As we all know that process of migration of existing taxpayers under different indirect taxation laws to GST system in at pace and this migration results in too many legal issues to be resolved. Under the existing provision lots of stock lying at departmental side and as well as on assessee side. The gist of such stock is as below:
- How CENVAT and / or VAT credit of earlier laws will carry forward under the new GST system?
- What happen to CENVAT on capital goods under earlier laws?
- Whether CENVAT Of on item not allowable under earlier laws can be claimed under the new law?
- What happens to wrong credit made by assessee under earlier law?
- Will ITC of VAT paid on inputs under earlier law is allowable to a service provider?
- Time limit for issue of debit notes or credit notes to be issued under earlier law?
- Pending refund proceedings, appeal or revision proceedings and interest recovery by departments under earlier law? Etc.
To resolved all the above issues CHAPTER XXVII (section 165 to section 197) is introduced under the model GST law with named as “TRANSITIONAL PROVISIONS”. Here we will discuss only transition provisions related to CENVAT credit and VAT credit carry forward in a return filled under earlier laws.
Section 167 – Amount of CENVAT credit carried forward in a return to be allowed as input tax credit
With the introduction of migration to GST regime endeavor of the central government, the first worries to the taxpayer is his CENVAT credit and VAT credits carry forward in his earlier laws. Under section 167 such taxpayer is eligible to carry forward such credits under GST regime also if he is allowed to do so under normal provisions of GST and he had not opted for composition scheme and such amount is also eligible under the GST regime for INPUT credit.
The provision of sec 167 as to carry forward of CENVAT is reproduced below:
A registered taxable person, other than a person opting to pay tax under section 9 , shall be entitled to take, in his electronic credit ledger, the amount of cenvat credit carried forward in the return relating to the period ending with the day immediately preceding the appointed day, furnished, by him under the earlier law in such manner as may be prescribed:
PROVIDED that the registered taxable person shall not be allowed to take credit unless the said amount is admissible as input tax credit under this Act.
The provisions of sec 167 as to carry forward of VAT is produced below:
(1) A registered taxable person, other than a person opting to pay tax under section 9, shall be entitled to take, in his electronic credit ledger, credit of the amount of Value Added Tax [and Entry Tax] carried forward in the a return relating to the period ending with the day immediately preceding the appointed day, furnished, by him under the earlier law, not later than ninety days after the said day, in such manner as may be prescribed:
PROVIDED that the registered taxable person shall not be allowed to take credit unless the said amount is admissible as input tax credit under this Act:
PROVIDED FURTHER that so much of the said credit as is attributable to any claim related to section 3, sub-section (3) of section 5, section 6 or section 6A of the Central Sales Tax Act, 1956 (74 of 1956) that is not substantiated in the manner, and within the period, prescribed in rule 12 of the Central Sales Tax (Registration and Turnover) Rules, 1957 shall not be eligible to be credited to the electronic credit ledger:
PROVIDED ALSO that an amount equivalent to the credit specified in the second proviso shall be refunded under the earlier law when the said claims are substantiated in the manner prescribed in rule 12 of the Central Sales Tax (Registration and Turnover) Rules, 1957.
(2) The amount of credit under the second proviso to sub-section (1) shall be calculated in such manner as may be prescribed.
Hence, the above provisions may be summarized as under:
|Particulars||CENVAT c/f under earlier laws||VAT c/f under earlier laws|
|Will credit is eligible to taxable person opting for composition scheme under GST?||No||No|
|Manner of carry forward of CENVAT and / or VAT under earlier returns in GST?||Take the amount shown in earlier return in his electronic credit ledger||Take the amount shown in earlier return in his electronic credit ledger after deducting the input which require special declarations from the dealer.|
|How the amount to be carry forward will be calculated?||Amount shown in last of the earlier returns relating of excise acts and / or service tax acts may get carry forward as such.||Carry forward of VAT or entry tax as the case may be claimed with in a period of ninety days.Any claim on this account is not maintainable after 90 days.|
|Additional condition||The carry forward shown in earlier return shall also be eligible under the GST regime also.||The carry forward shown in earlier return shall also be eligible under the GST regime also.|
|What happens when special declaration is required (e.g. Form C etc.) is required under sales tax laws?||——-||Input related to such turnover is not eligible to carry forward but such amount may be refunded when such claims are sustainable after proper deposit of form C etc to sales tax authority.|