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[email protected] www.smaca.in Sandesh Mundra & Associates 304, Super Plaza, Vastrapur, Ahmedabad. stitute of Company Secretaries of Ind Ahmedabad Chapter

Transitional provisions

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Page 1: Transitional provisions

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Sandesh Mundra & Associates304, Super Plaza, Vastrapur, Ahmedabad. [email protected]

Institute of Company Secretaries of IndiaAhmedabad Chapter

Page 2: Transitional provisions

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Let us look at Transitional Provisions

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Bifurcation of Dealers coveredManufacturer

Service providers

Builders

Works contractor

Trader

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Transitional issues

Migration

Credits

Goods Return (S/R and Job work)

Price revision and sale on approval

Litigations and claims

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Provisional registration (PRN) on

PAN

Furnish information for final

Registration

Eligible for compositio

n, Apply within time

Valid for 6 months

PRN cancel if info. Not furnished

PRN cancellation if not liable for registration

If not applied, pay @ regular

rates

Section 139 - Migration

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GENERAL ISSUES:-

Change in Constitution in VAT without change in PAN Cancellation of VAT no. on temporary basis Non-allotment of PRN Non-registration within allotted time Registration of Marketing offices required? What happens to Non Localized Dealers? What happens to banks / insurance companies / others with

Multiple branches in a state ? Whether separate registration required in IGST Act? Technical Loophole

E-signing not enabled after giving Adhar details

Issues in Migration

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1. Section 140(1) – CENVAT in return allowed as ITC (other than composition scheme)

2. Section 140(2) – Capital Goods Credit not c/f3. Section 140(3) – For unregistered in the previous

law in case of stocks held.4. Section 140(4) – Credit of eligible duties/taxes in

stock (in certain cases)5. Section 140(5) – Credit of eligible duties/taxes on

inputs and input services during transit 6. Section 140(6) – Credit of eligible duties/taxes on

inputs in stock to person switching from composition7. Section 140(7) – Credit distribution by ISD8. Section 140(8) - Transfer of unutilised credit in

centralized registration under earlier law

Carry forward of Credits

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Other than Composition Scheme

The returns are not furnished properly

for 6 months prior to AD

The amount of credit is not

admissible under GST Act

The amount of credit relates to goods

manufactured and cleared under

exemption notification by the

Government

Not Allowed to take credit if

SECTION 140(1)

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General issues:- What if sale in course of export delivery after

AD*? Refund of credits will be allowed? Whether ITC carried forward on basis of revised

return? What if erroneously carry forward of ITC has

been left? By mere availing credit in return, can we take

credit? Will I be given refund for my credit if I am not

eligible of its c/f**? If not registered and not liable to file returns,

credit can be c/f**?

Issues in Credits under Section 140(1)

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Capital Goods Credit not c/f

Entitled, CENVAT/VAT ITC in respect of capital goods, not carried forward in return

CENVAT credit is allowed under the

existing law.(before GST) and

also the GST regime.

Unavailed credit = Total credit - credit already

availed

Allowed to take credit ifSection 140(2)

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General Issues:- Credit not at all taken in earlier law and allowed in GST will lapse? Entry tax credit on capital goods? Dealer in composition- Excise, VAT, in GST- Regular. Capital goods (CG) credit allowed? How CENVAT on CG allocated to different places of business? Can we plan adhoc

distribution?

For Traders:- Trader allowed CENVAT on CG in GST?

For Manufacturer:- URD in Excise but Registered in GST ? Area based exemption under Current Regime, taxable in GST. Credit on CG allowed?

Issues in Credits under Section 140(2)

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For Service Provider:- Presently in centralized registration. 50% credit claimed in centralized return. Which

place of business eligible for rest 50% credit? Providing exempt services can claim CG credit?

For Builder/Works contractor:- CG on various sites in different states. In which state unavailed CENVAT to be claimed? Availing benefit of abatement Notification 26/2012, Can carry forward CENVAT on CG? CG credit on common capital goods used for projects in Composition and in Regular

scheme?

Issues in Credits under Section 140(2)

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Credit of eligible duties/taxes on stock

Section 140(3)

Conditions for Availing Benefits

supplier of services not eligible for any abatement under GST in

voic

es

issu

ed

not

befo

re

12

mon

ths

prec

edin

g 30

/06/

2017

in po

sses

si

on of

inv

oice

eligible for ITC in GST

inputs

intended for

taxable

supplies

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Person covered:- 1. Not liable to be registered under earlier law 2. Manufacture/sale of exempted goods 3. Exempted services 4. Works contract service and availing benefit of

Notification No. 26/2012-Service Tax, dated 20.06.2012 4. First stage dealer 5. Second stage dealer 6. A registered importer

Benefit provided in this section:- Credit of eligible duties and taxes for inputs in stock,

semi- finished or finished goods

Section 140(3) – Credit of eligible duties/taxes on stock……(cont.)

