How Does A Taxpayer Transition From The Old Regime To GST?
It's difficult to switch from one regime to another. Busy accounting software makes the transaction to GST from the previous regime seamless. Below we have explained everything about the transaction to GST.
How Does A Taxpayer Transition From The Old Regime To GST?
Registration Proceure
Input Tax Credit
Input Credit On Capital Goods
Credit Of Excise Duty Or Additional Customs Duty
Composition Scheme
Registration Proceure
According to the legislation, a certificate of registration on a temporary basis must be granted to every entity registered under any of the prior laws. This certificate will be valid for three months, during which time registered taxpayers may be needed to provide the necessary data for complete registration. A registered taxpayer must enrol under the GST regime for provisional registration, and the taxpayer may need to furnish some additional documents later. The certificate of registration would then be issued permanently.
Input Tax Credit
A taxable person will be qualified to claim credit for the amount of tax paid and carried forward in returns submitted under the prior law under the terms of the GST Act. For the time period prior to the designated day, this credit must be recorded in the electronic credit ledger.
When analysing this clause, it must be ensured that taxpayers provide their last return filed under the previous regime with the utmost care, account for all input taxes paid, and claim those credits under the new regime. For such purposes, taxpayers may have to re-count and re-validate the stock lying before the appointed day and ensure that credit for such goods/services is eligible under the GST law.
Input Credit On Capital Goods
According to GST's transaction provisions, any remaining input tax credit on capital goods bought under the previous system that only received partial input credit may likewise be used under the new regime.
Credit Of Excise Duty Or Additional Customs Duty
This is one of the most critical provisions of transactions under GST. Under the old tax regime, a trader is not allowed a credit of excise duty or additional customs against excise. However, it changes in the new regime. A supply of these products will be subject to GST under the new tax system; however, an excise tax credit or additional customs charge will not be permitted. The immediate effect of this would be the imposition of GST on commodities that have already been subject to taxation under the current tax system without the possibility of credit, which could cause cascading and price distortion. Additionally, this can lead to stock returns from merchants and traders to the manufacturers before the designated day and fresh purchases after that. Such situations may lead to manufacturers' panic and affect their profits and returns.
Composition Scheme
The composition scheme is a critical aspect of the transition process wherein the taxpayers must keep themselves updated about the implications of migration into the new regime. Such impact is expected to be massive as the turnover limit for the composition scheme under GST has been raised to be Rs. 75Lakh. Thus, it can be assumed that many taxpayers will convert themselves from regular taxpayers under the composition scheme. Similarly, vice versa of such cases is also expected wherein dealers under the composition scheme may get transformed into regular taxpayers as the goods they are dealing in may not be exempted anymore. The impacts of such changes have been shown in the above chart.
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