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Are you ready to implement GST ? कककक कककक GST कककक कककक कक ककक कककककक कक कक क (part-1) INTRODUCTION The Goods and Services Tax (GST) is a comprehensive Value Added Tax (VAT) on the supply of Goods or Services. The word Supply has vide scope which includes stock transfers also. It is a levy on Value Addition at each stage of supply chain with availment of tax credit on eligible inputs & capital goods procured from any place i.e., within the State or import from outside the State / Country. Its main objective is to combine all indirect tax levies into a single tax thereby replacing multiple tax levies, overcoming the limitation of current indirect tax structure and creating efficiency in tax administration. Present Indirect Taxes in India At present the following indirect tax aspects are relevant to the Construction Industry- i. Customs Duties on goods imported or exported into or out of India through Customs Act and Customs Tariff Act. ii. Excise Duty on goods manufactured in India and availment of Cenvat Credit through Central Excise Act and Central Excise Tariff Act iii. Central Sales Tax (CST) on sale or purchase of goods in the course of interstate trade or commerce through Central Sales Tax Act iv. VAT on Goods sold or bought including deemed sale of goods under Works Contract and availment of VAT Input Credit through VAT Acts by each State

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Page 1: Are you ready to implement GST

Are you ready to implement GST ? क्या आपने GST लागु करने के लिलए तैयारी कर ली है। (part-1)INTRODUCTIONThe Goods and Services Tax (GST) is a comprehensive Value Added Tax (VAT) on the supply of

Goods or Services. The word Supply has vide scope which includes stock transfers also. It is a levy

on Value Addition at each stage of supply chain with availment of tax credit on eligible inputs &

capital goods procured from any place i.e., within the State or import from outside the State /

Country. Its main objective is to combine all indirect tax levies into a single tax thereby replacing

multiple tax levies, overcoming the limitation of current indirect tax structure and creating efficiency

in tax administration.

Present Indirect Taxes in IndiaAt present the following indirect tax aspects are relevant to the Construction Industry-

i. Customs Duties on goods imported or exported into or out of India through Customs Act and

Customs Tariff Act.

ii. Excise Duty on goods manufactured in India and availment of Cenvat Credit through Central

Excise Act and Central Excise Tariff Act

iii. Central Sales Tax (CST) on sale or purchase of goods in the course of interstate trade or

commerce through Central Sales Tax Act

iv. VAT on Goods sold or bought including deemed sale of goods under Works Contract and

availment of VAT Input Credit through VAT Acts by each State

v. Entry Tax / Octroi for entry or consumption of goods in local area through Entry Tax Act or Octroi

Act by some States

vi. Service Tax on taxable value of services provided in taxable area through Finance Act, 1994

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Proposed Goods and Service TaxThe Government started its efforts in 2006-2007 to introduce the GST Act and the GST enactment

process has begun on 10-11-2009 by issue of white paper on GST for discussion. The constitution

(122nd Amendment) Bill, 2014 introduced in Lok Sabha on 19.12.2014 and passed on 6-5-2015. It is

waiting for approval of Rajya Sabha with the amendments proposed by the Select Panel of Rajya

Sabha.The following Central Taxes would be subsumed under the proposed GST:

a. Central Excise Duty

b. Additional Excise Duties

c. The Excise Duty levied under the Medicinal and Toiletries Preparation Act

d. Service Tax

e. Additional Customs Duty, commonly known as Countervailing Duty (CVD)

f. Special Additional Duty of Customs (SAD)

g. Surcharges, and

h. Cesses.

The following State related taxes and levies would be subsumed under GST:(i) VAT / Sales Tax

(ii) Entertainment Tax (unless it is levied by the local bodies)

(iii) Luxury Tax

(iv) Taxes on lottery, betting and gambling

(v) State Cesses and Surcharges in so far as they relate to supply of goods and services

(vi) Entry Tax not in lieu of Octroi.

Both the Centre and the States will have concurrent power to levy tax on all goods and services. But

local levies like Octroi imposed by local bodies on movement of goods and services are not in the list

of taxes which will be subsumed by GST and will continue to exist even after introduction of GST.

Taxable EventAt present the taxable event is manufacture or production for Excise Duty levy, providing service for

Service Tax levy and sale or deemed sale for Sale Tax/VAT. In respect of GST the taxable event will

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be at the point of “supply of goods or services”. Hence even the stock transfer would be taxable

under GST. 

