gst update no. 02/2017/kms · graphical presentation showing transfer of unutilized cenvat credit...

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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


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.


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


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.


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.


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.


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.


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.


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.


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.


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.


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.


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.

gst update no. 02/2017/kms · graphical presentation showing transfer of unutilized cenvat credit...

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