How to transit from earlier law to GST

With NDA government releasing the Model GST Law on 14/06/2016 the government had signaled
that 01.04.2017 could be the appointed day for enactment of GST. In this regards it becomes
important to understand the Transition provisions under the Law;
As per Section 142 every person registered under any of the earlier laws be it Central Excise, VAT,
Service Tax etc. SHALL be mandatorily given registration on provisional basis. Further on
submission of the required documents and information the provisional registration of the taxable
person shall be confirmed by the government.
The Various issues which a business unit/service provider shall face in this change over from
earlier law to GST would be:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.

1.

Carry forward of Cenvat Credit.

Un-availed Cenvat Credit on capital goods
Cenvat Credit in respect of stocks held in the date of enactment.
Cenvat Credit issues for taxpayers covered under the composition scheme.
Goods return/Movement of Goods and Services after the Appointed day to enact GST.
Cenvat Credit in the case of Job Work
Revision of prices after the enactment of GST
Refunds pending in the earlier law
Issues relating to continuous supply of goods and services
Issues of tax in case of goods lying with the agent.
Credit Distribution of service tax by Input Service Distributor.
Treatment of long term construction/works contracts.

Issues relating to carry forward of Cenvat Credit:

As per section 143(1) the taxpayer shall be eligible to carry forward the Cenvat credit reflected
by him/her in the returns filed under the earlier laws. The only condition where such carry
forward shall not be allowed is when the Cenvat credit permissible under the earlier law is not
admissible under the GST Law for that particular input/capital goods/input service.

2.

Un-availed Cenvat Credit on Capital goods

As per section 144 registered taxable person shall be entitled to take the credit of the unavailed Cenvat credit in respect of capital goods, not carried forward in a return, furnished
under the earlier law by him. The only condition where such carry forward shall not be allowed
is when the Cenvat credit permissible under the earlier law is not admissible under the GST
Law for the particular capital goods.
As per Explanation 2 to section 144 Capital goods means the goods defined under clause (a) of
rule 2 of Cenvat Credit Rules 2004.

3.

Cenvat Credit with respect to inputs/stock which are held at the date of enactment of
GST:
As per Section 145 the registered taxable shall be entitled to take the credit of eligible duties
and taxes in respect of inputs held in stock and inputs contained in semi-finished or finished
goods held in stock on the appointed day subject to fulfilling of ALL these conditions:
(i)
(ii)

(iii)
(iv)

(v)

such inputs and/or goods are used or intended to be used for making taxable supplies
under this Act;
the said taxable person was eligible for Cenvat credit on receipt of such inputs and/or
goods under the earlier law but for his not being liable for registration or the goods
remaining exempt under the said law;
the said taxable person is eligible for input tax credit under this Act;
the said taxable person is in possession of invoice and/or other prescribed documents
evidencing payment of duty/tax under the earlier law in respect of inputs held in stock
and inputs contained in semi-finished or finished goods held in stock on the appointed
day; and
such invoices and/or other prescribed documents were issued not earlier than 12
months immediately preceding the appointed day.

Duties and taxes eligible for claiming the credit are:

4.

S. No.

Duty Description

1.
2.
3.
4.
5.

Excise Duty
Additional Excise Duty
National Calamity Contingent Duty
Additional Custom Duty
Service Tax

Cenvat Credit issues relating to taxpayers covered under the composition scheme:

Issues in
Composition Scheme

Tax Payer opting OUT

composition scheme
under GST Law

Tax Payer opting IN

composition scheme
under GST Law

i)

Taxpayers opting OUT of Composition scheme:

A registered taxable person who was paying taxes under the composition scheme of
earlier law shall be entitled to take the credit of eligible duties provided he fulfills ALL
the following conditions:
a) such inputs and / or goods are used or intended to be used for making taxable
supplies under this Act;
b) the said person is not paying tax under section 8 i.e. composition scheme under GST;
c) the said taxable person was eligible for cenvat credit on receipt of such inputs
and/or goods under the earlier law but for his being a composition taxpayer under
the said law;
d) the said taxable person is eligible for input tax credit under this Act;
e) the said taxable person is in possession of invoice and/or other prescribed
documents evidencing payment of duty / tax under the earlier law in respect of
inputs held in stock and inputs contained in semi- finished or finished goods held in
stock on the appointed day; and
f) such invoices and /or other prescribed documents were issued not earlier than
twelve months immediately preceding the appointed day i.e 1st April 2016.

ii)

Taxpayers opting IN the Composition scheme of GST:

For opting the composition scheme as prescribed by section 8 of Model GST Law the
registered taxpayer shall pay the amount equivalent to the credit of the input tax in
respect of inputs held in stocks and inputs contained in semi-finished or finished goods
held in stock on the day immediately preceding the date of such switch over. After
payment of such amount the balance of input tax credit if any lying in the account of the
tax payer shall lapse.

5.

Issues relating to the movement of goods after the enactment of GST:

S.
No.
1.

Description

Section
No
Exempted
Goods 148
returned to place of
business
after
the
enactment of GST

2.

Duty
Paid
Goods 149
Returned to a place of
business on or after the
date of enactment.

3.

Goods sent on approval 162D

basis returned on or
after the date of
enactment

Provision
No Tax if the goods were removed 6 months prior
to date of enactment ie. 30/09/2016 AND the
goods are returned within 6 months of enactment
i.e. 30/09/2017. Tax have to paid if the goods are
returned after 6 months i.e. after 30.09.2017.
No Tax if the goods were removed 6 months prior
to date of enactment ie. 30/09/2016 AND the
goods are returned within 6 months of enactment
i.e. 30/09/2017. Tax have to paid if the goods are
returned after 6 months i.e. after 30.09.2017.
No Tax if the goods were removed 6 months prior
to date of enactment ie. 30/09/2016 AND the
goods are returned within 6 months of enactment
i.e. 30/09/2017. Tax have to paid if the goods are
returned after 6 months i.e. after 30.09.2017.
Competent Authority can extend this period by
maximum for 2 moths i.e. in total 6+2=8
months.

