GST Transition

Everything One Needs To Know About GST Transition

Online Legal India LogoBy Online Legal India Published On 27 Apr 2023 Category GST

Implementing the Goods & Services Tax (GST) on July 1, 2017, would usher in a new India. However, companies are concerned about the GST transition processes and rules that will apply when switching from the VAT/excise regime to the new one.

GST Transition

GST combines several taxes into one. Therefore, guidelines are critical to guarantee that a registered firm moves to GST successfully.

GST Transition Provisions for Work Contract

Service tax and VAT are applicable to works contracts because a works contract involves the supply of goods, such as iron bars and cement, and services, such as labour and engineering. Input Tax Credit (ITC) can be claimed on the proportion of the supply on which VAT or service tax has been paid before implementing the Goods and Services Tax (GST), but the supply is made after the appointed day.

To claim this credit, the taxpayer must submit an electronic declaration in FORM GST TRAN-1 providing the necessary details within ninety days of the appointed day.

Checklist for GST Transition

Transition of GST Registration

The transfer of GST registration is the first and most important part of the GST transition checklist. As part of the GST migration procedure, any dealer currently registered under State VAT, Central Excise, Service tax, etc. and with a valid PAN will be awarded a provisional certificate of registration in GST in Form GST REG-25. After issuing the provisional registration certificate, the dealer will have 90 days to submit the specified papers in Form GST REG-24 to convert the provisional registration into a final one.

If the information supplied is comprehensive and sufficient, the final registration certificate in Form GST REG-06 will be issued. However, suppose a taxable person is not needed to register under GST but has previously registered (under Central and State legislation). In that case, he can revoke the provisional registration granted by filing Form GST REG-28 within 30 days after the GST transition, i.e. by July 31, 2017.

ITC of The Most Recent Returns Submitted under The Present Regime

A registered taxable person may claim credit in his electronic credit ledger for the amount of CENVAT, VAT, and Entry Tax carried forward in return filed under the previous law for the month/quarter ending 30th June 2017. Nevertheless, a dealer can claim the ITC only if he has filed all of the requisite forms under the current legislation for the six months preceding the date of GST implementation, July 1st, 2017.

ITC on Capital Items VAT/Excise Paid

Today, the ITC against the purchase of capital goods is not accessible immediately, and it is only available for certain capital items. According to the CENVAT Credit Regulations of 2004, only 50% credit can be obtained in the first year, with the remaining 50% credit available in future fiscal years. Similarly, in most states, the ITC for capital goods is made available in monthly installments; in others, the ITC is accessible only when the capital goods are put to business use. The ability of a dealer to claim the total amount of VAT/Excise credit on capital goods as ITC is one of the fundamental changes brought about by the GST regime.

Excise Credit for Goods In Stock

The destiny of excise tax paid for items in stock, and their treatment in the GST migration process, is the most severe problem of all GST transition regulations. Therefore, the GST transition checklist will primarily address three scenarios:

Scenario 1: Excise Invoice Available- Dealers who purchase from manufacturers and first and second-stage dealers will have an invoice with excise duty listed on it and can claim full credit for the excise paid.

Scenario 2: Credit Transfer Document Available- Retail dealers who have purchased from parties other than the above would not have any invoices specifying the amount of excise paid, as they would have borne the same cost. Nevertheless, if the manufacturer has granted him a Credit Transfer Document, this will be proof of excise duty paid. Moreover, suppose verifiable inventory and supply chain records are kept. In that case, a manufacturer can provide such a certificate for items worth more than INR 25000 per item and bearing the maker's brand name.

Scenario 3: Neither the Excise Invoice nor the CTD is available- In such a case, the dealer may claim an input tax credit of 60% of CGST paid on outward supplies under GST where the CGST rate is 9% or higher (i.e., the GST rate is 18% or higher) and 40% of CGST paid on outward supplies under GST in other cases for six months on stocks that were not previously unconditionally exempted. In the event of interstate deliveries, the credit for IGST paid will be 30% and 20%, respectively.

Regardless of these circumstances, all registered people eligible for excise duty credit must file a declaration electronically in FORM GST TRAN-1, fully signed, on the Common Portal within ninety days.

Credits on Goods in Transit

According to the GST transition regulations, a registered taxable person can claim the input tax credit for both central and state taxes (applicable in the present system) paid on goods and services obtained after the implementation of GST. The invoice must be documented in the books of accounts within 30 days of the GST implementation date. But, if there are adequate reasons, the original 30-day timeframe might be extended by 30 days. The registered taxable person will provide a statement or appropriate papers in relation to the credit accepted.

The GST transition regulations and transitional provisions are two of the most critical areas of concern for businesses as they migrate into the GST regime. The GST migration procedure's simplicity relies heavily on how well these transitional rules are implemented.


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Anjali Malhotra


Anjali Malhotra


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