Transition & Areas of Immediate Action Points

Transition & Areas of Immediate Action Points - CA Ravi Kumar Somani 1978 2017 Hiregange & Associates

Amount of CENVAT Credit carried forward in the Return Section- 140(1) Pre-condition: • A registered person other than a person opting composition scheme in GST; • CENVAT credit carried forward in return relating to period ending with day immediately preceding appointed day, furnished under existing law. Credit furnished under existing law is not allowed in the following cases: Credit not admissible under this act. Returns are not filed for past 6 months immediately preceding the appointed day Credit relates to goods manufactured and cleared under any notified exemption Hiregange & Associates

Preparation - Action Points • Reconciliation between books, computations and returns; • Opportunity to maximize credits, sanitize credits; • Decision on disputable credits, credits reversed during dept audits, reversed under protest; • Ratio analysis as a tool to understand the exposure - input/ expense ratio, input/ output ratio; • Proper workings must be in place – Separate CENVAT file; • Obtaining proper cenvatable invoice, supplementary invoice; • Utilizing ineligible credits first; • Adjustment under rule 6(3) of service tax rules - refund route; Hiregange & Associates

Preparation - Action Points • Current timelines of filing of returns – last 6 months returns pending; • Status of pending forms under CST Act to be collected/submitted - Credit risk if forms are not received within due date, refund route; Hiregange & Associates

Credit Of Inputs Held As Stock In Certain Cases Section -140(3) • Entitled to take credit of “Eligible duties” of: • inputs held in stock, • inputs in semi-finished / finished goods. Stock Hiregange & Associates

Credit Of Inputs Held As Stock - (Contd.) Subject To Section -140(3) Hiregange & Associates

Credit of Inputs Held As Stock - (Contd.) Subject To Section -140(3) Credit on the basis to be prescribed: • A registered person other than a manufacturer or supplier of services; • Not in possession of invoice /document evidencing payment of duty; • Benefit to be passed by way of reduced prices. Hiregange & Associates

Credit In Respect Of Exempt And Taxable Goods Section -140(4) Eligible credit: • CENVAT Credit c/f in return as per sect140(1); & • CENVAT Credit of ‘Eligible duties’on inputs in stock, semi-finished goods, finished goods relating to exempted goods/services as per sec 140(3). Hiregange & Associates

Composition Scheme To Regular Scheme Section -140(6) • Entitled to take credit of “Eligible duties” of: • inputs held in stock, • inputs in semi-finished / finished goods. Stock Hiregange & Associates

Composition Scheme to Regular Scheme Section -140(6) Hiregange & Associates

Preparation - Action Points • Service Tax / CST credit not available - postponement; • Capital goods credit – not available; • Inputs contained in the immovable property??; • Stocks with registered persons which were not available for credit – Notification 2/ 2011, Hotels/ Restaurants, Railways, Airlines, • Stocks verification – Reco as per books; • Quantify the potential credit availability on stocks; • WIP/ FG/ RM total worked backwards on FIFO? • Credit availing document – Can be obtained now??; • Percentage of inventory aged older than 1 year - impact on credit; • Stocks older than 12 m.. Return and receive back; • Traders – credit based on presumption 40%; Hiregange & Associates

Credit With Respect To Inputs / Input Services in Transit Section -140(5) Registered person to take credit of ‘Eligible Duties & Taxes’ in Electronic Credit Ledger of Inputs or input services received on or after the appointed day Duty/ Tax has been paid by Supplier under the Existing law Invoice / document etc. recorded in the books within 30 days from the appointed day. * Extendable to more 30 days by Commissioner. Hiregange & Associates

Carry Forward of Credit in Case Of Centralized Registration Section-140(8) Hiregange & Associates

Reclaim of Cenvat Credit Reversed Due To Non Payment Of Consideration Section-140(9) Hiregange & Associates

Input And Semi Finished Goods Removed For Job Work Section- 141(1),(2),(3) Inputs & semi-finished/finished goods received/mfrd. at a place of business,removed for job work under existing law and returned to the said place after appointed day Returned after 6m* Returned within 6m* ITC recoverable in terms of section 142(8)(a) No tax *Extendable upto 2 months Apply the above only if manufacturer and JW declare -details of inputs or goods held in stock by JW on the appointed day. Hiregange & Associates

Preparation - Action Points • Inputs, Semi-finished, finished goods lying with Job worker: • Existing jobwork tracking mechanism - Jobworkchallans/ register; • Reco of jobwork Records; • ITC to be reversed - Principal to bear for the job workers lapses also; • Goods lying for more than 180 days - already credit reversed; Hiregange & Associates

