GST Transitional provision - Sec 139, 140, 141, and 142

Goods and Service Tax - GST
1
CMA Arunava Chakraborty
CMA CP Kalra
CMA Md Rehan
(Cost Accountants)
Chakraborty kapoor & Co. LLP
F-1210, LGF, CR Park, New Delhi-20
cma.rehan@gmail.com
011-26275907, 9911299105
Transitional Provisions

PRESENTATION ROADMAP
Migration of Existing
Tax Payers
Transitional
Arrangement for ITC
Transitional Provision
related to Job work
Miscellaneous
Transitional Provisions
Chakraborty Kapoor & Co. LLP © 2

139. Migration of existing taxpayers.
140. Transitional arrangements for ITC
141. Transitional provisions relating to job work.
142. Miscellaneous transitional provisions
3
CHAPTER XX
TRANSITIONAL PROVISIONS
Chakraborty Kapoor & Co. LLP ©

139. Migration of existing
taxpayers.
4Chakraborty Kapoor & Co. LLP ©

Existing Regime
Turnover>
20 Lakhs
Turnover<20
Lakhs
Mandatory
Migration
5
GST Regime
Sec 139- Migration of Existing Taxpayer/Dealer

9/14/2017 6

Who can Migrate to GST?
Section 139 (1)-Every person registered under earlier law and having
PAN No.
Registration shall be provisional
Section 139 (2)- Provisional Registration shall be replaced with final
registration in such form and manner and subject to such conditions as
may be prescribed.
7
Section 139 Migration of existing taxpayers.

Section 139 Migration of existing taxpayers. (Contd….)
Registration certificate issued u/s 139(1) shall be deemed to
have not been issued if said registration is cancelled in
pursuance of an application filed by such person that he was
not liable to registration under section 22 or section 24
(Note: Sec 22- Person Liable for registration. Sec 24- compulsory
registration under certain cases)

140. Transitional arrangements
for ITC

140. Transitional arrangements for ITC
Section 140 (1)-A registered person other-than opting to pay tax u/s
10 (Composition Levy) shall be entitled to take Input Tax Credit.
Input Tax credit available on CENVAT credit ,carried forward in
the return, furnished by registered person under the existing law in
such manner as may be prescribed:
Input tax credit should be admissible in the earlier regime
Also should be admissible in CGST/SGST Act
11
CENVAT CREDIT U/S 140(1)

140. Transitional arrangements for ITC (Contd…)
Application shall specify
(i) The value of claims u/s 3, u/s 5(3), u/s 6 and 6A and u/s 8 (8) of the Central Sales
Tax Act, 1956 made by the applicant during the financial year relating to the
relevant return, and
(ii) The serial number and value of declarations in Forms C and/or F and
Certificates in Forms E and/or H or Form I specified in rule 12 of the Central
Sales Tax (Registration and Turnover) Rules, 1957 submitted by the applicant in
support of the claims referred to in subclause (i) above;
12
To Claim CENVAT Credit u/s 140 (1)

(i) If the credit is not admissible as input tax credit under GST; or
(ii) If he has not furnished all the returns required under the earlier law
for the period of six months immediately preceding the appointed date;
or
(iii) If credit relates to goods manufactured and cleared under exemption
notifications
13
When CENVAT Credit shall not be allowed to take u/s 140 (1)?

 Claim all eligible credits in the last return
(service tax return, excise return, state VAT
return, Entry Tax return),
 The taxpaying documents (like invoice) should
be in possession,
 CENVAT credit audit to ensure no credit is missed out,
 In case of ambiguity on service tax under RCM, better to pay the same and avail
credit (if eligible),
 Special task force to be set up for collecting the pending statutory forms.
14
Precautions to be taken u/s 140 (1)?

