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from India Tax & Regulatory Services
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Government issues final transition rules and forms and issues draft rule for amending CENVAT credit rule for issuance of credit transfer document
June 07, 2017
In brief
The transition rules approved by the GST Council in its fifteenth meeting have now been released in the public domain. The government has also released draft rules for the issuance of a credit transfer document (CTD) by a manufacturer, which would be a prescribed document evidencing payment of duty on stocks held by a trader on the GST appointed date. The highlights of the amendments to the transition rules and the key features of the draft CTD Rules are as follows.
In detail
Transition rules
The rate of deemed credit when a person does not have any duty paying document is now 60% of CGST paid (increased from 40%) on sale of such goods, if the goods attract a CGST rate of 9% or more.
In other cases, the deemed credit is 40% of CGST paid.
In cases when IGST is paid on sale of such goods, deemed credit would be available at the rate of 30%
of IGST paid, if the IGST rate is 18% or above and 20% of IGST paid in other cases. The draft rules issued earlier did not specifically cover this situation.
For claiming deemed credit, (i) the goods should be leviable to excise duty or additional customs duty (in lieu of excise) and (ii) the goods should not be unconditionally exempt from the whole of duty of excise (draft rules issued earlier mentioned that the goods should not be wholly exempt).
The application in Form GST Tran1 shall provide (i) details of the amount of tax credit carried forward, adjusted by the amount of ITC attributable to statutory forms (Form C/
F/ H/ I) pending
submission and (ii) details of statutory forms received for the period 01 April, 2015 to 30 June, 2017.
A person claiming credit of service tax or VAT paid in the current regime against GST liability to the extent of supply made in the GST regime is required to furnish details of
proportion of such supply made under the GST regime.
For claiming credit of tax/
duty in cases where the goods were in transit on the appointed date, the recipient is also required to declare the quantity and unit or unit quantity code of such goods.
The time limit for filing various declarations for transition credit has been increased to 90 days (earlier 60 days) from the appointed date. The Commissioner is
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empowered to extend this period by a further period not exceeding 90 days on
recommendation of the GST Council.
Draft rule to issue credit transfer document
A manufacturer can issue a document called the CTD to evidence payment of excise duty on goods cleared before the introduction of GST to a person registered under the GST but not registered under the Central Excise Act.
Some of the important conditions to be satisfied are as follows:
o The value of goods should be more than INR 25,000 per piece and bear the brand name of the manufacturer or principal manufacturer and are identifiable as a distinct number, such as the chassis of a car.
o The manufacturer maintains verifiable records of clearance and duty payment relatable to each piece of such goods.
o The CTD shall be serially numbered and contain the particulars as prescribed.
o The manufacturer is required to assess that the dealer is in possession of such goods in the same form.
o The dealer availing credit using CTD maintains copies of all invoices relating to buying and selling from the manufacturer to the dealer, through intermediate dealers.
o The CTD shall not be issued in favour of a dealer to whom an invoice was issued for the same goods before the appointed date.
o A dealer availing credit on the basis of CTD on manufactured goods shall not be eligible to avail credit on identical goods manufactured by the same manufacturer.
The Rule also prescribed formats of documents to be maintained by the
manufacturer and dealer transferring and availing credit based on CTD.
It is proposed to include the CTD as a document that can be used to avail credit by amendment to the CENVAT Credit Rules.
The takeaways
The amendment in the transition rules to increase deemed credit (although only for goods taxed at higher rates) and passing of full credit using the credit transfer document are quite welcome changes. This minimises the concerns of the trade for credit eligibility on the stocks on hand and the impact on sales up to the GST-appointed date.
However, it is necessary to address several aspects in the draft rules for issuing the CTD (e.g., issuance of CTD by an importer, clarity on the value of goods of INR 25,000 or the definition of “per piece,” etc.).
The next meeting of the council is now scheduled on 11 June, 2017 to review the rates published earlier. The government has received various representations from the industry on rates of tax for various goods and services.
Considering past trends, it is expected that the GST Council will consider the representations made by various stakeholders on rates with proper justification in alignment with the present rate structure.
Let’s talk
For a deeper discussion of how this issue might affect your business, please contact your local PwC advisor
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