Skip to main content

HOW GST IMPACT ON STOCK AVAILABLE TILL 30TH JUNE

 Impact of GST on stock Market

Goods and Services Tax (GST) is considered to be the biggest tax reform in independent India.  As the deadline comes closer, small and medium companies as well as large enterprises are working on the transition from VAT era to GST regime. No doubt, this transition won’t be an easy task especially for those who are linked with fast-moving goods, durable, pharmaceuticals. Nevertheless, cutting down inventory levels is not an easy task either.  Already inventory correction has started across various sectors. Instead of lifting stocks for two months or so, the companies are taking up stocks for 10- 12 days.

Understanding the problem

The biggest question going around various quarter is – what will happen to the stocks sold after June 30.  Incidentally government had already announced that trade across various categories will get 40% reimbursement of the tax paid portion only.  In this regard, one can certainly highlight Section 167(1) of the revised Model GST law which clearly states that the credit of VAT / Entry tax amount appearing in the last return filed under the current VAT / Entry tax law regime will be eligible for being carried forward in the GST regime. But it also sets a condition that the definition of input tax credit has to be as per the GST law.  Last year too, the draft model law of GST had such provisions.  As far as the second and third provisions of Section 167(1) of the revised GST law is concerned, there are additional restrictions of input tax credit which the business houses need to remember on stock availability till 30th June.

VAT credit and GST liability

The adjustment of VAT credit against GST liability is the biggest issue as far as stocks available till 30th June is concerned. The GST council has laid down transition and input credit rules so that the journey to the GST era from current taxes such as VAT, Service Tax, and Excise Duty won’t be hazardous. In either case, tax payer has to declare the complete stock lying with input tax credit. Those goods or services which are in the exempted category or non-taxable, taxpayer won’t be able to carry forward the credit under GST.  No doubt, if any tax payer doesn’t use the stock in business after June 30, the particular taxpayer won’t get the GST credit and will need to pay the amount to the authorities.

Way ahead for the taxpayers 

For the time being the taxpayers need to do the following. First of all it is important to create a separate file of unsold stock till June 30.  Side by side it is important to keep the purchase bill, bill of entry along with excise paid documents.  It would be a wise decision to sell a stock which is one year sold. One must remove it and set it to the tax invoice within the state. Although it may imply giving more discount, would be profitable in the long run. Let’s not forget to make separate lists of duty paid and non-duty paid stocks. This specific list will be essential in getting credit in CGST. No doubt, the goods which are purchased in the locality will definitely be input credit in SGST.  One simply can’t afford to have any mismatch in Purchase report.  Even if there is any mismatch, one has to fix it within the next few days. The statutory forms like C-Form, H-Form, I-Form should also be collected along with.

If invoice is not available for specific input of goods, tax payer needs to submit a statement in Form GST Tran at the end of each of the six tax periods when the scheme is in operation.  Let’s not forget that the amount of credit which is allowed to be credited to the electronic credit ledger of the applicant needs to be maintained in Form GST PMT-2 in the GST portal.

Labels:

Comments

Post a Comment

Popular posts from this blog

MYSTERY AUDIT – WHAT IS MYSTERY AUDIT? | BENEFITS OF MYSTERY AUDIT

  Mystery audit- What is Mystery Audit? how to process it ? benefits of mystery audit? etc. are common question about mystery audit, We are used mystery audit to measure the quality of service and actual performance, compliance with regulation, or to gather specific information about products and services. What is Mystery Audit? Mystery audit is used to measure the quality of service or compliance with regulation, or to gather specific information about products and services. The audit yields better results when done by third-party companies as the stores would not be aware of the product/service being evaluated. A mystery Auditor is a paid consumer who is hired to shop in stores and collect data. Think of mystery auditors as “ undercover customers”  sent in to observe, interact, and report on other customers and store employees. Mystery Auditors are typically employed by a third-parties rather than the store or company personnel itself. Benefits of Mystery Audit to ...
Post a Comment
Read more

HOW TO HANDLE THE TAX IN WHEN AVAILING SERVICES FROM UNAUTHORIZED SECTOR

  Understand the GST: Mechanisms- Two mechanisms are there: a) Fore-ward Charge b) Reverse Charge What is Fore-ward Charge Mechanism? Fore-ward charge means liability to pay the taxes on the goods & services is on the supplier. E.g.: X sells goods for Rs.1 Lac to A, X will charge & pay tax on the said goods (say 5% GST) Rs 5000. What is Reverse Charge Mechanism? Reverse charge means the liability to pay tax by the  recipient of supply of goods or services  or both instead of the supplier of goods or services or both. E.g.: Z sells goods for Rs.1 Lac to B, in this case B will pay tax on the said goods (say 5% GST) Rs 5000 on the basis of goods/services receipt. On which supplies Fore-ward/Reverse charge will apply? In case of goods right now no such goods has been notified yet particularly on which tax liability is be discharged by reverse charge mechanism. However, if the goods are bought by the registered person under GST is from the un-registered person then the...
Post a Comment
Read more

NEW FINANCE PANEL AND A TASK FORCE: WHAT CAN BE EXPECTED FROM NEW TAX LAWS

  The cabinet approved the constitution of the fifteenth finance commission. The fifteenth finance commission will determine the devolution formula for the revenue sharing between Centre and state (from 2020 to 2025). It will also have its task cut with the new tax system. The panel will have to deal with significant changes in the taxation framework, such as GST before making recommendations. Finance Minister Arun Jaitley announced that the cabinet had given an in-principle approval to form the commission and negotiate its terms of reference.The commission, whose members and terms of reference will be notified after finalisation, will make crucial recommendations which will be more in tune with India’s economic needs. The recommendations made by Fourteenth Finance Commission were accepted by the Government. These recommendations will be brought into effect until March 31, 2020. As per the recommendation, the states’ share of the central pool of taxes was increased from 32% to 42%....
Post a Comment
Read more