Note: Unavailed Cenvat credit means the amount that remains after subtracting the amount
of Cenvat credit already availed
Input Tax credit available on Unavailed CENVAT credit in
respect of Capital Goods ,not carried forward in the return,
furnished by registered person under the existing law in such
manner as may be prescribed:
Input tax credit should be admissible in the earlier regime
Also should be admissible in CGST/SGST Act
15
CENVAT Credit on Capital goods U/S 140 (2)

Application shall specify separately every items of capital goods as on
appointed day (1 July 2017)-
(i) the amount of tax or duty availed or utilized by way of input tax
credit under each of the existing laws till the appointed day, and
(ii) the amount of duty or tax yet to be availed or utilized by way of
input tax credit under each of the existing laws till the appointed
day;
16
To Claim CENVAT Credit on Capital goods U/S 140 (2)

This section deals:
eligible credit of duties on:
Input held in stock
Inputs contained in semi-finished or finished goods held in stock
Who shall be entitled to take credit of eligible duties
Condition to avail input credit of eligible duties
If Condition not satisfied then how much input credit of eligible duties be
available
17
Section 140 (3)

Credit of eligible duties available on appointed day (1 July 2017) to:
inputs held in stock
Inputs contained in semi-finished or finished goods held in stock on
the appointed day (1 July 2017)
18
Credit of eligible duties u/s 140 (3)

Who shall be entitled to take credit of eligible duties u/s 140 (3)?
Following registered person shall be entitled to take credit of eligible duties:
who was not liable to be registered under the earlier law
Manufacture of exempted goods or provider of exempted services
Provider of works contract service and availing benefit of notification No.
26/2012—Service Tax.
first stage dealer or a second stage dealer
registered importer or a depot of a manufacturer
19
Credit of eligible duties u/s 140 (3)..(Contd…)

(i) Inputs or goods are used or intended to be used for making
taxable supplies under GST;
(ii) Input tax credit should be available such inputs/goods under
GST;
(iii) registered person should be in possession of invoice or other
prescribed documents evidencing payment of duty under the
earlier law in respect of such inputs;
20
Condition to avail input credit of eligible duties u/s 140 (3):

(iv) such invoices or other prescribed documents were issued should
not be earlier than twelve months immediately preceding the
appointed day; and
(v) the supplier of services is not eligible for any abatement under this
Act:
Note: Persons having excise invoices for stocks lying as on 30th June
will be entitled to take full credit of excise mentioned in the invoices
21
Condition to avail input credit of eligible duties u/s 140(3):
(Contd…)

22
If Condition not satisfied u/s 140(3)
then?

If the registered person (not registered in earlier law) other than manufacturer or
a supplier of services i.e trader is not in possession of invoice or any other
documents evidencing payment of duty in respect of inputs then:
such registered persons shall be allowed to take credit at such rate subject to such
conditions, limitations and safeguards as may be prescribed (Note: Refer it as
deemed credit) including that taxable person shall pass on the benefit of such
credit by way of reduced prices to the recipient.
Explanation : Persons not having excise invoices for stocks lying as on 30th June shall
not be entitled to take full credit
23
If Condition not satisfied u/s 140(3)

Registered Person whose condition is not satisfied u/s 140 (3)
Persons who do not have excise invoice, will be eligible to take credit in the following
manner:
a) For goods taxable @ 18% or above - Credit shall be allowed at the rate of 60%
of CGST payable on that goods – so if the rate is 18% then credit will be
available @ 5.4% (60% of 9% CGST)
b) For goods other than above - Credit shall be allowed at the rate of 40% of CGST
payable on that goods – so if the rate is 12% then credit will be available @ 2.4%
(40% of 6% CGST)
24
Deemed Credit GST Rule No. 3 – u/s 140(3)

Credit in Deemed Credit scheme will be available only once the said goods
are sold and GST is paid. It’s like a cash back scheme.
To take the credit in this scheme following conditions will have to be
fulfilled:
a. such goods were not unconditionally exempt from excise
b. the document for procurement of such goods is available
c. the stock of goods on which the credit is availed is so stored that it can
be easily identified by the registered person.
25
Deemed Credit GST Rule No. 3 – u/s 140(3) (Contd…)

Deemed credit scheme will go on for 6 months from GST date, so
stocks lying as on 30th June have to be sold maximum upto 31st
December, 2017.
26
Deemed Credit GST Rule No. 3 – u/s 140(3) (Contd…)