GST StructureThe GST shall have two components i.e., one levied by the Centre under 'Central GST' (CGST)

Statute and the other levied by the every State under 'State GST' (SGST) Statute. While the location

of the supplier and the recipient within the country is immaterial for the purpose of CGST, the SGST

would be chargeable only when the supplier and the recipient are both located within the State. In

the place of present CST, the government is proposed to introduce 'Integrated GST' (IGST) for levy

of tax on inter-state supply of goods or services which consist of SGST & CGST. Since the GST

would be a destination or consumption based levy as against the present concept of origin based

levy, the tax accrues to the State where the goods or services are consumed. It is understood that

the Government is considering the revenue neutral rate of GST at a rate between 18% to 22% which

represents the aggregate of CGST and SGST payable on the transaction. The salient features of

GST are given below- (click on respective heading to read details ) A. CGST - The CGST(Central Goods & Service Tax) is payable at the specified rates on all transactions of supply of goods or services whether within the State or Outside. This accrues to the Centre. B. SGST- The SGST (State Goods & Service Tax) is payable at the specified rates on all transactions of supply of goods or services whether within or outside the State. This amount accrues to the State of destination in normal course. C. IGST - The IGST (Integrated Goods & Service Tax) is payable on all interstate transactions of supply of goods or services. The rate would be a combination of both the State and Central GST. It will be applicable on imported goods or on consignment / stock transfer from outside the State. However there is proposal to exempt tax on consignment or stock transfers.

The CGST(Central Goods & Service Tax) is payable at the specified rates on all transactions of

supply of goods or services whether within the State or Outside. This accrues to the Centre.

GST Credit Availment`The GST credit i.e., CGST, SGST or IGST may be availed-  a. On all the input goods or input services procured for supply or resupply or resale. b. On the goods or services even though in the negative list, when the business is carried for trading / resale of such goods or services. c. On the eligible capital goods procured for use in the business or manufacture. d. On the consumables or maintenance spares procured for use in the manufacture or business other than those which are specifically excluded as ineligible.

GST Credit UtilizationGST credit can be utilized for payment of tax liability as given below: a. CGST can be used to pay CGST or IGST and it cannot be adjusted towards SGST. b. SGST can be used only to pay SGST or IGST and it cannot be adjusted towards CGST.

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c. IGST can be used first to pay for IGST then CGST and then SGST and can be adjusted with any tax but in order specified. The following mechanism is being evolved for IGST: The Inter-State seller will pay IGST on value addition after adjusting the available credit of IGST, CGST and SGST on his purchases i.e., tax to be collected by the Centre in the Origin State. If the dealer in exporting State utilizes credit of SGST for payment of IGST, then the exporting State will transfer to the Centre such amount of SGST used in payment of IGST or the Centre will debit that amount to the exporting State. The Importing dealer will claim credit of IGST while discharging his output tax liability in his own State. If he utilizes such IGST credit for payment of SGST, then the Centre will transfer the credit of IGST used in payment of SGST to the importing State. In other words, that amount will be reimbursed by the Centre to the importing State i.e., tax passed over to the destination State. Hence the tax revenue in case of SGST will accrue to the State where the imported goods and services are consumed. Full and complete set-off will be available on the GST paid on import of goods and service. Thus Centre will act as clearing house among different States.

Time Limit for CreditPresently under the State VAT Laws, the time limit for availment of input credit is the tax period and

in some States the time limit is 3 months or 6 months or within financial year from the date of

invoice. Similarly under the Cenvat Credit Rules the time limit is one year for credit availment. Hence

it is to be ensured to avail the credit within the time limits in order to avoid disallowance. Under the

GST the time limit may be one year for availing GST Credit similar to the present Cenvat credit. The

time of supply is considered to have taken place at the earliest of the following events as per the

principle adopted by many countries- a. The time of an invoice issued or b. The time of any payment received by the supplier or c. The time of a taxable supply made

Input Credit Claim VerificationAt present VAT input credit claims are being verified by the tax officials through their computer

system. Under GST Regime, a suitable system for automatic matching of invoice wise input credit

claims would be required for comprehensive revenue reconciliation and detection of fraudulent

availment or misuse of GST Credit. The suppliers and receivers of goods or services should be able

to upload the details of GST invoice into the Government Computer System, which would enable

them to identify the mismatches at their levels without involvement of tax officials like Income Tax

TDS credit gets reflected in Form 26AS. Otherwise the buyer has to suffer with loss of credit, when

there is mismatch of GST credit as per his Return with the GST amount shown by the seller in his

Return which further aggravates the problem instead of simplifying under GST Regime. Hence

automatic matching of GST credit claims and identification of all mismatches for follow up action

would be required. A transparent automated tax system will encourage voluntary compliance, reduce

disputes, and act as a major deterrent in preventing misuse of GST Credit, thereby augmenting

revenue.

