DIFFICULT CONDITIONS OF TRANSITIONAL PROVISIONS

GST Update 09.09.2016

GST DAILY DOSE OF UPDATION:-

DIFFICULT CONDITIONS OF TRANSITIONAL PROVISIONS:-

It is being provided in section 145 of the Model GST Law that a registered taxable person who was not liable to be registered under earlier law or who was engaged in the manufacture of exempted goods under earlier law but is liable to pay GST, shall be entitled to take credit of eligible duties and taxes in respect of inputs held in stock and inputs contained in semi-finished goods or finished goods held in stock on the appointed day subject to fulfillment of conditions. Similarly, it is provided in section 146 that a registered taxable person paying tax at fixed rate under earlier laws shall be entitled to take cenvat credit of eligible duties and taxes in respect of inputs held in stock and inputs contained in semi-finished goods or finished goods held in stock on the appointed day subject to fulfillment of conditions. One of the conditions to be fulfilled is that the said taxable person should be eligible to avail cenvat credit on receipt of such inputs under earlier law and should also be eligible for input tax credit under GST.

It is pointed that the condition of eligibility to avail cenvat credit both under earlier law and GST law is very difficult condition to comply with. This is for the reason that the provisions of earlier law are different than that proposed in the Model GST Act. It was mentioned in our yesterday’s update that the input tax credit in GST will be available for all goods/services used in relation to business and it appears that there will be seamless flow of cenvat credit. However, under present laws, there are number of restrictions on availment of cenvat credit. It is submitted that when the taxable person is being made liable to pay GST under the new regime, then the credit of taxes paid in earlier laws should be allowed without any restriction as if the credit is denied, it will lead to cascading effect. Moreover, the condition regarding eligibility to avail credit under earlier laws will only give rise to unnecessary litigation. While switching to GST regime, the aim of the government should be reduce the litigation pertaining to earlier laws to minimum possible extent but incorporation of such condition in the transitional provisions will increase litigation rather than reducing it.

Another condition for credit availment is that the registered person should be in possession of invoices evidencing payment of duty under earlier law in respect of stock and the invoice should not be older than 12 months. There will be practical difficulty in producing proper invoices because it is not necessary that the assessee is in possession of cenvatable invoices containing prescribed particulars on invoice because assessee was not availing credit under earlier laws. This condition will also be a cause of litigation as revenue authorities tend to object credit availment even if details like chapter sub-heading, registration number of supplier is not mentioned on invoices.

The stringent conditions formulated for transitional provisions will definitely be a hurdle in claiming the desired benefit by the assessees.

You may also visit our FB page at the following link

https://www.facebook.com/GSTTODAYBYPRADEEPJAIN/

Comments

GST Update 09.09.2016

Post a Comment

Query