27
 Prepare Stock Statement Summary as on 30.06.2017 (determining the
quantity, value, involvement of eligible duties, taxes and state VAT)
 Make sure whether the Taxpaying Documents are available before
claiming any credit,
 Such taxpaying documents should not have been issued earlier than
twelve months [Stock Level may be maintained at minimum level],
 Pricing policy – Such stock used / intended to be used for making
taxable supplies must lead to reduction in prices to the extent of
availment of benefit of ITC.
PRECAUTIONS TO BE TAKEN U/S 140 (3)

1. The goods/services are exempted in earlier law but will be taxable
in GST.
2. Credit in respect of stock will be available because ITC was not
available earlier
3. Person Having excise invoice will avail full credit
4. Person not having excise invoice will not avail full credit but 60%
& 40% subject to condition discussed earlier
28
Extracts of Section 140(3) of CGST Act:

Section 140 (4)
29
Manufacturer or
supplier of services
Taxable
goods/services
CENVAT Credit carried forward
in the return as per provision of
section 140(1)
Credit of input held in stock as
per provision of Section 140(3)Exempted
goods/services
Existing Regime GST Regime
CENVAT CREDIT CARRIED FORWARD/ ELIGIBLE DUTIES

Section 140 (5)
30
Credit Received After Appointed Day On Which Duties And Taxes
Paid Under Existing Laws
Duties or Tax paid
under existing Law
Appointed
date
Input/ input
services
received
Sec 140(5)
Applicable
Condition: The invoice/tax paying document should be recorded in the
books of accounts within 30 days of appointed day

 Ensure that the duty / tax in respect of the taxpaying
document (i.e. against the invoice) has been
deposited. A certificate may be obtained in this regard
from the supplier.
 Ensure that the invoice is duly received and recorded
in the books by 30.07.2017.
 Ensure that double credit is not availed -
 once in the earlier regime (may be when the payment is made) and
 again in the GST regime (may be when the invoice is received)
31

32
Person Paying TAX At a Fixed
Rate or Paying a Fixed Amount
i.e Composite Scheme
Now Registered
Person
GST RegimeExisting Regime
SECTION 140 (6):
ITC FOR GOODS WHERE TAX IS PAID UNDER EARLIER LAW AT FIXED RATE
OR FIXED AMOUNT i.e COMPOSITION SCHEME

9/14/2017 33
Condition to avail credit of input held in stock on appointed day
u/s 140 (6):
 Inputs/goods should be used or intended to be used for making
taxable supplies under GST
 Person is not paying tax u/s 10 of GST
 ITC should be available on such goods under GST;
 Invoices should be available evidencing payment of tax or duty
and should not be earlier than 12 months prior to appointed day
 Such goods were not wholly exempt or were not nil rated
CONDITIONS FOR
ENTITLEMENT OF
CREDIT

input tax credit on account of any services received prior to
the appointed day by an Input Service Distributor shall be
eligible for distribution as credit under this Act even if the
invoices relating to such services are received on or after the
appointed day.
34
SECTION 140(7)
CREDIT OF INPUTS FOR ISD WHEN SERVICES RECEIVED AFTER
THE APPOINTED DAY

35
Before filing of last return of ISD under earlier law, tag
the invoices which are considered for credit distribution
in respect of service received till 30.06.2017.
 Further before filing of first return of ISD under GST
regime, tag the invoices which are received after
30.06.2017 against the services received upto 30.06.2017
which were not considered under earlier law.
PRECAUTIONS TO
BE TAKEN

36
SECTION 140 (8)
UNUTILIZED CENVAT CREDIT WITH TAXABLE PERSON HAVING
CENTRALIZED REGISTRATION
XYZ Ltd. Has
centralised
registration in
Mumbai
Delhi Branch
Chennai
Branch
Haryana
Branch
CENVAT credit should be furnished in last
return under the earlier law,
Last return should have been filed within 3
months from the appointed day,
Said credit must be admissible as ITC under
GST law.
Credit can be transferred to any business unit having the same PAN

37
SECTION 140 (9)
ITC REVERSED DUE TO NON PAYMENT UNDER EXISTING LAW
Where CENVAT credit reversed under earlier law due to non payment of
consideration within 3 months,
Such credit can be reclaimed, provided…
Taxable person has made payment of consideration for the supply of services
within 3 months from the appointed day

Electronic Credit Ledger
A registered person shall be entitled to take his carried forward and
input of eligible duties u/s 140 in electronic credit ledger

141(1)(2)(3)(4). Transitional provisions
relating to job work.

