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Arjuna: O Lord! I am an honest assessee and I discharge all my tax liabilities. I have knowledge of existing indirect tax laws impacting my business. What will be my fate in new GST Law. I am afraid of new law.

Krishna:Whenever and wherever there is a decline in virtue/religious practice, O Arjuna, and a predominant rise of irreligion - at that time I descend Myself, i.e. I manifest myself as an embodied being.”

Similarly, these existing laws got obsolete and there was need to revive Indian economy, the new GST law is for everyone’s good and will kill the existing woes of double taxation.

Arjuna: I knew a lot about the existing law but I don’t know anything about GST. I want to put aside my business and don’t want to proceed further in new regime of tax.

Krishna: Hey Arjuna, there is no need to feel depressed by your own perceptions and conceptions. This is not time to give up, this is the time for action.

Krishna takes the chariot in the middle of battle ground and asks Arjuna, "Arjuna, What do you see on both sides?"

Arjuna: Oh Lord, on my side, I can see lots of input tax credit in existing laws and on the other side, I see the new law about which I don’t have any idea. How will I graduate from existing law to GST.

Krishna:The soul is never born nor dies at any time. Soul has not come into being, does not come into being, and will not come into being. Soul is unborn, eternal, ever-existing and primeval. Soul is not slain when the body is slain." 

Similarly, your input will not vanish in the new law.

Arjuna: My lord, what is suggested for me to at this point of time.

Krishna:You have a right to perform your prescribed duty, but you are not entitled to the fruits of action. Never consider yourself the cause of the results of your activities, and never be attached to not doing your duty."

You keep doing the need of hour; rest time will take his own course. Planning is the key.

“As a human being puts on new garments, giving up old ones, the soul similarly accepts new material bodies, giving up the old and useless ones.”

GST is just the new garment of taxation system.

Arjuna: My lord, I have deep intuitions that I will not be able to migrate to new GST law and will lose my benefits of existing law.

Krishna: Arjuna, “Ignorance is a sin, desisting from fight is a sin.” I will tell you the transitions law and your ignorance will vanish.”

Arjuna: Thank you Lord. Please appraise me by your knowledge. What will be the fate of so many existing tax officers in new GST law?

Krishna: On the date notified all existing officers shall be deemed to have been appointed as GST officers/Competent Authorities under the respective provisions of the Act.

Arjuna: What will happen to my registrations in existing law, how will I get the new registration under GST?

Krishna: Provisional Registration certificate (RC) would be issued basis your current registrations, that would be regularised in the time frame of 6 months

Arjuna: My Lord, my biggest worry is, who will decide the fate of existing input tax reflecting in my books of accounts.

Krishna: My dear Arjuna, as said by Section 142 of Model GST Law, Basically those inputs which are allowed in earlier law and new law would be allowed on the basis of your last return filed in earlier law to be carried forward.

Arjuna: That means, probability of loosing input is remote, if I file my tax returns correctly in present law.

Krishna: Right, Arjuna, Keep doing you good deeds.

Arjuna: But, I have not availed input on capital goods, it is allowed under GST? How do I tackle this situation?

Krishna: As mentioned in Section 144, position will be governed by existing Cenvat Credit Rules, if you haven’t taken input credit earlier, now you are entitled.

Arjuna: Oh Lord, thanks for enriching me with this. But there are many other circumstances, wherein I am still confused about my fate in new law.

Krishna: Arjuna, please describe those circumstances.

Arjuna: I was dealing into exempted goods, wasn’t required Registration even. I have lots of input in new GST upon my stock, how do I avail this input.

Krishna: Section 145 provides that you can avail credit subject to two conditions.

First, you are entitled to “eligible duties and taxes” as defined in the GST Act.

Second, 12 months restriction window is there, seems like if you not eligible for input on stock older than 12 months.

Arjuna: I was dealing in taxable goods but was under fixed rate system / composition scheme, how do I take the input?

Krishna: Section 146 provided if you do not opt for composition scheme in GST, you are entitled to take input credits on your stock. As applicable in all cases one need to have complete documentation to avail any inputs.

Arjuna: In case of any dispute, say after implementation of GST, some tax liability arises from earlier law and I pay the same. Am I entitled to input under GST for the tax so paid.

Krishna: No, never. “Both heaven and hell are on this earth while you are living. Based on your past karmas you create your own hell and heaven in this life.”

Arjuna: I am a regular dealer and wants to opt for composition scheme in GST. What happens to my input?

Krishna: Section 147, Please forget your huge input credit, allowed only to the extent of inputs on stock in hand. Rest will be nullified. One might require paying some tax too. Once this process is complete you are welcome to system of paying tax based on turnover.

“You did not bring anything to this world, neither you will be going to take anything.”

Arjuna: Hey Krishna, what will be fate of input on exempted goods which will not be in my possession on appointed day.

