GST is a paradigm change and smooth transition to this regime is of utmost importance for every business. Understanding this need, the Government, associations and professionals have undertaken various steps to train the industry and assist them in becoming GST ready.  Our team at GSTconnect LLP also got an opportunity to partner India in transition GST and making industry GST ready.

Transition to GST does not stop at taking GST registration under GST. It encompasses a whole lot of things including the most of important being transition of credits and preparedness of IT systems. Herein, a broad overview of the legal provisions has been covered to understand the importance of smooth transition to GST.

Migration of Registration

For business that were already registered under the erstwhile excise duty, service tax or VAT, the GST migration process was started in November 2016. The businesses were given provisional login details to access the GST portal. The process entailed businesses re-submitting various information and documents and then submitting it electronically. The GST migration window for those who have not undertaken this process is open will September 2017.

Transition of credits

As is generally misunderstood, VAT  / CENVAT credits shown in returns for period ending 30 June 2017 will not be automatically carried forward in GST regime. For carry forward of credits, filing of GST TRANS 1 form is necessary. General provisions regarding carry forward of credit are as follows:

  • CENVAT credit balance or VAT / Entry tax credit balance on 30 June 2017 can be carried forward as CGST and SGST credit respectively.
  • Credit of unavailed credit on capital goods can be taken immediately in GST by filing GST TRANS 1 form
  • Persons not registered under excise or dealing in exempt goods, and becoming taxable under GST will be eligible to claim credit of excise  duties paid on stock in hand on 30 June 2017. In case of non-availability of excise invoice, credit will be available under adhoc scheme. This adhoc scheme has its own set of conditions and requires filing of GST TRANS 2 form for six months. 
  • Similar to the above provision, person dealing in VAT exempt goods which are taxable under GST will be eligible to avail credit of VAT/entry tax paid on purchase of stock in hand.
  • Pre-GST taxes (such as excise duty, VAT, service tax) paid on goods or services in transit on 30 June 2017 can also be taken under the GST regime.

The details of credit on stock available under various scenarios can be read here.

It may be noted that detailed conditions have been prescribed for taking various above mentioned credits which needs to be fulfilled by every GST registered person.

Refunds and Tax Liabilities

Any refunds claims pending for pre GST period will be disposed off in accordance with previosu laws. Amount entitled as refund will be disbursed in cash and amount rejected will lapse

Similarly any tax demands / litigations for period upto June 2017 will be decided in accordance with previous laws. Confirmed tax demands will be treated as arrears under the GST law.

Job Work 

Job Worker is a person who undertakes some process on goods of someone else.

These provisions are for cases where inputs, semi-finished goods or finished goods were sent to job worker pre-GST and received back post-GST.

  • If the goods sent to job worker are received within by December 2017, there would be no implication
  • If goods are not received by December 2017, on a specific request the Commissioner may extend the time limit by another 2 months
  • If goods are not received by December 2017 or extended time limit, input tax credit availed on such goods pre-GST will have to be reversed by the sender.
  • No credit reversal will be required where both the sender and job worker declare details of stock with job worker on 30 June 2017 in GST TRANS 1.

Other Action Points required by businesses

Besides the law points discussed above, the businesses will also have to focus on the following to ensure smooth sailing in GST:

  • Ensure registration has been availed at all required locations
  • Understand input tax credit availability on various expenses and conditions to avail the same
  • Revisit their pricing strategies
  • Update their IT / accounting systems
  • Issue proper invoices and other statutory documents
  • Train the accounting and other staff

Wishing you all a happy GST transition!!