Transition Areas of Immediate Action Points CA Ravi

Transition & Areas of Immediate Action Points - CA Ravi Kumar Somani 1978 1 Hiregange & Associates 2017

Amount of CENVAT Credit carried forward in the Return Section- 140(1) Pre-condition: � A registered person other than a person opting composition scheme in GST; � CENVAT credit carried forward in return relating to period ending with day immediately preceding appointed day, furnished under existing law. Credit furnished under existing law is not allowed in the following cases: Credit not admissible under this act. 2 Returns are not filed for past 6 months immediately preceding the appointed day Credit relates to goods manufactured and cleared under any notified exemption Hiregange & Associates

Preparation - Action Points • Reconciliation between books, computations and returns; • Opportunity to maximize credits, sanitize credits; • Decision on disputable credits, credits reversed during dept audits, reversed under protest; • Ratio analysis as a tool to understand the exposure - input/ expense ratio, input/ output ratio; • Proper workings must be in place – Separate CENVAT file; • Obtaining proper cenvatable invoice, supplementary invoice; • Utilizing ineligible credits first; • Adjustment under rule 6(3) of service tax rules - refund route; 3 Hiregange & Associates

Preparation - Action Points • Current timelines of filing of returns – last 6 months returns pending; • Status of pending forms under CST Act to be collected/submitted - Credit risk if forms are not received within due date, refund route; 4 Hiregange & Associates

Credit Of Inputs Held As Stock In Certain Cases Section -140(3) Registered Person (CGST) Not liable to register under existing law Works 1 st stage, 2 nd Mfr / provider of contractor & stage dealer or exempted availing benefit a registered goods/service of Not. 26/2012 importer or a -ST depot of a mfr �Entitled ü ü 5 to take credit of “Eligible duties” of: inputs held in stock, inputs in semi-finished / finished goods. Hiregange & Associates Stock

Credit Of Inputs Held As Stock - (Contd. ) Subject To Section -140(3) Such inputs Taxable person 6 • Are used or intended for making taxable supplies under this act • Eligible for input tax credit under this Act • Is in possession of invoice or other prescribed docs Such invoice/ document • Issued not earlier than 12 months preceding the appointed day No Abatement (CGST) • Supplier of services is not eligible for abatement under this Act. Hiregange & Associates

Credit of Inputs Held As Stock - (Contd. ) Subject To Section -140(3) Credit on the basis to be prescribed: �A registered person other than a manufacturer or supplier of services; �Not in possession of invoice /document evidencing payment of duty; �Benefit to be passed by way of reduced prices. 7 Hiregange & Associates

Credit In Respect Of Exempt And Taxable Goods Section -140(4) Registered Person Manufacturing both Taxable and Exempted Goods Providing both Taxable and Exempted Services Eligible credit: � CENVAT Credit c/f in return as per sect 140(1); & � CENVAT Credit of ‘Eligible duties’ on inputs in stock, semifinished goods, finished goods relating to exempted goods/services as per sec 140(3). 8 Hiregange & Associates

Composition Scheme To Regular Scheme Section -140(6) Registered Person Paying Tax at Fixed Rate Paying Fixed amount in lieu of Tax �Entitled ü ü 9 to take credit of “Eligible duties” of: inputs held in stock, inputs in semi-finished / finished goods. Hiregange & Associates Stock

Composition Scheme to Regular Scheme Section -140(6) Such inputs Registered person Taxable person Such invoice/ document) 10 • Are used or intended for making taxable supplies under this act • Not paying tax under section 10 • Eligible for ITC on such inputs under this act • Is in possession of invoice or other prescribed docs • Issued not earlier than 12 months preceding the appointed day Hiregange & Associates

Preparation - Action Points • • • Service Tax / CST credit not available - postponement; Capital goods credit – not available; Inputs contained in the immovable property? ? ; Stocks with registered persons which were not available for credit – Notification 2/ 2011, Hotels/ Restaurants, Railways, Airlines, Stocks verification – Reco as per books; Quantify the potential credit availability on stocks; WIP/ FG/ RM total worked backwards on FIFO? Credit availing document – Can be obtained now? ? ; Percentage of inventory aged older than 1 year - impact on credit; Stocks older than 12 m. . Return and receive back; Traders – credit based on presumption 40%; 11 Hiregange & Associates

Credit With Respect To Inputs / Input Services in Transit Section -140(5) Registered person to take credit of ‘Eligible Duties & Taxes’ in Electronic Credit Ledger of Inputs or input services received on or after the appointed day 12 Duty/ Tax has been paid by Supplier under the Existing law Invoice / document etc. recorded in the books within 30 days from the appointed day. * Extendable to more 30 days by Commissioner. Hiregange & Associates

Carry Forward of Credit in Case Of Centralized Registration Section-140(8) Credit may be transferred to any registered person having same PAN Revised Return - Credit reduced to that claimed earlier 13 Cenvat credit as per last return allowed to be c/f in a manner prescribed Person having centralized registration Last return to be filed within 3 m of the appointed day Can be original or revised return Hiregange & Associates

