Fusion of Confusions in GST provisions
JUNE 20, 2017
By P G James
"CES-SANTE Ratione Legis Cessat Ipsa Lex" - "Reason is the soul of the law, and when the reason of any particular law ceases, so does the Law itself."
[Supreme Court in Shri Swamiji of Shri Admar Mutt etc. vs. The Commissioner, Hindu Religious and Charitable Endowments Dept. and Ors.-AIR 1980 SC 1.]
For the following uncertainties and doubts in the GST Act, there seems to be no plausible reason for exclusion or deviation from the existing tax provisionsand several queries raised from different angles still remains unanswered and also not clarified by the Board or GST Council.
1. Sec 140 (5) - Transitional Provisions- Capital Goods in transit as on 30th June
(5) A registered person shall be entitled to take, in his electronic credit ledger, credit of eligible duties and taxes in respect of inputs or input services received on or after the appointed day but the duty or tax in respect of which has been paid by the supplier under the existing law, subject to the condition that the invoice or any other duty or tax paying document of the same was recorded in the books of accounts of such person within a period of thirty days from the appointed day:
Provided that the period of thirty days may, on sufficient cause being shown, be extended by the Commissioner for a further period not exceeding thirty days:
Provided further that said registered person shall furnish a statement, in such manner as may be prescribed, in respect of credit that has been taken under this sub-section.
Tax paid on Input and Input Services under the earlier law, but received within one month after the appointed day is permitted to be taken credit in electronic credit ledger. But there is no mention about Capital Goods.
However, as an answer to Qn No 24(3) of the FAQ published by CBEC on 31.03.17, it has been stated as follows:
Q 3. A registered person, say, purchases capital goods under the existing law (Central Excise) in the June quarter of 2017-18. Though the invoice has been received within 30th June but the capital goods are received on 5th July 2017 (i.e. in GST regime). Will such a person get full credit of CENVAT in GST regime?
Ans. Yes, he will be entitled to credit in 2017-18 provided such a credit was admissible as CENVAT credit in the existing law and is also admissible as credit in CGST - section 140(2) of the CGST Act.
Sec 140(2) covers situations of carrying forward unavailed credit not carried forward in a Return, as for instance, 50% credit of goods received during the period April-June deferred for taking credit in April, 2018. There is no enabling provision in the Act for taking credit of Capital Goods received in July, the Invoice of which is raised prior to 1st July, 2017.
2. Sec 140 (5) - Transitional Provisions- Input services on which tax paid earlier but received after appointed day
(5) A registered person shall be entitled to take, in his electronic credit ledger, credit of eligible duties and taxes in respect of inputs or input services received on or after the appointed day but the duty or tax in respect of which has been paid by the supplier under the existing law , subject to the condition that the invoice or any other duty or tax paying document of the same was recorded in the books of account of such person within a period of thirty days from the appointed day:
The above transitional provision presumably takes care of situations wherein tax has been provided on advances for a service provided or agreed to be provided as per Sec 66 B of Finance Act 1994.
Following issues emerge out of this:
a) Services for which advances were received may not be rendered after 30 days from the appointed date.
b) Even if the document is recorded in the books of accounts within 30 days or extended period of another 30 days after the appointed day, without the actual receipt of services, how can the credit be taken?
c) In the case of services received, tax paid and Invoices raised prior to the appointed date, how the credit will be taken after the appointed date. As per existing Rules, Invoice can be raised within 30 days of rendering service and for Banks and financial institutions it is 45 days. Even if Invoice is raised on 30th June, such Invoices will be received by the recipient after the appointed day only.
d) In the case of services rendered prior to the appointed date attracting reverse charge, how the credit will be taken for payment made after the appointed day?
3. Sec 140 (1) - Transitional Provisions- carry forward of Cenvat balances as per last return
140. (1) A registered person, other than a person opting to pay tax under section 10, shall be entitled to take, in his electronic credit ledger, the amount of CENVAT credit carried forward in the return relating to the period ending with the day immediately preceding the appointed day , furnished by him under the existing law in such manner as may be prescribed:
Last return filed for Service providers is for the half year period ended on 31st March, 17 due on 25th April. Subsequent Return for the period April to June is due for filing on 25th October as of now. There is no clarity on how to transfer Input Service credit balance as on 30th June to the electronic credit ledger .
4. Section 20 (2)–ISD turnover
Explanation:
(c) the term ‘turnover', in relation to any registered person engaged in the supply of taxable goods as well as goods not taxable under this Act , means the value of turnover, reduced by the amount of any duty or tax levied under entry 84 of List I of the Seventh Schedule to the Constitution and entry 51 and 54 of List II of the said Schedule.
As per the existing Rule 5(1) of CCR, turnover of goods as well as value of all services of previous year are to be considered for arriving at the value of turnover. For a registered person engaged in the supply of services, method of calculating turnover for distribution of credit is not specified.
5. Sec 15– Value of taxable supply
15. (1) The value of a supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply.
(2) The value of supply shall include–––
(a) any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than this Act, the State Goods and Services Tax Act, the Union Territory Goods and Services Tax Act and the Goods and Services Tax (Compensation to States) Act , if charged separately by the supplier;
A tax paid under IGST is missed out for exclusion in arriving at the value of supply. This would imply that when goods procured under IGST is further supplied, value shall include IGST also, i.e., tax on tax.
There is no separate valuation rules for IGST and as per Sec 20 of IGST Act provisions of CGST Act related to value of supply shall apply mutatis mutandis to IGST Act also.
20. Subject to the provisions of this Act and the rules made thereunder, the provisions of Central Goods and Services Tax Act relating to,––
(i) scope of supply;
(ii) composite supply and mixed supply;
(iii) time and value of supply;
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shall, mutatis mutandis, apply, so far as may be, in relation to integrated tax as they apply in relation to central tax as if they are enacted under this Act:
Since the ‘Appointed day' as committed is nearing, it is imperative that the above issues are clarified on priority rather that adopting the usual policy of ‘Let the Courts decide'.
In passing:
"Ubi Jus Incertum, Ibi Jus Nullum- Where the law is uncertain there is no law"
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