GST UPDATE ON PRACTICAL PROBLEMS IN USE OF CREDIT CARRIED FORWARD FROM EXISTING LAW

Every registered person can carry forward the closing balance of credit available under existing laws like Excise, VAT, and Service Tax through TRAN-1 form. The serial no. 5 of the Form TRAN-1 is to be used by manufacturers, services providers and traders who are eligible to carry forward input tax credit from earlier law to GST. This form allows the eligible credit to be carried forward into the Electronic Credit Ledger of the assessee who shall be able to utilize the same for discharging their liability towards payment of tax under GST. Form TRAN-2 is for use of traders registered under GST who are not liable to be registered under existing laws and are not in possession of invoice or duty paying document evidencing payment of tax on inputs, but want to avail input tax credit of such stock held on appointed date. The Form GST TRAN-1 is to be filed upto 28.09.2017 while the Form GST TRAN-2 is to be submitted at the end of each of the first six months indicating therein, the details of supplies of such goods affected during the tax period. The amount of credit specified in the FORM GST TRAN-1 and FORM GST TRAN-2 shall be credited to the electronic credit ledger of the applicant maintained in FORM GST PMT-2 on the common portal.
This GST Tran-1 form can be uploaded only after Excise, service tax and VAT returns are filed by the assessees. The last date of filing of service tax and VAT return is August 15. Hence, this GST Trans-1 can be filed only after that date. This implies the credit in closing balance of returns will not be carried forward in the month of July to the assessee. But the GST payment of invoices issued in the month of July 17 is to be paid by 20th August. If the credit available on purchases during the month of July is less than output liability in month of July then it has to be paid in cash. This situation will arise in spite of fact that a huge amount of input credit is available in closing balance with the assessee.
The government has given a slight relaxation of time for two months July and August. For filing GSTR-1 of July 2017, the due date of filing return has been relaxed from 10/08/2017 to 05/09/2017. However, the liability to pay tax under GST will arise as soon as the registered person files GSTR-3B. Thus, the issue that arises here is that though the time limit for filing TRAN-1 is 90 days but the liability to pay tax for July arises by 20th August 2017 and for the month of August, the tax is to be paid upto 20 September 2017 itself while last date for TRAN 1 is 28 September 2017. So, this will inflict hardship on the assessee who will have to pay tax liability for month of July & August 2017 in cash despite having huge amounts of credit to be carried forward into the new tax regime.
Thus, the registered person will be bound to file TRAN 1 before 20 August 2017, despite the fact that time limit prescribed for the same is 90 days.

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GST UPDATE ON PRACTICAL PROBLEMS IN USE OF CREDIT CARRIED FORWARD FROM EXISTING LAW

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