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General Issues:- Not availing abatement in GST and abatement notified for us. Will we

loose all credits? Credit eligible in GST not eligible in earlier law. Can we claim credit? What if we avail any exemption in GST? Our credit will lapse? Change in accounting to claim maximum credit My invoice is earlier then 12 months but goods/services received 12

months before AD*? Credit of capital goods, WIP and input services? Meaning of “PERSON NOT LIABLE TO BE REGISTERED” For passing on benefits in anti-profiteering clause, can I deduct my ITC

losses incurred because of GST?

Issues in Credits under Section 140(3)

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For Traders:- Not liable to get registered in excise and service tax. Can take CENVAT? Credit not allowed as goods in NO ITC SCHEDULE

For Service Provider:- Claim VAT credit of inputs held in stock as not liable to register in VAT? Service tax paid on advance. Credit availed. Invoice raised after AD Availing abatement in Service tax

For Builder and Works contract:- A BOT can avail credit of input services?

Issues in Credits under Section 140(3)

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Credit of eligible duties/taxes on stock

Conditions for Availing

Benefit

Cenvat credit carried forward in a return furnished in

earlier law

Cenvat credit of eligible duties of

inputs held in stock, semi-

finished and finished goods

relating to exempted goods or

services

Section 140(4)

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Credit of eligible duties/taxes on inputs and input services during transit

Condition for Availing Benefit

Rec

eived

on or

after

30/06

/201

7

Eligible

duties and

taxes as in

Section

140(3)

Invoice recorded in books within

30 days (30 extension

possible) from

30/06/2017

Duty/tax paid

before

30/06/2017

Section 140(5)

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General Issues:- Tax paid after appointed day with interest? If statement not furnished credit not allowed? What if the output supply is exempt? It covers input goods and input services. What about capital goods in transit?

For Service provider:- How to substantiate services received prior 30/06/2017?

Issues in Credits under Section 140(5)

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For Manufacturer:- Goods are in transit but moved to job-worker for quality checking purpose?

Benefit be allowed? Includes goods on which ownership is already transferred but the goods are

held by third party on our instructions?

For Works contractors:- In case of construction projects, what if the goods are not coming to the

dealer's premise but directly moving to the construction site? Can these goods be termed as goods-in-transit?

Issues in Credits under Section 140(5)

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Credit of eligible duties/taxes on inputs in stock to person

switching from composition

Inputs intended for making taxable supplies

(Only for state taxes) goods not specified in schedule containing ITC restricted

goods

Person not in GST Composition

Person eligible for ITC under this Act

Person in possession of invoice

Invoices not before 12 months preceding AD*

Condition for Availing Benefit

SECTION 140(6)

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General issues:- What about capital goods, input services and WIP? Goods mentioned in State’s negative list What about credit of Service tax? Composition in VAT claim. Can we claim excise in this Section?

For Service Provider:- Service at abated value

Issues in Credits under Section 140(6)

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Section 140(7) – Credit distribution by ISDONLY FOR CGST

ITC of services received prior to AD*

Eligible for distribution as credit

Even if the invoice received on/after AD*

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ONLY FOR CGST Person with centralized registration Eligible to credit of cenvat in a return Return to be filed within 3 months of AD* Return has to be original or revised return where the credit has

been reduced from that claimed earlier Credit allowed under GST Credit may be transferred to persons having same PAN as

centralized registration have

Section 140(8) - Transfer of unutilised credit in centralised registration under earlier law

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Return from Job work

1. Section 141(1) – Inputs returned on/after AD 2. Section 141(2) – SFG returned on/after AD3. Section 141(3) – FG returned on/after AD

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Inputs received in factory removed to a job worker For processing, testing, repair, reconditioning or any other

purpose in accordance with the provisions of earlier law Prior to AD Returned to factory on/after the AD No tax payable if returned within 6 months from AD Time may extend by 2 months Manufacturer and job worker to declare details of inputs in stock If not returned within 6/8 months ITC to be recovered

Section 141(1) – Inputs returned on/after AD

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SFG removed for manufacturing processes in earlier law Prior to AD* Returned on/after AD* No tax payable if returned within 6 months from AD* 6 months may be extended for 2 months. Goods not returned within 6/8 months ITC liable to be recovered Manufacturer and job-worker to declare details of goods Manufacturer may transfer goods for supply on payment of tax in

