What is Transition Provisions in GST
When VAT is applicable, goods leaving a seller might reach buyers after GST has been live.
Want to know more about the transition provisions of goods in transit under the act of GST, then read below:
A business is an ongoing process, mainly working 365 days of the year. It is very true for manufacturing industries. Goods in transit are mainly a regular type of occurrence for such businesses, with a goods being mainly sent from a factory to its a regular branch or the buyer type of regularly. On any given day, one is able to see delivery trucks transporting goods on highways. GST would roll out on 1st July 2017, bringing to mind that the treatment of goods in transit after the tax regime can change. When excise/VAT is applicable, goods will leave a seller’s premises and reach the buyer and also when GST is applicable.
Sounds slight confusing, right?
So, let us discuss in deep about the transition provisions of goods in transit under GST so that you can understand which tax to be paid and when.
Will GST is ready to be Payable on Goods In Transit?
If a supplier is selling any goods or services regarding which tax was collected under the earlier tax law and an invoice, have also been issued before the day of the appointment. GST cannot be applicable even if the payment is made after the implementation of GST.
The transited provisions of goods in transit under GST can also be understood through the rules of point of taxation. If the point of taxation of goods/services is before the GST implementation, it will be taxed under the earlier law in which GST is not applicable. Any portion of any supply whose point of taxation have been applied after GST implementation would be taxed under the act of GST.
Case study 1:
Mr. A. sells goods to his buyer Mr. B. He have also issued an invoice on 27th June 2017. Mr. B. have received the goods on 9th July and have paid the dues on 10th July.
In this is the GST is applicable on this?
According to the supply rules of GST for goods, the point of taxation would be before of either the Invoice issue date (27th June) or later the date of payment (10th July). In this case, 27th June have been considered. Since the sale was made before the implementation of GST, it would be taxable under the earlier law.
GST would not be particularly applicable.
Case study 2:
Mr. A. sells goods to his buyer Mr. B on 29th June. Mr. B. have received the goods on 9th July. Mr. A have issued an invoice on 12th July and have also received payment on 15th July.
In this case, is GST applicable?
According to the supply rules of GST for goods, the point of taxation would be before the Invoice issue date (12th July) or the date of payment (15th July). In this case, it will be 12th July. Since the point of taxation is after implementation of GST, it would be taxable under the act of GST.
Case study 3: Payment before GST Transition Provisions for Goods in Transit under GST
Ajay have sold goods at 1,00,000 INR to Vijay on 20th June 2017 and have charged VAT @ 5%. Vijay have paid all the dues on 25th June 2017. The goods have left his premises on 21st June, and Vijay received these goods on 5th July 2017. In this case, VAT is the only value that would be charged. GST would not be applicable as VAT have been collected under the law of earlier tax, and an invoice have also been issued before GST.
Case study 4: Payment after GST
Ajay have sold goods of 1,00,000 INR to Vijay on 20th June 2017 and have charged VAT @ 5%. The goods have been delivered on 5th July 2017, and Vijay have made the payment on 10th July 2017. In this case, only VAT it will be charged. GST that will not be basically applicable as no a GST shall be mainly payable on a goods to mainly extent VAT was a levied on the mention said goods.
Can ITC be Claimed on Goods in Transit?
A registered taxable person that can claim an input tax credit of goods/services received after GST, for which taxes can be paid under the earlier law. The condition is that invoice or proof of tax payment must be recorded in accounts within 30 days from the GST implementation date. The original period of 30 days can be extended by 30 more days based on sufficient reasons. The registered type of taxable person will be furnish a statement in respect of credit that has been taken.
My Name is Nadeem Shaikh the founder of nadeemacademy.com. I am a Qualified Chartered Accountant, B. com and M.Com. having professional and specialize experience in field of Account, Finance, and Taxation. Total experience of 20 years in providing businesses solution in Taxation, Accounting, and Finance with all statutory compliance with timely business performance Financials reports. You can contact me on firstname.lastname@example.org or email@example.com.