GST For Service Providers – Transition From Service Tax to GST

The implementation process for Goods and Service Tax has been started and it is very important for all the businesses to understand the basics of GST. The initial move for every service provider is to know the transitional issues and take necessary action to ensure the smooth transition to GST. In this post, we will cover all the aspects of GST transition relating to Service Providers. If you want to know the transitional provisions relating to traders and manufacturers, you can read following posts:

Traders – GST Transitional Issues and Carry Forward of Input VAT Credit 

Threshold Limit and Registration Requirements – Service Tax Vs GST

As per the existing Service Tax Law, a service provider is required to pay service tax if his annual turnover exceeds Rs. 10 Lakhs. However, in GST Law, the threshold exemption limit is Rs. 20 Lakhs (Rs. 10 Lakhs for North-East States).

Service TaxGoods and Services Tax (GST)
Threshold Exemption LimitRs. 10 LakhsRs. 20 Lakhs (Rs. 10 Lakhs in North-East States)
Registration Requirement If turnover exceeds Rs. 9 LakhsIf turnover exceeds Rs. Rs. 20 Lakhs (Rs. 10 Lakhs in North-East States)

GST Migration/Registration Process For Service Tax Assessees 

  • Service Tax assessees (not registered with VAT) can register for GST till 31st Jan 2017. Check the detailed migration process here:

GST Registration for Existing Service Tax, VAT and Excise Assessees

  • The provisional GST Registration Certificate will be issued to all the existing taxpayers registered under Service Tax.
  • The provisional registration will be valid for 6 months.
  • Prescribed information has to be submitted within 6 months for taking final registration under GST.
  • Final GST registration will be granted after submission of such information.
  • Provisional registration will be cancelled after 6 months if prescribed information is not submitted.
  • The taxpayer may opt for compound levy scheme within 6 months.

Service Tax Assessees Not Liable for GST

The provisional GST registration certificate will be issued to all the existing service tax assessee. However, some existing assessees are not required to take GST registration if their annual turnover is less than Rs. 20 Lakhs (Rs 10 Lakhs in north-east states). In such cases, he may file an application that he is not liable for GST registration. On receipt of such application, the provisional registration will be cancelled.

Carry Forward of Cenvat Credit of Service Tax To GST

  • Service Tax assessees can carry forward the closing balance of Cenvat Credit (as shown in the last return of service tax) to GST
  • The carried forward Cenvat Credit will be treated as CGST credit under GST regime.
  • The carry forward is allowed only if such types of credit is also admissible under GST regime,

Transfer Unavailed Cenvat Credit of Capital Goods (Not availed )

  • The unavailed credit (not shown in last service tax return) on Capital Goods which was admissible to the service provider under earlier laws (Service Tax) can be transfer to GST.
  • The transfer of unavailed credit on capital goods is allowed only when Cenvat credit on such capital goods were admissible under the earlier law (Service Tax Law) and is also admissible in GST Law.
  • Such transfer of input credit will be treated as CGST Input Credit under GST regime.

Credit of  Inputs/ Input Services during Transit

  • Assessee can take credit in respect of inputs/input services which are received after implementation of GST but tax has been paid under earlier laws (Service Tax / Excise).
  • Invoice or duty paying document should be recorded in books of accounts withing 30 days.
  • The assessee should submit the prescribed statement in respect of such types of credit.
  • Such input credit will be treated as CGST Input Credit under GST regime.

Taxability of Supply of Services During Transition – Service Tax or GST?

  • Taxability of supply of service during transitional period will be decided on the basis of “point of taxation”.
  • If the point of taxation of service is before the GST implementation date then such services will be liable for Service Tax.
  • If the point of taxation is on or after the implementation date, then such supplies of services will be liable for GST.

Long Term Contacts/ Work Contract Service – 

In cases where goods/services are supplied on or after the implementation day but the contact was entered prior to the to the implementation day, the tax shall be paid under GST Act.

 

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