Dutiable Goods Returned To Place Of Business Section- 142(1) Return of goods after appointed day on which duty had been paid under existing law Returned within 6 months Returned after 6 months Returned by a Registered Person Returned by other than a Registered Person No refund Taxable person shall be eligible for refund of the duty paid under the existing law Deemed Supply Hiregange & Associates

Preparation - Action Points • No credit reinstatement, refund restricted; • Refund route if returned by unregistered person - tax already paid; • Identifiable to the satisfaction of the proper officer..??; • Difference in tax rate - dominating party; • Clear return policy - more than 6 months, tax rate, refund eligibility, deemed supply etc.; Hiregange & Associates

Issue Of Supplementary Invoices, Debit/Credit Notes Section-142(2) *Issue within 30 days of such revision. Hiregange & Associates

Preparation - Action Points • Can discounts be covered – transactional change; • Different tax rate on escalation element; • complexity for Firm price contracts, exempted contracts, lesser tax rate contracts - addl tax collectability issue; • In case of credit note Higher ITC reversal & lower tax payment if tax rate increased in GST regime; Hiregange & Associates

Pending Refund Claims To Be Disposed Of Under Existing Law Section-142(3) No refund of CENVAT credit to the extent c/f on appointed day. Claim for refund is fully or partially rejected - amtshall lapse Amt eventually accruing- CGST - paid in cash subject to unjust enrichment SGST - as per the provisions of the said law Hiregange & Associates

Refund Claims Filed After Appointed Day Section-142(4),(5) Hiregange & Associates

Preparation - Action Points • Credit v/s refund - if utilizable in GST. For ex: software companies – credit utilisable even against goods; • Rebate option can be looked into; • No option for recoupment of refund of CENVAT credit in returns, if rejected; • Option to take credit where no surety, no documentation, disputable cases etc. – Professionals view on probability to be taken; • Re-look at the old refund claims - central & various states; • Rule 6(3) reversal - Adjustment in returns if timely known; • Deficiency in the provision of service..?? Hiregange & Associates

Amount Recovered Or Refunded Pursuant To Revision Of Returns Section-142(9)(a),(b) Return furnished under existing law is revised If amt is recoverable If amt is refundable Recover as arrear of tax under GST* CGST - To be refunded in cash subject to unjust enrichment SGST - In accordance with the provisions of the said law * If revised within time limit specified under existing law *not be admissible as input tax credit in GST. For Ex: RCM Hiregange & Associates

Pre-GST Contracts Section-142(10) Contract entered prior to appointed day & Goods and/or services supplied Beforethe appointed day On/Afterthe appointed day Provisions of existing law Provisions of GST law Proposals, RFQ’s, Sale Orders sent in current regime - executed in the GST regime. Cum Tax, international txns; Hiregange & Associates

Tax Levy Under Existing Law, Payment Due Under GST Section-142(11)(a),(b),(c) Tax leviable under existing law No Yes Tax was paid both under VAT and Service Tax law No tax shall be payable on such goods/ services under GST law Tax shall be leviable under this act to the extent supply made in the GST law and Taxable person shall be entitled for credit of VAT or ST Hiregange & Associates

Preparation - Action Points • Impact on long term contracts - exempted, cum-tax, low tax rate; • Planning the tax regime - for ex: telecommunication, internet, security/ manpower supply, AMC’s etc. • receive advance & pay off taxes, • beneficial in B2C supplies, marketing opportunity, • boost in working capital. • Spill over transactions - opportunity to shift tax regime to the extent POT covered under earlier law. • Taxability/ exempted; • credit availability; • Rate of tax; Hiregange & Associates

Branch transfer • Any amount of ITC • Reversed prior to appointed day • Is not admissible as credit. Section-194 Branch Factory Hiregange & Associates

Course Of Action By Business Entities • Make a GST core Team covering SPOC’s from all departments – Create Master Trainers; • Training the resources – Employees / Vendors / Customers / Business Partners; • Migration of the existing GST registrations; • Internal audit of IDT - Preparation of SOPs; • Understand the GST Law and evaluating business specific impact - Not restricted to F&A; • Make representation before the Government; Hiregange & Associates

Course Of Action By Business Entities • Key Business Decisions: • Pricing - Understanding impact on margin - whether to decrease – timing; • Consolidation of warehouses / depots - regional warehousing, super distribution; • Building execution & Compliance capacities; • Hierarchal Restructuring; • Synergizing additional cash flow – Tax priority; • Business process automation / IT – Tax automation. Hiregange & Associates

Course Of Action By Business Entities • Key Transactional Decisions: • Composite/ mixed supply; • Discounts policy - free supply?, • Pricing - rate contracts; • Employee agreements; • ISD v/s Deemed supply; • Centralised v/s De-centralised Billing; • Restricted local credits; • Stock transfers; • Procurement in lots (JIT); Hiregange & Associates