India or without payment of tax for exports within six months or the extended period

Section 141(2) – SFG returned on/after AD

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Taxable goods removed without payment of tax For carrying out tests or any other process not amounting to

manufacture Prior to AD* Returned on/after AD* No tax payable if returned within 6 months from AD* 6 months may extend for further 2 months If goods not returned within 6/8 months ITC shall liable to be recovered Manufacturer may transfer goods for supply on payment of tax in

India or without payment of tax for exports within six months or the extended period

Section 141(3)– FG returned on/after AD

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General Issues:- In case of SFG, what if manufacturing process does not takes place? What if I forgot to declare details of stock? What if goods were in transit and not in stock with job-worker? What if I have send some capital goods and some value addition has

taken place? What if job-worker was URD in earlier law and registered in GST? Which ITC to be recovered? We will caught if third party stock is with us?

Issues under Section 141(1),141(2) and 141(3)

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Revision of sales price

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Goods on approval basis not earlier than 6 months before AD* Rejected/not approved by buyer and returned to seller On/after AD No tax payable if goods returned within 6 months from AD* 6 months may be extended for 2 months Tax by person returning goods if returned after 6/8 months Tax by person sending goods if not returned in 6/8 months What is difference between not returned or returned

after…..Drafting anomaly?

Section 142(1)– Goods returned on/After AD

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Contract entered prior to AD* Price revised upwards/downwards On/or after AD* Registered person who made supply Issue to the recipient Debit/Credit note, within 30 days of revision In credit note, person allowed to reduce his liability if recipient

reduced ITC corresponding to such reduction of tax

Section 142(2) – Issue of Debit/Credit Notes

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Pending Litigations and Claims

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1. Section 142(3) - Pending refund claims disposed of under earlier law

2. Section 142(4) - Refund claims filed after AD* for supply before AD* and exported before/after AD* disposed of under earlier law

3. Section 142(5) - Refund claims filed after AD* for payments received and tax paid before AD* for services not provided

4. Section 142(6) - Claim of CENVAT credit disposed of under earlier law

5. Section 142(7) - Finalization of output tax liability proceedings6. Section 142(8)- Treatment of amount recovered/refunded in

pursuance of assessment or adjudication proceedings7. Section 142(9) - Treatment of amount recovered or refunded

pursuant to revision of returns

Following sections are added to carry forward

Pending Litigations, Refunds and related Claims

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Identify controversies expected and apply for advance rulings Credits dependent on vendors. Ensure registrations, improvements in vendors

compliance rating class, communicate GST impacts for vendors, contractual clauses, Vendor training etc.

Analysis of credit leakage points in our business and plan to reduce them to the lowest. For example:- Procuring material within India instead of resorting to imports as custom duty is a cost to the company.

Review contractual terms considering the impact of GST. For example:- – Probable reduction in purchase price for probable A-Class vendors– Time limits for issue of debit/credit notes – Compulsions regarding vendor timely paying tax for claiming its credit etc.

General Transitional Activities

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Review of registrations for various place to ascertain impact under GST We may do scenario analysis such as –

1. How to price the products?Ex:- CIF, FOB, Quantum of discount 2. Contract price to be kept exclusive or inclusive 3. What if tax inclusive price should be kept constant? 4. What if tax exclusive price should be kept constant? 5. Impact on pricing if absolute profit is kept constant 6. Impact on cash flows

General Transitional Activities

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Companies have to revamp existing distribution strategies. But how to analyise it?

A solution for this issue can be trend analysis. We can do trend analysis on following subjects:- i. Inventory - Location wise & category wise ii. Branch transfers iii. Location wise sales

By trend analysis we make sure the importance of each and every distribution point in our distribution pattern and we can do decision making as to which one to shut down and where to start a new one. As a result of above decision we will be able to select states where we have to obtain provisional registration in GST.

General Transitional Activities

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Review credits availed and disclosure in returns Schemes opted in VAT and impact under GST Ascertaining possibility of planning present purchases for better

transition Review existing litigations pending and action point required for

smooth transition in GST Presently, in C Form sales, submission of C Forms get delayed.

Govt. may not allow C Form in transition and gives cash refund of remaining balance on the submission of C Form?

General Transitional Activities

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For Manufacturer:- Review of systems followed with respect to goods sent for job

work and impact under GST

For Trader:- Review of systems followed for goods received back from

customers and impact under GST

General Transitional Activities

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• Thank you • Hope your transition is made easy