Krishna: There are three Sections in Model GST Law, which you can understand by following analysis

Section 148

Section 149

Section 162D

Exempted Goods returned to place of business after the enactment of GST

Duty Paid Goods Returned to a place of business on or after the date of enactment.

Goods sent on approval basis returned on or after the date of enactment

The following window isn’t taxable

Goods moved 6 months prior ---- Appointed date ---- Goods return within 6  months

   

Competent authority may increase above 6 months by 2 more months

The transaction is subject to tax, if out of window above

You need to plan your deeds accordingly.

Arjuna: My lord, on similar lines, what will be the fate of input on material given to job work.

Krishna: There are three more Sections in Model GST Law, which you can understand by following analysis

Section 150

Section 151

Section 152

Inputs removed for Job Work and returned on or after the date of enactment.

Semi-finished Goods removed for Job work and returned on or after the appointed day.

Finished goods removed for carrying out certain processes and returned.

The following window isn’t taxable

Goods moved 6 months prior ---- Appointed date ---- Goods return within 6  months

Competent authority may increase above 6 months by 2 more months

The transaction is subject to tax, if out of window above

Arjuna: Krishna, my doubts are getting clearer, I can see the opposite side (GST Law) more clearly but I am still afraid what will happen if you want to change price of Invoice issued under existing law, once the GST is implemented.

Krishna: Arjuna, Section 153, defines the process very amicably.

Matter

Need

Action

Tax treatment

Invoice pertaining to earlier law

Wants to increase price now / debit to client

Issue supplementary invoice / Dr. Note / Cr. Note

pay tax in new system

Wants to decrease price now / credit note to client

Reduce your output tax, provided your client also reverses corresponding input tax

Arjuna: Krishna, I have filed refund applications in existing law. How my refund will be processed after appointed date of GST rollout.

Krishna: Section 154 disposes them on the basis of provisions earlier laws and you will get those refunds. If refund is rejected, amount is lapsed.

Arjuna: Krishna, the things are not easy as they appear, there are proceedings, appeals, assessments, return revisions, how all this would be dealt with in new GST Law.

Krishna: Let’s understand Section 155-158 together

Proceedings of appeal, revision, etc under existing law

Assessments under existing law

Return revisions of earlier law

Section 155

Section 156

Section 157

Section 158

Cenvat Credit

Output tax / liability

 

The result figure would be settled in cash only

Any tax liability will be recovered as arrear, no input to anyone

Arjuna: I entered into long term contract with my business partners, how the position changes with GST for these contracts.

Krishna: Section 159, No respite, after appointed date, start paying tax as per the new regime. “Accept things, no matter how they’re”

Arjuna: I am still making supplies, however I raised invoices in earlier law and consideration received.

Krishna: Arjuna, there is no need to fear, Section 160 helps you. It says no tax in new law if you paid it earlier.

Arjuna: Krishna, I did completed the job earlier, however some retention has been held with client. What will be the impact in GST.

Krishna: Section 161, No tax on retention money received under new law provided you paid tax in earlier law. Cheer up Arjuna!

Arjuna: I am an Input Service Distributor (ISD), I do not have invoices for all branches currently and how do I distribute input service tax.

Krishna: Section 162 allows you to do that provided Invoices are received afterwards

Arjuna: Krishna, I am an agent and posses trading and capital goods of my principal. Will I be allowed input?

Krishna: Arjuna, Section 162A & Section 162B of Model GST Act answers your query.

Goods of principal lying with agent

Traded goods

Section 162A

Input is allowed to agent provided

  1. Declaration to be submitted by both principal and agent for details of stock
  2. 12 month condition
  3. Principal hasn’t availed credit

Capital goods

Section 162B

Arjuna: How is transition of branch transfers dealt with?

Krishna: Hey Arjuna, Section 162C guides you. However, any amount of input tax credit reversed prior to the appointed day shall not be admissible as credit of input tax under this Act. Keep your branches aligned beforehand.

Arjuna: Thank you for enlightening me with these provisions, my last query is, my transaction is subject to TDS in existing law, and I raised the Invoice in earlier law, but consideration received after appointed date. Will TDS be deducted?

Krishna: Section 162E, transaction isn’t liable to TDS.

Arjuna: My lord, I will never forget all the learning I got today and will plan my actions in a much better way now.

Krishna: Arjuna, whenever there will be disputed between tax officers and assessees between existing credits and new GST law, these points would be recalled. I wish you all the very best towards transition to new GST Law.

Disclaimer: The above dialogue is an attempt to answer reader’s query in simple manner. There is no intention to hurt anyone’s religious sentiments and feelings. Although utmost care has been taken while compiling above dialogue, please refer to your tax consultant for planning and filing your tax returns.

The author can also be reached at saurabh.gupta@gsandco.in

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