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Negative List under GSTAs the GST envisages seamless credit, the restrictions on tax credits may be at a minimum. GST credit will not be available on the proposed 1% CST levy which is expected to be in force for 2 years. In case the tax is paid under special rates prescribed for small businesses or lower rate prescribed under special schemes then the GST credit may not be available. In general, GST credit may not be available in respect of the following items:

a)    On supply of goods or services supplied by unregistered person unless GST paid under RCM (Reverse Charge Mechanism).

b)   On supply of goods or services for manufacture or processing or packing or storing of exempted goods or services, except when such goods or services are exported.

c)    On restricted goods such as those specified when such goods are not used for supply or resale or trading or manufacture or process of goods and for provision of services.

d)   On petroleum products when used as fuel to motor vehicles except when used as fuel in the production and supply of goods or services.

e)    On the inputs which are lost or destroyed or damaged prior to use of the same in the manufacture or process or in provision of service.

f)    On goods or services used for personal and non business use.g)   On capital goods specifically excluded.

Documents on which credit is eligibleThe following documents may be specified for availment of GST Credit:  a. Supply Invoice for goods or services issued by manufacturer, dealer or service provider b. GST payment challan c. Supplementary Invoice for goods or services d. Bill of Entry where GST is charged e. Certificate of Customs appraiser f. Any other document specified/ prescribed for this purpose

The above source documents are to be collected and preserved for the specified period as proof for availing the GST Credit since the Assessment under GST Regime may be the Audit based one. Various States as well as Central Government Audit agencies will verify / scrutinise the records and documents periodically in order to protect the Revenue. Credit would not be available unless supply of goods or service is evidenced by tax paying documents.

Advantages of GSTa. It will bring uniformity in tax rates with only one or two tax rates across the supply chain and avoid cascading effect of taxes.

b. It will enable simple, transparent and easy tax structure by subsuming of all levies on goods and services into one GST.

c. It will provide smooth administration for levy and collection of indirect taxes.

d. It will increase tax collections due to wider tax base and better conformity. 

e. It will reduce the overall production cost so that to compete in Global Market 

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f. It will remove tax distortions from the economy which will lead to sustainable higher growth and improve the business climate in the country. As a result GDP ratio is expected to grow by 2%.

g. Simple tax system will attract more productive investment for growth.

Are you ready to implement GST ?Activities to be undertaken for smooth Transition to GST (part-2) क्या आपने GST लागु करने के लिलए तैयारी कर ली है।Activities to be undertaken for smooth Transition to GSTIn view of likely implementation of GST w.e.f. 1-4-2016 or after some time later, various activities are

to be undertaken for smooth transition from the existing tax system to the GST Regime. A team is to

be formed allocating the specific areas to be attended by them. Create awareness within the

organization about the changes and modifications in roles/responsibilities of concerned personnel.

Communicate the GST requirements through training, circulars etc to the concerned. The important

