In the GST era, Input Tax Credit is however also thus allowable on the purchase of all the
goods and services which is used for the business purposes.
We have however ushered in a new era of a transparent and simple indirect taxation regime
thus with the implementation of Goods and Services Tax (GST) with effect from July 1,
2017. It has however resulted in replacing a plethora of the existing indirect taxes in the
form of Central Excise, Service Tax, VAT, Entertainment Tax, Luxury tax etc.
The purpose of this article is to highlight the five things which every entrepreneur should
however know about GST.
1. Take Benefit of Cenvat and VAT on Pre-GST Stock
A manufacturer or either a service provider will thus be allowed in order to carry forward
the cenvat credit thus as per the return which is however filed for the period which is thus
ended on June’ 2017. Similarly, a dealer who is thus registered under VAT will however be
allowed in order to carry forward VAT credit as per the return which is filed for the period
which is ended on June’ 2017. The carry forward of Cenvat/VAT credit is thus irrespective
of the quantum or the age of the stock.
A reseller of the goods, manufacturer of the exempted goods or either a provider of
exempted services, will thus be allowed 100% credit of Excise, CVD and SAD on the pre-
GST stock, thus provided that he is however in possession of the invoice or the documents
evidencing of the payment of such duties and also that the stock is thus not more than 12
months old.
A trader, except of a manufacturer or a service provider, who is thus not in possession of
the ‘Central Excise Invoice’, will thus be allowed transitional credit on the pre GST stock
@ 60% of CGST, if the rate of CGST is 18% or either more or 40% of the CGST, if the
rate of CGST is thus less than 18%. Such credit will thus however be allowed only after the
payment of CGST or the IGST within six months. Thus In order to claim the benefit of
transitional credit thus in case of (a) and (b) above, Form GST TRAN – 1, will however
have to be filed by 29 th September 2017. However, also in order to claim the transitional
credit in case of (c), FORM GST TRAN 2 will however have to be filed for each month thus
up to six months. There is also no time limit in order to utilize the carried forward
transitional credit.
2. Enhanced Benefit of Input Tax Credit (ITC)
Thus, Under the old tax system, a variety of taxes which were thus paid on the purchase of
goods or services were thus ineligible for set-off against the various types of output tax
liability. In the GST era, ITC is thus allowable on the purchase of all the goods and services
which are however used for the business purposes except a few negative list items like a
motor vehicle, immovable property etc.
3. Renegotiate Price with Suppliers of Goods and Services
Also, the cost of the majority of the business entities will however reduce with the enhanced
credit of ITC. Therefore, it is thus imperative in order to renegotiate the prices with the
vendors in order to nudge them to pass on the benefit of the reduced costs due to the free
flow of credits.
4. Include Safeguard Clause in Vendors’ Contract
The ITC in the GST regime is however also allowed subject to the payment of tax and also
correct filing of the return by the supplier. Therefore, it is thus imperative in order to
intimate GSTIN no. to all the vendors and also thus have an indemnity clause in the
contracts with them in order to ensure that in case of any default in the payment of either
tax or incorrect filing of a return, the loss of ITC can however be recouped.
5. Payment of Tax on Purchase from Unregistered Vendors and Reverse Charge
Mechanism
A registered person will thus also be liable in order to pay GST on the purchase of goods or
services of thus more than INR 5,000/- per day from one or also more unregistered
suppliers. Further, a registered person will thus also be liable in order to pay GST on the
services which are however provided by a non-resident, goods transport agency, individual
advocate or either a firm of advocates, directors etc.
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