Section 141 (1)(2)(3)(4). Transitional provisions for job work.

40
Goods removed for job work/from place of business to any other premises in
earlier law for further processing, testing, manufacture and returned on or after
appointed day.
Input
Semi-
Finished
EXISTING REGIME GST REGIME
If Goods
returned within
6 months
No tax shall be payable
If Goods not
returned with in
6 months
Input tax credit shall be liable to be
recovered in accordance with u/s 142 (8)
(a). (Any amount not recovered in earlier
law shall be recovered in GST)

142. Miscellaneous
transitional provisions

142. Miscellaneous transitional provisions
42
Section 142(1) - If goods sold by manufacturer in earlier law six months prior
to appointed day (1 July 2017) returned within six months after appointed day (1
July 2017)
GOODS SOLD BY
MANUFACTURER 6 MONTHS
PRIOR TO
1 JULY 2017
RETURNED BY DEALER POST 1 July 2017 WITHIN 6
MONTHS
If Supplies returned: Remarks
From Un-Registered Person Manufacturer can claim refund of
Duty Paid
From Registered Person Termed as outward supply in the
hands of dealer- Manufacture can
claim ITC

142. Miscellaneous transitional provisions (Contd…)
43
Section 142(2) -Issue of supplementary invoices, debit or credit notes
where price is revised in GST regime for a contract entered in earlier law
Contract made in earlier law
PRICE
RISE
PRICE
DECLINE
Supplementary
invoice / Debit
Note
Credit Note
TO BE ISSUED WITHIN
30 DAYS

44
Section 142(3) Claim for refund of CENVAT credit, duty, tax, interest or
any other amount paid under earlier law for the goods or services exported
 If refund claim filed Before, on or after the Appointed Day (1 July 2017)
 It would have to be processed according to earlier law. The provisions of GST law
would have no bearing on refund claim of earlier law.
1. The amount of refund will be paid in cash and would not be credited to the electronic credit
ledger or electronic cash ledger.
2. No amount of credit is c/f as on appointed day under GST
3. Refund claim rejected fully or partially shall lapse and not be available as credit.

9/14/2017 45
Section 142(4) Claim filed after the appointed day (1 July 2017) for refund of
any duty or tax paid in earlier law for the goods or services exported
Where:~
 Goods or services exported before or after the appointed day (1 July 2017)
It would be processed according to earlier law. The provisions of GST law would have no
bearing on refund claim of earlier law.
1. The amount of refund will be paid in cash and would not be credited to the electronic credit ledger
or electronic cash ledger.
2. No amount of credit is c/f as on appointed day under GST
3. Refund claim rejected fully or partially shall lapse and not be available as credit.

46
Section 142(5) Claim filed after the appointed day (1 July 2017) for refund of
tax paid in earlier law in respect of services not provided
It would be processed according to earlier law. The provisions of GST law would
have no bearing on refund claim of earlier law.
1. The amount of refund will be paid in cash and would not be credited to the electronic
credit ledger or electronic cash ledger.

47
Section 142(6) Appeal & Review
The Section applies where any matter in respect of CENVAT credit is pending in an appeal
or review or reference under any of the earlier laws.
It provides that the provisions of CGST would have no bearing on the same and should be
dealt in accordance with the provisions of earlier laws as follows:
 If the input credit are finally allowed: A refund would accrue to the claimant in cash.
 If the input credit is disallowed: It would become recoverable by CGST department as
an arrear of tax.
 The amount so recovered by CGST department would not be allowed as input tax
credit.

48
Section 142(7) Finalization of proceedings relating to output duty or tax
liability
~Every proceeding of appeal (Case) started on or after the appointed day for output duty or
tax liability under the earlier law shall be dealt according to earlier law
~Every proceeding of appeal & review (Case) for output duty or tax liability started before,
on or after the appointed day under the earlier law, shall be dealt according to earlier law,
 If the amount found refundable (in proceeding & appeal for case of earlier law): amount shall be
refunded in cash.
 If output duty or tax are found payable under proceeding (case of earlier law): It shall be paid as
an arrear to GST department (if it was not paid in earlier law). This amount so paid shall not be
allowed as input credit

49
Section 142(8) Output tax / duty liabilities pending in appeal & review (Case)
proceedings under any of the earlier law.
If an output duty or tax liabilities are pending in appeal & review (case) proceedings under
earlier law.
It provides as follows:
If the output liability is finally payable: It should be paid to GST department as an
arrear of tax.
The amount so paid to GST department would not be allowed as input tax credit.
If the amount found refundable (in proceeding & appeal for case of earlier law): amount
shall be refunded in cash.
If any amount is rejected, the same shall not be available as input tax credit under CGST.