Reclaim of Cenvat Credit Reversed Due To Non Payment Of Consideration Section-140(9) • Credit has been reversed due to non payment of consideration within 3 m under existing law. • Such Credit can be reclaimed, if consideration paid within 3 m from the appointed day. 14 Hiregange & Associates

Input And Semi Finished Goods Removed For Job Work Section. Inputs & semi-finished/finished 141(1), (2), (3) goods received/mfrd. at a place of business, removed for job work under existing law and returned to the said place after appointed day Returned after Returned within 6 m* ITC recoverable in terms of section 142(8)(a) No tax *Extendable upto 2 months Apply the above only if manufacturer and JW declare -details of inputs or goods held in stock by JW on the appointed day. 15 Hiregange & Associates

Preparation - Action Points • Inputs, Semi-finished, finished goods lying with Job worker: ü ü 16 Existing jobwork tracking mechanism - Jobwork challans/ register; Reco of jobwork Records; ITC to be reversed - Principal to bear for the job workers lapses also; Goods lying for more than 180 days - already credit reversed; Hiregange & Associates

Dutiable Goods Returned To Place Of Business Return of goods after appointed day on which duty had been paid under existing law Returned within 6 months Returned after 6 months No refund Returned by a Registered Person Deemed Supply 17 Section 142(1) Returned by other than a Registered Person Taxable person shall be eligible for refund of the duty paid under the existing law Hiregange & Associates

Preparation - Action Points • No credit reinstatement, refund restricted; • Refund route if returned by unregistered person - tax already paid; • Identifiable to the satisfaction of the proper officer. . ? ? ; • Difference in tax rate - dominating party; • Clear return policy - more than 6 months, tax rate, refund eligibility, deemed supply etc. ; 18 Hiregange & Associates

Issue Of Supplementary Invoices, Debit/Credit Notes Contract entered prior to appointed day Section-142(2) Price of goods/services revised on/after appointed day: Upwards - Issue Supplementary invoice or debit note. Downwards - Issue supplementary invoice or credit note. Deemed to be in respect of outward supply under GST Reduction in tax liability allowed only if recipient has reduced corresponding ITC 19 *Issue within 30 days of such revision. Hiregange & Associates

Preparation - Action Points • Can discounts be covered – transactional change; • Different tax rate on escalation element; • complexity for Firm price contracts, exempted contracts, lesser tax rate contracts - addl tax collectability issue; • In case of credit note Higher ITC reversal & lower tax payment if tax rate increased in GST regime; 20 Hiregange & Associates

Pending Refund Claims To Be Disposed Of Under Existing Law Section 142(3) Every claim for refund Of CENVAT credit, duty, tax , interest, paid before appointed day Filed by any person before or after the appointed day Disposed of in accordance with existing law Claim for refund is fully or partially rejected - amt shall lapse Amt eventually accruing. CGST - paid in cash subject to unjust enrichment SGST - as per the provisions of the said law No refund of CENVAT credit to the extent c/f on appointed day. 21 Hiregange & Associates

Refund Claims Filed After Appointed Day Section 142(4), (5) Refund of duty / tax paid under existing law for goods / services exported Refund of tax deposited under existing law with respect to services not provided Shall be disposed off in accordance with existing law Amount if rejected shall lapse. No refund if CENVAT credit is c/f on appointed day 22 Amount accruing shall be paid in cash subject to unjust enrichment Hiregange & Associates

Preparation - Action Points • Credit v/s refund - if utilizable in GST. For ex: software companies – credit utilisable even against goods; • Rebate option can be looked into; • No option for recoupment of refund of CENVAT credit in returns, if rejected; • Option to take credit where no surety, no documentation, disputable cases etc. – Professionals view on probability to be taken; • Re-look at the old refund claims - central & various states; • Rule 6(3) reversal - Adjustment in returns if timely known; • Deficiency in the provision of service. . ? ? 23 Hiregange & Associates

Amount Recovered Or Refunded Pursuant To Revision Of Returns Section 142(9)(a), (b) Return furnished under existing law is revised If amt is recoverable Recover as arrear of tax under GST* *not be admissible as input tax credit in GST. For Ex: RCM 24 If amt is refundable CGST - To be refunded in cash subject to unjust enrichment SGST - In accordance with the provisions of the said law * If revised within time limit specified under existing law Hiregange & Associates

Pre-GST Contracts Contract entered prior to appointed day & Goods and/or services supplied Before the appointed day Provisions of existing law On/After the appointed day Provisions of GST law Proposals, RFQ’s, Sale Orders sent in current regime executed in the GST regime. Cum Tax, international txns; 25 Hiregange & Associates Section 142(10)

Tax Levy Under Existing Law, Payment Due Under GST Yes No tax shall be payable on such goods/ services under GST law 26 Tax leviable under existing law Section 142(11)(a), (b), (c) No Tax was paid both under VAT and Service Tax law Tax shall be leviable under this act to the extent supply made in the GST law and Taxable person shall be entitled for credit of VAT or ST Hiregange & Associates