Course Of Action By Business Entities • Updating vendor/ Customer / Tax Masters - obtaining documents / information; • Finalizing Invoice / Delivery Challan formats - Billing sequences (alpha numeric) etc.; • Understanding registration requirements: • No. of registrations – impact on compliance; • Separate or centralized?? Decision to be based on business and not based on mere compliance; • Casual dealer registration to avail credits • Perception of customers - Demand for reduction in the basic price - tackling customers; • Determining HSN / SAC Codes; Hiregange & Associates

Course Of Action By Business Entities • Procurement Planning / Vendor Management: • Knowing objective of current procurements; • Optimising credit utilisation at entity level - High accumulated credits in some states and lack of credits in other. For ex: high costs at HO; • Identifying multiple new vendors; • Multiple quotations / Price negotiations; • Reviewing the current vendors history - GST Compliance rating; • A one time meeting with all key vendors on teething issues; • Un-registered vendors; Hiregange & Associates

Course Of Action By Business Entities • Vendor education programmes; • Procurement transactional restructuring; • Obtaining information from vendors; • Revision of Agreements/ contracts - change in Tax clause, cum-tax contracts, reflection in GSTR-2; • Demonstrating GST Readiness to customers / vendors / business partners; • Finalising the valuation mechanism to be adopted in case of stock transfers, deemed supplies etc. • Advances given / received must be tracked on bill to bill basis & accordingly knocked out in the returns Hiregange & Associates

Course Of Action By Business Entities • Vendor Sample Form • Name of the Vendor; • PAN of the Business; • Provisional GSTIN No. in each supplying state; • Details of Goods supplied & HSN Code; • Software used by your organization for accounting; • Vendor IT readiness & support required, if any; • Understanding of the GST law - trainings • Date of last reconciliation? Any open issue? • Email id / contact no. – state-wise person in-charge • Restriction on issuing of PO if information not provided. Hiregange & Associates

Course Of Action By Business Entities • Human Resource Management • Hiring of new employees; • Services of freelancers / non-employee professionals/ directors - URD RCM; • Temporary/ permanent movement of employees; • Re-structuring in the organisational hierarchies, Roles & responsibilities; • Birthday coupons, Festival Gifts etc. to employees; • Facilities to employees - Employment terms; • Expense documents/ tax invoices on reimbursements to the employees; • Expense bills in the names of employees. Hiregange & Associates

Course Of Action By Business Entities • Finance & Accounts • Identify taxability, Place of supply, Time of Supply, Type of Supply, Nature of Tax etc. following for each revenue transaction and key procurements; • Clean up action - filing of pending returns, revising the returns; • Present system of computing taxes, availing credits – change needed; • State-wise accounting - Co-ordination and communication between HO and site offices; • Accounting to be live and online – Backdated accounting to be avoided; Hiregange & Associates

Thank you For any clarification ravikumar@hiregange.com Hiregange & Associates

Our Presence Hiregange & Associates Gurugram 509, Vipul Trade Centre, Sohna Road, Sector 48, Gurugram, 122009 Tel: 8510950400 ashish@hiregange.com Vishakhapatnam Sai Sree Kesav Vihar, Flat No.101, D.No.9-19- 18, CBM Compound, Visakhapatnam – 530 003 Tel + 91 891 6009235 anil@hirengange.com Mob:9989604111 Hyderabad “Basheer Villa”, HN 8-2-268/1/16/12 2nd Floor, Sriniketan Colony, Road No.3, Banjara Hills, Hyderabad – 500034 sudhir@hiregange.com Tele Fax- +91 40 23606181 Mumbai No.409, Filix, Opp. Asian Paints, LBS Marg, Bhandup West, Mumbai-400078 Tel. +912225955533, +912225955544, Vasant.bhat@hiregange.com Mobile:+91 9867307715 Pune Rajyog Creations Apartment, Flat No. 5, IV Floor, Anand Park, Above HDFC Bank, Aundh, Pune - 411 007.Phone: 7680000205 / 020-41202013 ravikumar@hiregange.com Bengaluru (HO) 1010, 1 st Floor, 26 th Main, (Above Corporation Bank) 4th T Block, Jayanagar, Bangalore- 560041 madhukar@hiregange.com Tel: +91 80 41210703 Gurugram Mumbai Vizag Pune Hyderabad Bengaluru Chennai Chennai T3, AmanSindhur Pantheon Road, Egmore, Chennai – 600 008. vikram@hiregange.com Mob: 9962508380 www.hiregange.com Hiregange & Associates

Transition & Areas of Immediate Action Points