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

THE IMPACT ON AFFORDABLE HOUSING IN GST REGIME

  Measures for promoting affording housing “It is proposed to exempt service tax on construction of affordable houses up to 60 square meters under any scheme of the Central or State Government including PPP Schemes.”   After a prolonged demand from industry, the Central Government announced above incentive and vide Notification no. 9/2016 dated 01 st March 2016 came up with a scheme of exemption from service tax liability pertaining to low cost houses up to carpet area of 60 sq meters to be developed by private developers. Before any new project could have seen the light of day under new exemption notification, and start under the new scheme, there comes a GST from 1 st  of July 2017 whereby this exemption to affordable housing by private builders, from service tax stands omitted in the new list of exempted services approved by GST council. Thus the group housing projects proposed by private builders up to a carpet area of 60 square meters no longer qualify for exemption ...
Post a Comment
Read more

INTERNAL AUDIT

  WHAT IS INTERNAL AUDIT? Internal audit is an independent, objective assurance and consulting activity designed to add value to and improve an organization’s operations. The role of this audit is to provide independent assurance that an organisation’s risk management, governance and internal control processes are operating effectively. An internal audit may be used to assess an organization’s performance or the execution of a process against a number of standards, policies, metrics, or regulations. Internal audits  may include examining a business’s internal controls around corporate governance, accounting, financial reporting, and IT general controls. Auditors may cover all areas of an organization or specialize based on their skill-sets. In simple words we can say Internal audits evaluate a company’s internal controls. WHAT ARE THE TYPES OF INTERNAL AUDITS? Some types are: Compliance Audit IT Audit Operation Audit Performance Audit This allows the company’s Board and manag...
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