AREAS UNTOUCHED IN TRANSITIONAL PROVISIONS

GST Update 23.09.2016

GST DAILY DOSE OF UPDATION:-

AREAS UNTOUCHED IN TRANSITIONAL PROVISIONS:- The transitional provision provides for transfer of balance of cenvat credit reflected in the last return immediately preceding the appointed day, availment of credit on stock of inputs, semi-finished goods and finished goods in case of assessee who was not liable to taken registration under earlier law or was exempted under earlier law but is liable to pay GST, credit of inputs held in stock to be allowed to person switching from composition scheme and similar provisions. However, it appears that the transitional provision has missed the dealers operating under the prevailing laws. The dealers/traders that are presently operating under various laws and when they will migrate to GST regime should also be eligible to avail the credit of tax contained in their stock as after migrating to GST regime, they will be liable to pay GST on the supply of stock held by them. They will be able to claim the credit of VAT as they will be taking credit of VAT. But the registered dealers under Central Excise Laws are not permitted to reflect credit details in the returns furnished by them and so there will be practical difficulty in passing on the cenvat credit by such registered dealers post GST regime.

A dealer/ Trader is paying VAT and will be having credit of the same. As he is liable to pay SGST after the enactment of GST, the credit of VAT can be carried forward by him. However, a dealer/trader trading in goods is not eligible to avail cenvat credit of excise duty levied on the goods sold by him. However, after migration to GST, even the dealer/trader supplying goods would also be liable to pay CGST. In such situation, the dealer/trader would be at disadvantageous position because neither he will be able to claim credit of Central Excise and service tax contained in his stock and on the contrary, he will be required to pay CGST on supply of goods from stock held by him. Furthermore, there is condition in transitional provision that the credit will be allowed on inputs held in stock or inputs contained in stock to assessee only if he was eligible to avail the credit in earlier laws. This condition will also be hurdle for claiming credit of input tax on stock because as per current laws, a trader is not eligible to claim credit of excise duty levied on goods and so this will also disable him to claim credit on stock post GST regime. The government should ponder on these issues so that dealers/traders are not suffered by lack of proper transitional provisions in this regard and the taxes contained in the stock of goods held by them are not considered as part of their cost.

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GST Update 23.09.2016

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