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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.
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Overview of GST Transition Filing
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.
Advantages of GST Transition Filing
| Authorisation to Collect Tax | Only registered persons can collect GST from customers on the supplies of goods or services or both & subsequently utilize the ITC. |
| Single Platform | With the implementation of GST in India, the indirect taxes would be streamlined and standardized. A single GST registration for the respective state(s) in India from where the supply of goods and/or services will be sufficient. |
| One nation one tax | GST subsumes various other taxes like Central Sales Tax, Additional Customs Duty, Purchase Tax, Luxury Tax, etc., Hence, under GST, many of the taxes in existence today would be subsumed and made into one tax. |
| Ease of doing Business | Currently, many businesses like restaurants, computer sales, and services businesses have to comply with both VAT and Service Tax. This creates a compliance burden on the business, as they have to calculate taxes for the transaction based on different rates for different items. GST won’t make the distinction between goods and services which will, in turn, leads to relief to the business. |
| Increase tax payers volume | GST will work on value addition concept and it is expected that new registration will come in existence to take to benefit of Input Tax in the Transaction chain. GST allows a seamless flow of input tax credit. |
| Lower taxes | Currently in some states under the VAT regime, businesses are required to comply with VAT regulations once they cross an annual turnover of Rs.5 lakhs. Under the GST regime, GST liability accrues only if an entity crosses an annual turnover of Rs.10 lakhs in northeast or hilly states, whereas, for the rest of India, the threshold is set at Rs.20 lakhs which ultimately leads to lower tax payment. |
Registration Process of GST Transition Filing
Step 1: Introduction: According to the GST Act, every entity registered under any of the earlier laws shall be issued a certificate of registration on a provisional basis on the appointed day, which is the 1st of July 2017. This certificate will be valid for 6 months within which a registered taxpayer may have to furnish the required information.
Step 2: Registration: On analysis of this provision, we can conclude that a registered taxpayer need not worry to again register under the GST regime as automatic registration will be granted on the appointed day. However, such registration will be a provisional registration and the taxpayer may need to furnish some additional documents electronically which will be notified. After that, the certificate of registration would be granted on a final basis.
Documents Required of GST Transition Filing
1. Provisional ID obtained by the concerned department
2. Password obtained by the concerned department
3. Valid email address
4. Valid mobile number
5. Proof of constitution of business:
In case of partnership deed – Partnership Deed
In the case of others: Registration Certification of the business entity
6. Photograph of promoters/partners/Karta of HUF
7. Proof of appointment of authorized signatory
8. Photograph of authorized signatory
Opening page of passbook or statement containing the following information:
1. Bank account number
2. Address of branch
3. Address of account holder
4. Few transaction details
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