task of the team is to review the impact of new tax on- 

Contracts which under progress or completed or tendering stage with the Clients considering the present taxation terms and conditions or clauses Purchase Orders for supply of goods which are under progress / quotation stage with vendors Work Orders for procurement of services which are under progress / completed / quotation stage Agreements for professional services  Carry forward of Credit Pending Assessments / Appeals Changes to Information Technology / EDP SystemDifference between the present Taxes and proposed GST VAT is not applicable on job work charges whereas GST is applicable on the same.  VAT is not payable on stock transfer of goods whereas GST is applicable on such goods. A major defect under the State VAT is that the State is charging VAT on the excise duty paid to the Central Government, which goes against the principle of not levying tax on taxes.  CST is not available for input credit whereas the Central GST / IGST is available for setoff.  The present system of issue of ‘C’ Forms or ‘EI/EII” will be dispensed with in view of levy of IGST and availment of IGST setoff. Exports would be zero-rated. Similar benefits may be given to Special Economic Zones (SEZs). However, such benefits will only be allowed to the processing zones of the SEZs. No benefit to the sales from an SEZ to Domestic Tariff Area (DTA) will be allowed.Works Contract Tax concept under present VAT Law and under GSTVAT is payable on Works Contract which is a contract to carry out any work such as building, processing or manufacturing. Such work may be for purposes of repairing or fabricating things and materials. The intention may be manifest when the prices for the goods to be used in the works contract and the charges for work / labour are given in lump sum. With the introduction of GST the concept of deemed sale of goods under works contract will become irrelevant. The elaborate

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scheme of reductions such as labour etc from the gross sale value will not be required since GST will have a simple structure and goods as well as services will be taxed on a uniform rate based on destination place principle. 

Some of the specific issues relevant to Works Contract are given below:i. Tax on Materials supplied by the client or employerUnder the present VAT Law the value of materials supplied by the client to the contractor or by the contractor to the sub-contractor at free cost is not taxable, since there is no sale in such transaction, whereas the value of materials supplied for a price would be treated as a sale. Under Service Tax Law even the value of free issue of materials by the client to the main contractor or by the main contractor to the subcontractor is required to be included for levy of service tax under the Works Contract Composition Scheme. Under the GST the question of inclusion of free issue of materials does not arise since the goods as well as services would be taxed on a uniform rate and the concept of composition scheme will become redundant.ii. Works Contract Tax (WCT) Deducted at Source under present VAT LawUnder the present system WCT is to be deducted by the client from the payment to the contractors and by the contractor from the payment to the sub-contractor at appropriate rate as may be prescribed in State VAT Laws and to be deposited to the Government. Similarly under Service Tax Law, service receiver has to remit Service Tax under Reverse Charge Mechanism (RCM) in respect of certain services and specified service providers. It is not clear from the “Discussion Paper on GST” that whether the TDS provisions existing under the present State VAT Laws or the RCM under Service Tax Law will be retained or not. In case the provisions for TDS or RCM are not retained, then a suitable mechanism is to be evolved by the Government to give GST credit to the buyer immediately based on the remittance or discharge of tax by the seller in similar to the system like Income Tax TDS credit gets reflected in Form 26AS.iii. Discharge of VAT liability either by main contractor or subcontractor under present VAT Law

Under the present VAT Law, in most of the States, either the main contractor or subcontractor can discharge the VAT liability in respect of transfer of property in goods involved in execution of the

works contract. Under Delhi VAT Law both the main contractor and subcontractor have to pay VAT and main contractor has to claim VAT ITC based on Tax Invoice raised by subcontractor. Similarly under Service Tax Law also both the main contractor and subcontractor have to pay Service Tax and main contractor has to claim Cenvat credit based on invoice raised by subcontractor. Under

GST also both the main contractor and subcontractor may have to pay tax on their turnover value and the main contractor has to avail input tax credit based on tax invoice of the subcontractor.

Activities to be undertaken for smooth Transition to GST

i. Review of Contracts with Clientsa. List out the contracts in progress and closed project sitesb. In respect of contracts with closed sites, it is to be reviewed as to whether disputes are existing against amount of sale value or escalation pending and impact of GST on realisation of such disputed amount.c. In respect of contracts in progress, to review the work pending in terms of value and quantity to assess the impact of GST liability.d. Tax clauses or conditions are to be reviewed as to whether the price is inclusive of taxes or exclusive of taxes.e. Calculate the expected additional tax liability under GST if taxes are inclusive. General clause can be used for claiming of the above tax by submitting a letter to the client and follow up action is to be taken till obtaining a confirmation from him for such claim.