6.

Issues related to Taxability in case of Job Work:

S.
No.
1.

Description

Section
No
Inputs removed for Job 150
Work and returned on or
after
the
date
of
enactment.

2.

Semi-finished
Goods 151
removed for Job work and
returned on or after the
appointed day.

3.

Finished goods removed 152

for carrying out certain
processes and returned.

Provision
No Tax if the goods were removed 6 months
prior to date of enactment ie. 30/09/2016 AND
the goods are returned within 6 months of
enactment i.e. 30/09/2017. Tax have to paid by
manufacturer if the goods are returned after 6
months i.e. after 30.09.2017. Competent
Authority can extend this period by maximum
for 2 moths i.e. in total 6+2=8 months.
No Tax if the goods were removed 6 months
prior to date of enactment ie. 30/09/2016 AND
the goods are returned within 6 months of
enactment i.e. 30/09/2017. Taxes have to paid by
manufacturer if the goods are returned after 6
months i.e. after 30.09.2017. Competent
Authority can extend this period by maximum
for 2 moths i.e. in total 6+2=8 months.
No Tax if the goods were removed 6 months
prior to date of enactment ie. 30/09/2016 AND
the goods are returned within 6 months of
enactment i.e. 30/09/2017. Tax have to paid if
the goods are returned after 6 months i.e. after
30.09.2017. Competent Authority can extend
this period by maximum for 2 moths i.e. in
total 6+2=8 months.

The prior condition to the above scenario is that the person dispatching the goods and
the job worker declare the details of the goods seld in stock by the job worker on behalf
of the said person on the appointed day in such form and manner and within such time as
may be prescribed.
7.

Revision of Prices after the enactment of GST Law;

S. No.
1.

Description
Section
Where the Prices of the 153
goods/services supplied before
enactment has increased.

2.

Where the Prices of the 153

goods/services supplied before
enactment has decreased.

Provision
The taxable person shall issue to the
recipient a supplementary invoice or
debit note containing the particulars
within 30 days of such price revision.
The tax shall have to be paid on the
same as it will be classified as Deemed
Sales.
The taxable person shall issue to the
recipient a supplementary invoice or
credit note containing the particulars
within 30 days of such price revision.
The taxable person shall be allowed to
reduce his tax liability on account of
issue of the said credit note only if the
recipient has reduced his Input Tax
Credit Corresponding to such reduction
of tax liability.

8.

Pending refund claims to be disposed of under earlier law

Every claim for refund of any duty/tax and interest, if any, paid on such duty/tax or any other
amount, filed by any person before the appointed day, shall be disposed of in accordance with
the provisions of earlier law and any amount eventually accruing to him shall be paid in cash,
notwithstanding anything to the contrary contained under the provisions of earlier law other
than the provisions of sub section (2) of section 11B of the Central excise Act, 1944.

9.

Issues relating to continuous supply of goods and services under section 12 & section 13:
S. No.
1.

10.

Description
Section
Where the consideration for the 160
supply of the goods/services
have been received prior to the
appointed day and the tax
payable thereon has already
been paid under the earlier law.
2.
Where the part consideration 161
for the supply of goods/services
is received on or after the date
of enactment but the full duty
/tax payable on such supply has
already been paid under the
earlier law.
Issues of Tax relating to goods lying with the agent.
S.
No.
1.

Description

Section

2.

Where any capital goods 162B

belonging to the principal
are lying at the premises of
the agent on the day of
enactment.

Where any goods belonging 162A

to the principal are lying at
the premises of the agent on
the day of enactment.

Provision
No Tax shall be payable on the supply of
goods/services made on or after the
enactment of the law.

No tax shall be payable on the supply of

goods and/or services made before the
date of enactment of law.

Provision
Agent shall take credit of the tax paid only upon
fulfilling the following conditions:
i)
Agent must be registered.
ii)
Declaration by both of principal and
agent regarding the stocks prior to
the enactment of law.
iii)
The invoices for such goods have
been issued 12 months immediately
preceding the date of enactment.
iv)
The principal has either reversed or
not availed the input tax credit in
respect of such goods.
Agent shall take credit of the tax paid only upon
fulfilling the following conditions:
i)
Agent must be registered.
ii)
Declaration by both of principal and
agent regarding the stock of capital
goods prior to the enactment of law.
iii)
The invoices for such goods have
been issued 12 months immediately
preceding the date of enactment.
iv)
The principal has either reversed or
not availed the input tax credit in
respect of such capital goods.

11.

Credit Distribution of service tax by Input Service Distributor (Section 162):

The input tax credit on account of any services received prior to the date of enactment by an
Input service Distributor (ISD) shall be eligible for distribution as credit under this Act even if
the invoice(s) relating to such services is received on or after the date of enactment.

12.

Treatment of long term construction/works contracts:

The goods and/or services supplied on or after the date of enactment in pursuance of a contract
entered into prior to the date of enactment shall be liable to tax under the provisions of this Act.

By:

Keshav R Garg
(B.Com, CA, CS, ISA(ICAI))
Member of:
Indirect Tax Committee of PHD Chambers
Indirect Tax Committee of CII
Indirect Tax Committee of MyGst.MyTax Foundation
Co-Author A Handbook on Goods & Service Tax
3328, Sector 27 D, Chandigarh
Ph: +91-172-461-3328
Mob: +91-9888-090-008
Mail: mygst.mytax@gmail.com
servicetaxindia@outlook.com