Preparation - Action Points • • • Impact on long term contracts - exempted, cum-tax, low tax rate; Planning the tax regime - for ex: telecommunication, internet, security/ manpower supply, AMC’s etc. ü receive advance & pay off taxes, ü beneficial in B 2 C supplies, marketing opportunity, ü boost in working capital. Spill over transactions - opportunity to shift tax regime to the extent POT covered under earlier law. ü Taxability/ exempted; ü credit availability; ü Rate of tax; 27 Hiregange & Associates

Branch transfer Section-194 � Any amount of ITC � Reversed � Is prior to appointed day not admissible as credit. ch n a Br y r o t c Fa 28 Hiregange & Associates

Course Of Action By Business Entities • Make a GST core Team covering SPOC’s from all departments – Create Master Trainers; • Training the resources – Employees / Vendors / Customers / Business Partners; • Migration of the existing GST registrations; • Internal audit of IDT - Preparation of SOPs; • Understand the GST Law and evaluating business specific impact - Not restricted to F&A; • Make representation before the Government; 29 Hiregange & Associates

Course Of Action By Business Entities • Key Business Decisions: 30 ü Pricing - Understanding impact on margin - whether to decrease – timing; ü Consolidation of warehouses / depots - regional warehousing, super distribution; ü Building execution & Compliance capacities; ü Hierarchal Restructuring; ü Synergizing additional cash flow – Tax priority; ü Business process automation / IT – Tax automation. Hiregange & Associates

Course Of Action By Business Entities • Key Transactional Decisions: 31 ü Composite/ mixed supply; ü Discounts policy - free supply? , ü Pricing - rate contracts; ü Employee agreements; ü ISD v/s Deemed supply; ü Centralised v/s De-centralised Billing; ü Restricted local credits; ü Stock transfers; ü Procurement in lots (JIT); Hiregange & Associates

Course Of Action By Business Entities • Updating vendor/ Customer / Tax Masters - obtaining documents / information; • Finalizing Invoice / Delivery Challan formats - Billing sequences (alpha numeric) etc. ; • Understanding registration requirements: ü No. of registrations – impact on compliance; ü Separate or centralized? ? Decision to be based on business and not based on mere compliance; ü Casual dealer registration to avail credits • Perception of customers - Demand for reduction in the basic price - tackling customers; • Determining HSN / SAC Codes; 32 Hiregange & Associates

Course Of Action By Business Entities • Procurement Planning / Vendor Management: 33 ü Knowing objective of current procurements; ü Optimising credit utilisation at entity level - High accumulated credits in some states and lack of credits in other. For ex: high costs at HO; ü Identifying multiple new vendors; ü Multiple quotations / Price negotiations; ü Reviewing the current vendors history - GST Compliance rating; ü A one time meeting with all key vendors on teething issues; ü Un-registered vendors; Hiregange & Associates

Course Of Action By Business Entities ü Vendor education programmes; ü Procurement transactional restructuring; ü Obtaining information from vendors; • Revision of Agreements/ contracts - change in Tax clause, cum-tax contracts, reflection in GSTR-2; • Demonstrating GST Readiness to customers / vendors / business partners; • Finalising the valuation mechanism to be adopted in case of stock transfers, deemed supplies etc. • Advances given / received must be tracked on bill to bill basis & accordingly knocked out in the returns 34 Hiregange & Associates

Course Of Action By Business Entities Vendor Sample Form Ø Ø Ø Ø Ø 35 Name of the Vendor; PAN of the Business; Provisional GSTIN No. in each supplying state; Details of Goods supplied & HSN Code; Software used by your organization for accounting; Vendor IT readiness & support required, if any; Understanding of the GST law - trainings Date of last reconciliation? Any open issue? Email id / contact no. – state-wise person in-charge Restriction on issuing of PO if information not provided. Hiregange & Associates

Course Of Action By Business Entities Human Resource Management Ø Hiring of new employees; Ø Services of freelancers / non-employee professionals/ directors - URD RCM; Ø Temporary/ permanent movement of employees; Ø Re-structuring in the organisational hierarchies, Roles & responsibilities; Ø Birthday coupons, Festival Gifts etc. to employees; Ø Facilities to employees - Employment terms; Ø Expense documents/ tax invoices on reimbursements to the employees; Ø Expense bills in the names of employees. 36 Hiregange & Associates

Course Of Action By Business Entities Finance & Accounts Ø Identify taxability, Place of supply, Time of Supply, Type of Supply, Nature of Tax etc. following for each revenue transaction and key procurements; Ø Clean up action - filing of pending returns, revising the returns; Ø Present system of computing taxes, availing credits – change needed; Ø State-wise accounting - Co-ordination and communication between HO and site offices; Ø Accounting to be live and online – Backdated accounting to be avoided; 37 Hiregange & Associates

For any clarification ravikumar@hiregange. com 38 Hiregange & Associates

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