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f. Modify the invoicing and other systems with required Information Technology Support to make them GST compliant.g. Review the supplies pending under the Contract in respect of E-1 Sales and calculate the expected additional tax liability under GST for such Sales. Submit a letter to the client claiming the above tax and follow up action is to be taken till obtaining a confirmation from him.h. Review the Contracts with VAT Composition Scheme which was specified by the Client in the contract and calculate the expected additional tax liability under GST for the pending work. Submit a letter to the client claiming the above tax and follow up action is to be taken till obtaining a confirmation from him.i. Review the Service Tax applicability on Contracts and arrive the additional tax cost under GST considering the following components and initiate necessary action for collection of it:

Service Tax Applicability Price is inclusive or Exclusive

Regular Method or Composition Method

Applicable Inclusive RegularApplicable Inclusive CompositionApplicable Exclusive RegularApplicable Exclusive CompositionExemption claimed but disputed by the Dept

Check whether exemption clause is specified or not in the contract

Exemption claim disputed by the Dept

Exemption  claim without any dispute

Exempted

j. In case of un-invoiced services, the same to be taxed at the rate of Service Tax prevailing prior to

GST for the service completed before implementation of GST. In case of continuous services, the

portion completed before GST implementation to be taxed at the Service Tax rate and the services

provided thereafter to be taxed at the Rate of GST.

k. Study the implications of the changes due to GST on the organizational cash flows.

ii. Review of Contracts for which VAT Composition Scheme opted Review the contracts for which Composite Scheme has been opted under existing State VAT Laws

and avail Credit of VAT or CST or Entry Tax paid on available stock under transitional provisions as

on the date of GST implementation. 

iii. Review of Contracts for which Regular Scheme optedReview the contracts for which Regular Scheme has been opted under existing State VAT Laws and

avail Credit of VAT or CST or Entry Tax paid on available stock of non eligible items such as

consumable items, maintenance materials, lease rentals etc., on which VAT Input Credit was not

availed as on the date of GST implementation.

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iv. Review of Purchase Orders with Vendorsa. To verify whether the vendor is Registered Dealer or not.

b. Purchase Orders are to be reviewed for the supplies pending and quantify the supplies to be

made before GST period and after the GST period. 

c. Tax Clauses or conditions to be reviewed as to whether price is inclusive or exclusive of taxes and

in case of inclusive of taxes the rate is to be revised considering the GST.

d. A clause is to be inserted for issue of valid GST invoice in order to avail GST Credit irrespective of

the vendor whether local or from out side the State.

e. A clause is also to be inserted for recovery of GST amount in case of mismatch of GST Credit

with the Return filed by the vendor.

f. Review of Purchase Orders placed for Supplies under E-1 Sales, High Sea Sales and other

exempted Sales such as SEZ etc., and revise those Purchase Orders considering impact of GST.

g. Review of Purchase Orders placed for procurement of Capital Goods

v. Review of Work Orders with Subcontractorsa. To verify whether the Subcontractor is a Registered Dealer or not.

b. In case of Un-Registered dealer necessary steps are to be take for obtaining GST Registration if

exceeded the exemption value.

c. Work Orders are to be reviewed for the work pending in terms of quantity as well as value and

whether with material or without material. 

d. Tax Clauses or conditions to be reviewed as to whether price is inclusive or exclusive of taxes and

in case of inclusive of taxes the rate is to be revised considering the GST.

e. A clause is to be inserted for issue of valid GST invoice in order to avail GST Credit.

f. A clause is also to be inserted for recovery of GST in case of mismatch with the Return filed by the

Subcontractor.

g. Review of Piece Rate Work Contracts as to whether inclusive of taxes or exclusive taxes and

necessary amendments are to be made for tax clauses.

vi. Review of Agreements with Professionalsa. To verify whether the Professional is a Registered dealer or not.

b. In case of Un-Registered dealer, necessary steps are to be take for obtaining GST Registration if

exceeded the exemption value.

c. Agreements are to be reviewed for the job pending value.

d. Tax Clauses or conditions to be reviewed as to whether fees is inclusive or exclusive of taxes and

in case of inclusive of taxes the rate is to be revised considering the GST.

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e. A clause is to be inserted for issue of valid GST invoice in order to avail GST Credit.

f. A clause is also to be inserted that in case of mismatch of GST Credit with the Return filed by them

the GST amount will be recovered from them.

vii.     Carry forward of existing Cenvat / State VAT CreditsCredit availed but not utilised may be allowed to carry forward. Similarly the tax or duty paid on stock of goods as on the date of implementation of GST may be allowed to take as cenvat / input credit. Hence the following steps are to be taken:

      Carry forward the existing Credit under VAT, Service Tax, Central Excise as per the books of accounts to GST Credit Account depending upon the provisions specified in the GST Law.

