GST Transition Filing

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GST Transition Filing

There is a lot of discussion around Goods and Services Tax (GST) and the impact that it may have on small and medium businesses. Large enterprises are already preparing themselves for the change that they may have to make in their current system to comply with the new GST regime. There are, however, certain doubts among small and medium enterprises (SMEs) on the preparation required for a successful transition into the new tax regime. The SMEs must prepare themselves for the migration to the new tax structure from the current one.

Input Tax Credit

According to the GST Act, a taxable person will be entitled to take credit of the amount of tax paid and carried forward in a return furnished under the earlier law. This credit will have to be taken in his or her electronic credit ledger, for the period before the appointed day. Now on analysis of this provision, what needs to be ensured as part of the transition process is, a taxpayer must furnish his last return under the old regime with the utmost care and should account all the input taxes paid and claim the credit of the same in the new regime. Thus, considering 1st July 2017 as the appointed day for the rollout of GST, a taxpayer should ensure that he has accounted for all the stock lying on 30th June 2017 and claimed the input credit in the return filing for the period ending on 30th June 2017. And the taxpayer must ensure that all such goods and services are eligible for such credit under the new GST law.

Input Credit on Capital Goods

Input credit on capital goods that have been purchased in the previous regime will be allowed in the new regime as well. The provisions for transition as specified under the model GST Law make clear references to such approval.

Credit of Excise Duty or Additional Customs Duty

This is probably the most critical provision of transition under GST. Under the present tax regime, a dealer or a trader is not allowed a credit of excise duty or additional customs against excise. Under the new tax regime, a supply of such goods will fall under GST but a credit of excise or additional custom duty will not be allowed. The immediate result of this would be the levying of GST on goods that have already been taxed under the existing tax procedure, without any credit availability. This may lead to cascading and distortion of prices. This may also result in stock returns from dealers and traders to the manufacturers before the appointed day, and further making a new purchase after that day. Such situations may lead to panic among manufacturers and in turn affect their profits and returns.

Composition Scheme

Under the composition scheme of the new regime, the taxpayer must keep himself/herself in the know-how about the implications that migration from the old regime to the new regime may have. Now, such migration is expected to have a huge impact as the limit of the turnover under GST is Rs. 50 lakh, as against the existing Rs. 10 lakh.
It would, thus, be safe and fair to assume that many taxpayers will move from being regular taxpayers to pay taxes under the composition scheme.
The opposite of this would be wherein dealers, who are under the composition scheme, would be transformed into a being regular taxpayers. This may happen if the goods they are dealing in does not qualify under the exemption list of the new regime.

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