50
Section 142(9) Return filed in earlier law revised in GST regime
where any return filed in earlier law is revised after appointed day (GST regime) but within time
limit specified under earlier law by virtue of which any amount becomes payable or refundable to,
the taxable person.
This could arise due to any of the following reasons:
(i) Short payment of output tax liability (payable);
(ii) Excess payment of output tax liability (refundable);
(iii)Short claim of CENVAT credit (refundable);
(iv)Excess claim of CENVAT credit (payable);
The Section specifies that:
If any amount is payable: It should be paid to GST dept. The amount so paid would not be
allowed as input tax credit.
If the amount is receivable as refund: It would accrue to the claimant as cash refund under the
existing law.

51
Section 142(10) Long Term Contract
Contract entered
goods or services are supplied
goods or services are supplied
liable to tax under the GST Act
Contract continued of earlier law
Even if the construction contract or works contract is entered into prior to the appointed day, the
contracts would be taxable under the GST Act.

52
Section 142(11) Transaction which has suffered VAT/Service Tax
consideration was
received
Goods/Services
Supplied
GST shall not be payable on a supply to the extent VAT or Service Tax is leviable under
earlier law.
Eg: Advance of Rs. 1,00,000/- was received on 10th June, 2017 for service to be rendered
in July, 2017. The invoice for the service was raised for Rs. 1,50,000/- on 31st July, 2017.
On 1st July, 2017, GST shall be levied only on Rs. 50,000/-.

53
Tax paid on both Vat and Service Tax i.e Works Contract and food etc.
Supply Made
VAT and ST paid in earlier law shall be
available as credit in GST to the extent
supplies made after appointed day (1
July 17)
VAT/ST paid on advance but
supplies not made. (See example on
next slide)

54
Example: Contract entered in March, 2017 for Rs. 1 Crore. Advance amount received till
30th June, 2017 Rs. 10 Lakhs. VAT of Rs. 40,000/- and ST of Rs. 60,000/- have been paid
on the said advance. on 1st July, 2017 GST shall be levied on Rs. 1 Crore as per Sec 13 of
the CGST Act. VAT and ST paid under earlier law shall be available as credit GST
regime.

55
Section 142(12) Supply of Goods on Approval Basis
Goods sent by seller for approval within six
months before appointed day
Goods Returned by buyer within six months
from appointed day or as extended period of
two months by the commissioner
No tax shall be payable if goods rejected or not approved by buyer and returned to
seller if:
Goods returned to seller after six months or as
extended period of two months of appointed
day– Buyer shall pay GST
Goods returned from buyer after six months
or as extended period of two months of
appointed day – Seller shall pay GST. This
shall be available as credit to purchaser
Tax Treatment if same goods taxable under GST regime

56
Section 142(13) TDS under Section 51 of CGST
This Section would apply in the following circumstances:
(i) The supplier had sold any goods under the earlier law; and
(ii) TDS applies on such transactions under earlier law; and
(iii) The supplier had issued the invoice before the appointed day;
(iv) Payment is made to the supplier after the appointed day.
It provides that merely because payment is made to the supplier after the date of
introduction of GST, the TDS provisions under Section 51 of the CGST Act will not apply.
In other words, Since transaction is related to earlier law, hence no tax shall be deductible
under GST regime at the time of making payment to the supplier

GST’s Time has started
Thank you
PPT made by CMA Md Rehan
Chakraborty Kapoor & Co. LLP (CKC LLP)
F-1210, LGF, CR Park, New Delhi-19
011-26275907, 9911299105, 9711515118
www.cmackc.com
info@cmackc.com, cma.rehan@gmail.com 57

GST Transitional provision - Sec 139, 140, 141, and 142

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