      The Credit of Duty / Tax paid on stocks of goods available in raw material, work in process or finished stage which was not taken or partially taken due to disallowance or restrictions on admissibility in earlier periods. Such credit of Duty / Tax on those items can be allowed to avail under GST Regime. This could be:  CST which was not allowed as credit on goods procured.  VAT which was not availed / allowed as credit on goods procured.  Entry Tax which was not availed / allowed as credit on entry of goods into the State.  Central excise duty which was not availed / allowed as cenvat on goods procured.  Service Tax which was not availed / allowed as credit on services.

      The Duty / Tax paid on capital goods on which credit has not been availed due to disallowance or restrictions on admissibility in earlier periods. Such credit of Duty / Tax on those items may be allowed to avail if GST applicable for output services / goods. This could be:

 CST which was not allowed as credit on goods procured. VAT which was not availed / allowed as credit on goods procured. Entry Tax which was not availed / allowed as credit on entry of goods into the State. Central excise duty which was not availed / allowed as cenvat on goods procured. Service Tax which was not availed / allowed as credit on services.      Additional duties of excise credit for imported goods have not been availed due to disallowance

or restrictions on admissibility in earlier periods by certain dealers. Such credit of Duty / Tax on those items can be allowed to avail if GST applicable for output services / goods. This could be:

 VAT credit not availed by service providers. All taxes on those who were not liable or exempted in earlier regime.

viii. Other requirements in relation to input creditThe following other requirements are also to be fulfilled before implementation of GST-

A. Steps to be taken for availment of Credit on Stock As on the date of transition the stocks in the nature of raw material, packing material, consumables,

stores, fuels, semi-processed goods, finished goods and capital goods may be physically available

at various places / sites. The said stocks including capital goods may be subjected to GST after

implementation. GST laws may provide one time facility for availment of credit pertaining to pre GST

period say within the three months or six months period from the date of implementation of GST.

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Hence necessary steps are to be taken for availing credit of the tax / duty paid on such stocks as

given below:

a. The quantitative confirmation of stocks in hand as on date of transition would be required.

b. Chalking out a plan for physical verification of the stocks in all the sites / places where they exist.

This would cover the goods for resale, job work and the capital goods. 

c. The duty/ tax paying documents of stocks are to be collected and preserved for specified period.

d. The proportionate credit of stocks based on above stocks is to be claimed. 

e. In case tax quantum is not available in the documents, then the rules are to be referred on how

and to what extent credit could be claimed. 

f. The entitlement to carry forward may be subject to fulfilment of certain conditions such as

transitional credit to be provided only in respect of goods that have suffered appropriate tax and in

respect of which the stock records are maintained on day-to-day basis etc., or as required under the

law of the appropriate State.

g. The burden of proving that such goods have suffered tax would be on the dealer. Hence,

purchase invoices along with appropriate stock records must be shown as evidence for tax paid on

such inventory.

h. The details of carry forward credit are to be provided in the declaration/ claim forms or statements

as prescribed under GST Law. The declaration may require to specify the complete details of

inventory or goods lying in the stock and to be filed before the jurisdictional tax officer in the

prescribed manner. The Prescribed Officer on satisfaction of the claim would issue a certificate

which will entitle the dealer to avail the Credit under GST and carry forward the appropriate credit. 

B. Credit on goods lying at job-workers or third party or client premisesAs on the date of implementation of GST, it may be possible that the goods are lying with job-worker

or third party or client. Ensure that transitional provisions are followed for availing credit of

appropriate tax paid on goods lying in stock with the Job-worker. The possible situations with respect

to goods lying at job-worker’s premises are: 

a) The goods after being processed are lying at job-worker’s premises on the implementation date

and would be returned back to the principal.

b) The goods are being used by the job-worker for further processing.

c) The goods are in the nature of capital goods.

C. Partial credit taken prior to GST for tax paid on capital goods Normally cenvat credit / input tax credit on capital goods would be available in instalments or in

proportionate for the specified periods. The entitlement to credit is conditional and it is possible that

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certain conditions are yet to be fulfilled on the date of implementation of GST. Ensure that

Transitional provisions are followed for availing credit of appropriate tax paid on capital goods.

