SECTION 145. CREDIT OF ELIGIBLE DUTIES AND TAXES IN RESPECT OF INPUTS HELD IN STOCK TO BE ALLOWED IN CERTAIN SITUATIONS

GST Update 25.07.2016

GST DAILY DOSE OF UPDATION:-

TRANSITIONAL PROVISIONS

SECTION 145. CREDIT OF ELIGIBLE DUTIES AND TAXES IN RESPECT OF INPUTS HELD IN STOCK TO BE ALLOWED IN CERTAIN SITUATIONS

A registered taxable person, who was not liable to be registered under the earlier law or who was engaged in the manufacture of exempted goods under the earlier law but which are liable to tax under this Act, shall be entitled to take, in his electronic credit ledger, credit of eligible duties and taxes in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the appointed day subject to the following conditions:

(i) such inputs and / or goods are used or intended to be used for making taxable supplies under this Act;

(ii) the said taxable person was eligible for cenvat credit on receipt of such inputs and/or goods under the earlier law but for his not being liable for registration or the goods remaining exempt under the said law;

(iii) the said taxable person is eligible for input tax credit under this Act;

(iv) the said taxable person is in possession of invoice and/or other prescribed documents evidencing payment of duty / tax under the earlier law in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the appointed day; and

(v) such invoices and /or other prescribed documents were issued not earlier than twelve months immediately preceding the appointed day.

The amount of credit available to assessee shall be calculated in accordance with generally accepted accounting principles in such manner as may be prescribed.

The amount taken as credit shall be recovered as an arrear of tax under this Act from the taxable person if the said amount is found to be recoverable as a result of any proceeding instituted, whether before or after the appointed day, against such person under the earlier law.

Explanation.— For the purpose of this section and section 146, the expression “eligible duties and taxes” means-

(i) the duty of excise specified in the First Schedule to the Central Excise Tariff Act, 1985;

(ii) the duty of excise specified in the Second Schedule to the Central Excise Tariff Act, 1985;

(iii) the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Textile and Textile Articles) Act, 1978;

(iv) the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957;

(v) the National Calamity Contingent Duty leviable under section 136 of the Finance Act, 2001;

(vi) the additional duty leviable under sub-section (1) of section 3 of the Customs Tariff Act, 1975;

(vii) the additional duty leviable under sub-section (5) of section 3 of the Customs Tariff Act, 1975; and

(viii) the service tax leviable under section 66B of the Finance Act, 1994;—

in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the appointed day.

Similar provisions are there for SGST Law.

Although the above transitory provisions appear to be lucrative but at the same time these provisions raise various doubts in the minds of assessees. After implementation of GST regime, there will be only 4 types of levies being CGST, SGST, IGST and Additional Levy. Moreover, the Joint Committee Report on Business Processes expresses the intention of the legislature regarding restriction of cross utilisation of credit of CGST and IGST. Consequently, whether different types of duties levied by Centre will be pooled into a common credit called CGST or will be tagged under altogether different nomenclature is the question that remains unanswered. The assessees will fact problem in accounting of credit. Similarly, whether VAT levied by States will be subsumed as SGST or will it be tagged under an altogether different nomenclature. Furthermore, what will be the fate of VAT credit pertaining to different States is also ambiguous.

Another point to ponder is that presently, there are various restrictions as regards utilisation of credit like NCCD can be utilised for paying NCCD only. Whether the credit taken of various duties on the appointed day will continue to have restrictions as stated in earlier law or not? Whether the credit subsumed as CGST or SGST will be seamlessly available for utilisation is also not clear.

Nonetheless, possession of invoices for availing credit may be condition difficult to be fulfilled as assessee exempted under earlier law will not preserve invoices and not ensure that invoices contain all relevant details so as to avail credit. In order to resolve the complexities in transfer of cenvat credit earned under earlier laws to the new GST regime, provision of ‘one-time credit’ should be introduced for providing credit to sectors presently exempt from tax.

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GST Update 25.07.2016

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