works contract service involves both service as well as goods. We need to apply both the
provisions Sec: 188 & 189 of the Revised MGL. By applying the provisions of Sec: 188 of Revised MGL it
seems that GST shall not be payable as the Service Tax has already been paid on the said value of Rs.
50,000/- received from the customer. On the other hand, by applying the provisions of Sec: 189 of the
Revised MGL it seems that GST shall be payable as the VAT has not been payable at the time of
advance receipt as per the State VAT law.
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In nutshell, the aforesaid both the provisions contradicts with each other and it is also not clear which
provision should be applied in the cases where transaction involves both service as well as goods.
However, an order of removal of difficulties is expected to be passed to resolve the said issue.
,
Will the provisions of Sec:190 of Revised MGL covers the situation where ISD has received the
services after the appointed day?
Where the service itself is received after the appointed day then transitional provisions cannot be
applied. In such case for distributing the credit ISD is required to follow the provisions stated in Sec: 21
of Revised MGL.
Sun Pvt. Ltd. is having the centralized registration under the current regime in Service Tax. It has H.O.
situated in Ahmedabad and having the offices in the State Maharashtra, Delhi & Kerala. The H.O. has
accumulated CENVAT credit of Rs. 40,000/- till June'17. Assume the GST will be applicable from 1st
July, 2017. However, the company has not filed it's Service Tax return for the period ending
immediately preceding appointed day. Whether the company can distribute the said transitional
credit under GST regime?
The specific provision under Sec: 190 in respect of distribution of credit by ISD has been given under
Revised MGL. According to the same taxable person having centralized registration under the earlier
law and has obtained the registration under the GST Act, then such person shall be allowed to take the
credit of the CENVAT credit and distribute the same subject to the condition specified in the law.
One of the conditions is that such taxable person has filed valid return under the earlier regime before
the appointed day which contains the balance of un-utilized CENVAT credit to be carried forward into
GST regime. If the said return has not been filed before the appointed day, then he can file the return
for the period ending with the day immediately preceding the appointed day within 3 months of the
appointed day, then such credit shall be allowed to the condition that the said return is either an
original return or a revised return where credit has been reduced from that claimed earlier.
Accordingly, if the company has filed the valid return within 3 months from the appointed day then, it
is eligible to distribute the credit accumulated in the ledger.
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Mr. X, a service provider provides advertising services. He has availed the service from the hording
owner in the month Dec'16 for providing output service. Where he has availed CENVAT credit of tax
charged on such input service against the output Service Tax payable for the said month. However,
Mr. X is unable to make payment to the service provider till June'17. Hence, he has reversed CENVAT
credit pertaining to the said transaction in the return. Now, in the month of Aug'17 he has made the
payment to the service provider then, in such case whether he can claim the credit as ITC in the
month Aug'17 under GST regime?
The said situation is covered under Sec: 197 of the Revised MGL. According to it, if the output service
provider makes the payment of the service within 3 months from the appointed day (Assume 1st July,
2017) then, he can very well avail the credit of the Tax portion involved in the said payment.
In the given case, Mr. X has made payment to the service provider in the month Aug'17 i.e. within 3
months from the appointed day. Hence, he is eligible again reclaim the said credit in the month Aug'17
under the GST regime.
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Corresponding Sections under Draft GST law dated 14.06.2016
Provisions under earlier draft law Provisions under present draft law
Section Heading Section Heading
161 Treatment of retention payments
188 Taxability of supply of services in
certain cases
189 Taxability of supply of goods in certain cases
162 Credit distribution of service tax by ISD 190 Credit distribution of service tax by ISD
- - 191 Provision for transfer of unutilized Cenvat Credit by taxable person having centralized registration under the earlier law
162A Tax paid on goods lying with agents to be allowed as credit
192 Tax paid on goods lying with agents to be allowed as credit
162B Tax paid on capital goods lying with agents to be allowed as credit
193 Tax paid on capital goods lying with agents to be allowed as credit
162C Treatment of branch transfers 194 Treatment of branch transfers
162D Goods sent on approval basis returned on or after the appointed day
195 Goods sent on approval basis returned on or after the appointed day
162E Deduction of tax source 196 Deduction of tax source
- - 197 Transitional provisions for availing Cenvat credit in certain cases
Disclaimer: KMS Updates is meant for information purpose only and does not purport to be advice or
opinion, legal or otherwise, whatsoever. KMS updates are prepared based on the understanding of the
provisions as stood applicable as on date. KMS is not responsible for any error or omission in this update or
for any action taken based on its contents.
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