Transitional Provisions:
Since a large number of taxes, which are in the nature of taxes on supply of goods and / or services, are being subsumed in GST, elaborate transitional provisions have been provided in the MGL. These provisions have been provided so that the available ITC balances should be carried forward to the new regime without any undue revenue loss to either the taxable persons or to the tax authorities.
Section 143 of the MGL provides that a registered taxable person shall be entitled to take, in his electronic credit ledger, credit of the amount of CENVAT credit (under CGST Act) or Value Added Tax (under SGST Act) carried forward in a return furnished under the earlier law. The manner shall be prescribed by rules.The ITC shall be allowedonly if the said amount was admissible as CENVAT credit or ITC under the earlier law and is also admissible as input tax credit under this Act. The recovery of the amount taken as credit, under section 143, shall be under this Act, if found recoverable as a result of proceedings instituted, whether before or after the appointed day, under earlier law.
In the present law on Central side and in some of the States, ITC of capital goods is allowed in two or more instalments. The portion of such credit of capital goods which is not available in the current year cannot be reflected in the returns filed by assessee. As per the provisions of section 143 of the MGL, such amount of credit in respect of capital goods would not get transferred to electronic credit ledger in the new regime. Therefore, separate provision has been made. Section 144 of the MGL provides that a registered taxable person shall be entitled to take, in his electronic credit ledger, credit of the unavailed CENVAT credit (under CGST Act) or input tax credit (under SGST Act) in respect of capital goods, not carried forward in a return, furnished under the earlier law by him. Unavailed CENVAT credit means the amount that remains after subtracting the amount of CENVAT credit already availed in respect of capital goods by the taxable person under the earlier law from the aggregate amount of CENVAT credit to which the said person was entitled in respect of the said capital goods under the earlier law. The ITC shall be allowedonly if the said amount was admissible as CENVAT credit or input
tax credit under the earlier law and is also admissible as input tax credit under this Act. The recovery of the amount taken as credit, under section 144, shall be under this Act, if found recoverable as a result of proceedings instituted, whether before or after the appointed day, under earlier law.
Some persons may not have been liable for registration in the earlier law. One reason can be higher exemption threshold in the earlier law. Some of the goods which were exempted under the earlier law may come in tax net in the GST regime. The persons dealing in such goods were not required to be registered under the earlier law. Section 145 of the MGL provides for entitlement of ITC to such registered taxable persons under GST. The ITC of eligible duties and taxes or value added tax in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the appointed day would be allowed subject to the following conditions:
(i) such inputs and / or goods are used or intended to be usedfor making taxable supplies under this Act;
(ii) the said taxable person was eligible for CENVAT credit or ITC 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
Section 146 of the MGL provides for transfer of credit of eligible duties and taxes on inputs held in stock to a taxable person switching over from composition scheme under the earlier law to the normal scheme in the GST regime. It has been provided that a registered taxable person, who was either paying tax at a fixed rate or paying a fixed amount in lieu of the tax payable under the earlier law (composition taxpayer), shall be entitled to take, in his electronic credit ledger, credit of eligible duties and taxes (under CGST Act) or Value Added Tax (under SGST Act) in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the appointed datemsubject to the following cconditions:
(v)such invoices and /or other prescribed documents were issued not earlier than twelve months immediately preceding the appointed day.
(vi) the recovery of the amount taken as credit, under section 145, shall be under this Act, if found recoverable as a result of proceedings instituted, whether before or after the appointed day, under earlier law.
(i) such inputs and / or goods are used or intended to be used for making taxable supplies under this Act;
(ii) the said person is not paying tax under section 8 of this Act;
(iii) the said taxable person was eligible for CENVAT credit on receipt/purchase of such inputs and/or goods under the earlier law but for his being a composition taxpayer under the said law;
(iv) the said taxable person is eligible for input tax credit under this Act;
(v)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
(vi)such invoices and /or other prescribed documents were issued not earlier than twelve months immediately preceding the appointed day.
It has also been provided that the amount of credit shall be calculated in accordance with the generally accepted accounting principles in such manner as may be prescribed. The recovery of the amount taken as credit, under section 146, shall be under this Act, if found recoverable as a result of proceedings instituted, whether before or after the appointed day, under earlier law.
The expression “eligible duties and taxes” used in section 145 and 146 of the MGL has been defined. The said duties and taxes are those duties and taxes the credit of which is presently available under the CENVAT Credit Rules.
A person may switch over to composition scheme under GST from normal scheme under the earlier law. Such a person, in terms of section 147 of the MGL, is required to pay an amount, by way of debit in the electronic credit ledger or electronic cash ledger, equivalent to the credit of input tax in respect of inputs held in stock and
inputs contained in semi-finished or finished goods held in stock on the day immediately preceding the date of such switch over. It has also been provided that the balance of input tax credit, if any, lying in electronic credit ledger shall lapse.
Section 155 (1) of the MGL provides that every proceeding of appeal, revision, review or reference relating to a claim for CENVAT credit or input tax credit shall be disposed of under the earlier law. As a result of the proceedings, if any amount of credit is found to be admissible to the claimant, it shall be refunded to him in cash subject to the provisions of unjust enrichment, and shall not be admissible as input tax credit under this Act.
Section 155 (2) of the MGL provides that every proceeding of appeal, revision, review or reference relating to recovery of CENVAT credit or input tax credit under the earlier law shall be disposed under the earlier law. As a result of the proceedings, if any amount of credit becomes recoverable, the same shall be recovered as an arrear of tax under this Act. Further the amount so recovered shall not be admissible as input tax credit under this Act.
It may so happen that on the appointed day, tax paid goods belonging to the principal are lying at the premises of the agent. In terms of section 162A of the MGL, the agent shall be entitled to take credit of the tax paid on such goods subject to fulfillment of the following conditions:
(i) the agent is a registered taxable person under this Act;
(ii) both the principal and the agent declare the details of stock of goods lying with such agent on the date immediately preceding the appointed day in such form and manner and within such time as may be prescribed in this behalf;
(iii) the invoices for such goods had been issued not earlier than twelve months immediately preceding the appointed day; and
(iv) the principal has either reversed or not availed of the input tax credit in respect of such goods.
It may so happen that on the appointed day, tax paid capital goods belonging to the principal are lying at the premises of the agent. In terms of section 162B of the MGL, the agent shall be entitled to take credit of the tax paid on such capital goods subject to fulfillment of the following conditions:
(i) the agent is a registered taxable person under this Act;
(ii) both the principal and the agent declare the details of the stock of capital goods lying with such agent on the date immediately preceding the appointed day in such form and manner and within such time as may be prescribed in this behalf;
(iii) the invoices for such capital goods had been issued not earlier than twelve months immediately preceding the appointed day; and
(iv) the principal has either not availed of the input tax credit in respect of such capital goods or, having availed of such credit, has reversed the said credit, to the extent availed of by him.