D. Tax paid on sale of goods in transit or pending for certification / approval The Goods procured in the current regime may be in transit before delivery to customer and may be

received by the said customer post implementation of GST or may be pending with customer for

approval. Transition provisions are to be followed to avail transitional credit on tax / duty paid on

those goods in transit or pending for approval.

ix. Ensure for proper Accounting of Goods or Services procured As the Central Excise duty, Service Tax, CST & VAT paid on stocks in hand, semi finished goods,

finished goods & capital goods may be allowed to avail as credit. Hence, the Goods or Services

procured in pre GST period are to be accounted properly in the books of accounts as on the date of

GST implementation. The unaccounted stocks or stocks not represented by valid duty/ tax paid

invoices would not be entitled to avail credit. 

x. Sales/ Service Exempt at present but taxable under GST In case a product or service becoming liable for GST for first time, the credit for the goods in stock

on which taxes or duties such as CST, Central Excise , VAT, CVD, SAD or Entry Tax paid or service

tax paid for services for the work in progress would be eligible for availing credit. Hence proper

records are to be maintained in case of exempted sales or services in order to entitle for transitional

credit on those goods or services.

xi. Review of Assessments pendingReview the Assessments pending now and initiate necessary action for completion of VAT

Assessments up to the latest Financial Year. The claim for refund of credit as per Returns can be

made wherever possible instead of carry forward. In case refund is not materialised through

Assessments then carry forward the same. Under the current taxation system, a claim might have

been filed for refund which may be pending before the Assessing Authority or Adjudicating Authority

for disposal. Transition provisions are to be applied for protection of pending refund claims. Similarly

Credit of VAT TDS under the existing VAT Act or payment of service tax under RCM can be taken

under GST Returns if remitted in transition period.

xii. Review of Tax Disputes / Appeals / Cases Review the Disputes / Appeals or Cases for which credit has been reversed but pending before

various Authorities or Courts. The reversed credit under protest in pre GST period can be availed in

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GST period if settled favourably. Also the tax / duty paid under old laws may be entitled as credit

under GST if those goods / services are subjected to GST. 

xiii. Changes to Information Technology / EDP SystemAs maintenance of records is essential under GST Regime in order to comply with the provisions,

necessary changes are to be made in the EDP System as given below: 

a. Insertion of New Accounting Codes for GST Expenditure in the Accounting Package and for

transfer of existing Tax Receivable Accounts to GST Receivable Accounts wherever required. 

b. Insertion of New GST Rate Master i.e., SGST, CGST & IGST Rates in the Tax System

c. Development of various Reports as per the Formats to facilitate for filing of GST Returns as given

below: Purchase Statement with the details of Site Name, Division Name, Description of Material, Vendor Name, Address, GST Registration Number, PO Number & Date, MRN No & Date, Invoice No & Date, Value, GST Rate, GST Amount, Payment Voucher No & Date  GST Credit Report for Services with the details of Site Name, Division Name, Type of Service, Service Provider’s Name, Address, GST Registration Number, WO Number & Date, particulars of input service, Invoice No & Date, Value, GST Rate, GST Amount, Service Receiver Portion for Payment under RCM, Service Provider Portion for Payment under RCM, Payment Voucher No & Date. Project Site wise, Division Wise and State wise GST Receivables / Payables Reports Report of output services showing the Site Name, Division Name, Type of Service, Client / Service Receiver’s Name & Address, ST Registration Number, Contract / Agreement Number & Date, Particulars of output service, RA Bill / Invoice No & Date, Date of Completion of Service, Certification Date, Value, GST Rate, GST Amount, Receipt Voucher No & Date Project Site wise, Division wise and State wise GST Turnover Details.

ConclusionThe present multiplicity of rates in goods or services in India is leading to complexity in interpretation as well as in implementations. The initiation of the Government to introduce GST is a revolutionary step to ease the present complexities in indirect taxes. It brings further tax reforms in the process of economic liberalization, privatization and globalisation. This process should be continued and the proposed dual GST system is to be replaced by a single unified GST system applicable to the whole country in future. It is expected to have a simple tax structure by elimination of distinction between goods & services and in turn avoids cascading / multiple tax effect on works contracts. GST should provide a clear definition to the concept of goods, services, manufacture, sale, works contract, valuation and taxable event though the relevance of those components is low under the proposed GST. It is also expected to frame simplified procedures, rules and regulations in administering the GST and enable for smooth transition from the existing system to proposed GST Regime.