The Goods and Service Tax (GST) even before its implementation attracted lot of discussions and queries about its implementation and the impact which it will make on small and medium enterprises. The new tax regime is said to make a lot of difference into the current tax system and hence, there are certain doubts among the small and medium enterprises about its implementation.
The most discussed doubt about the GST implementation is the concern of migrating the existing input tax credit under GST, although many forums have been organised by the Various tax departments and local authorities, still people are not clear about the exact mechanism of the same, in this article we will address the issue of the input tax credit migration under GST.
Model GST law allowed the tax payer to accumulate the taxes paid by him and carry it forward in the return.In order to claim the input tax credit of old tax regime under the GST, the tax payer has to file the returns under the old tax regime and submit the proof of the same. By doing so the tax payer will be able to claim the accumulated input tax credit of the old tax regime under the GST.
For Example,
As the GST rollout date has been set to be July 1, 2017, the tax payer in that case must insure to file the tax returns upto the period June 30, 2017 under the old tax regime and claim all the inputs on the stock held correctly. For this purpose the tax payer must be aware of the taxability of the said stock under both the old and the new tax regime.
Input credit of Excise Duty and Additional Customs Duty
The GST transition will be more critical in this case. Under the old tax regime, it can be noted the duty paid by way of Excise Duty and Additional customs duty were not allowed for input tax credit to the trader under the old regime. Under the new GST regime, supply of such goods will fall under GST but same as in the old regime the excise duty and additional customs duty will not be allowed for input credit and this will result in the levy of GST on the goods which are already tax paid under GST without the availibity of the credit and the end result will be cascading and distortion of prices.
Input Tax Credit under Composition Scheme
Under the new tax regime the turnover limit for composition scheme has been increased to Rs. 50 lakhs as against the turnover limit of Rs. 10 lakhs under the old tax regime.
It can be noted that same as in the old regime the composition dealer will not be allowed to take credit on the goods purchased.
The provision for carry forward of input tax credit under VAT, Excise and Service Tax will be same as discussed above.
In order to claim the input tax credit under GST the tax payer will need to file the return under the old tax regime for the period ended 30th June, 2016 and claim the input tax credit in that return.