Section 142(11) of CGST Act, 2017 (Service Tax/ VAT v. Goods and Services Tax )

[CASANJAY AITHAN]

Existing Taxation v. GST

In this article, we would like to explain the concept of section 142(11) of the CGST Act, 2017. This transition provision deals with transactions which have suffered tax (Value Added Tax or Service Tax or Service Tax and VAT).

Section 142(11)

(a) notwithstanding anything contained in section 12, no tax shall be payable on goods under this Act to the extent the tax was leviable on the said goods under the Value Added Tax Act of the State;

(b) notwithstanding anything contained in section 13, no tax shall be payable on services under this Act to the extent the tax was leviable on the said services under Chapter V of the Finance Act, 1994;

(c) where tax was paid on any supply both under the Value Added Tax Act and under Chapter V of the Finance Act, 1994, tax shall be leviable under this Act and the taxable person shall be entitled to take credit of value added tax or service tax paid under the existing law to the extent of supplies made after the appointed day and such credit shall be calculated in such manner as may be prescribed.

Accordingly, this section can be divided into 3 parts, are as follows:

1. VAT : When VAT is levied in relation to the supply under VAT then GST will not be levied. Point of taxation for VAT is sale of goods therefore, if sale of goods made as well as invoice raised on or before appointed date then GST will not be levied on the supply to the extent tax was levied under VAT.
2. Service Tax :  When Service Tax is levied in relation to the supply then GST will not be levied. Point of taxation for Service Tax is date of invoice(or date of completion of services) or payment, whichever is earlier. Therefore, if invoice is raised or payment received on or before appointed date then GST will not be levied on the supply to the extent tax was levied under Service Tax.

Example: Advance of ₹ 1,00,000/- was received on 20^th June, 2017 for service to be rendered in July, 2017. The invoice for the service was raised for ₹ 1,50,000/- on 31^st July, 2017. Appointed day as 1^st July, 2017, GST shall be levied only on ₹ 50,000/-.

3. VAT and Service Tax : In case where VAT and Service Tax, both have been paid in relation to the supply which is to be made after appointed date then a registered person can claim the credit of taxes paid under existing taxation regime in GST regime. It may be noted that GST is to be paid on full value of supply although tax paid under existing taxation can be claimed as credit. In short, person will have to pay differential tax amount to the Government.

In case of works contract service, construction services and food and beverage services, etc. VAT and Service Tax, both are levied. In this case if person has paid any tax under existing taxation in respect to the supply to be made after appointed date then person will have to pay full GST under GST regime and such person can claim the credit of tax paid, i.e., VAT and Service Tax under GST.

Contract entered in March, 2017 for ₹ 1,00,00,000/-. Advance received till 30^th June, 2017 amounts to ₹ 10,00,000/-. VAT of ₹ 40,000/- and Service Tax of ₹ 60,000/- have been paid on the said advance. Appointed day is 1^st July, 2017, GST shall be levied on ₹ 1,00,00,000/- as per Section 13 of the CGST Act. The VAT and Service Tax paid (i.e., ₹ 1,00,000/- ) shall be allowed as credit under the existing law.

A person who has paid VAT and Service Tax under section 142(11) of the CGST Act, 2017., need to submit details of tax paid in Entry No.11 of Form GST TRANS-1 on or before 90 days from appointed date.

Discussions to this article

[venkatesh g]

Agree to the above point. But cases where taxable services rendered before appointed day where service tax has been paid, and vat has not been discharged. How to treat the same.

For example, in case of construction service demand raised is rupees hundred and service tax has been discharged hundred that is 4.5 and where amount received is only 50 rupees and what has been discharge earn 50 rupees.

Now for the above what would be the treatment of rupees 50 received in GST regime.

[venkatesh g]

Agree to the above point. But cases where taxable services rendered before appointed day where service tax has been paid, and vat has not been discharged. How to treat the same.

For example, in case of construction service demand raised is rupees 100 and service tax has been discharged on ₹ 100 and amount received is only 40 rupees on which MVAT has been paid under composition.

Now for the above, what would be the treatment of rupees 60 received in GST regime. Whether it will be taxable under GST or not? If yes how?

[VAMSI KRISHNA]

Sir,

For example, 'A' is a service provider who received advance for to provide service on 01-06-2017 amounted 10,000 (actual service value is 20,000 as per contract) and he paid service tax under service tax regime on advance receipt of 10,000 (agreed to be provided also taxable on receipt basis). and 'A' provided service on 29-07-2017 and issued invoice dated 31-07-2017, as like follows:

Taxable value: 20,000

Tax: 1,800 (say tax rate is 18%, 10,000*18/100)

​Invoice value is 21,800

'A' contention is like as follows:

a) in terms of 142(11)(b) of CGST act, tax payment on advance payment is not required to be follow as per section 13 of CGST act.

b) in terms of 142(11)(b) of CGST, there is no clarity on GST levy on advance receipt of 10,000 so it is going to levy under GST.

Kindly clarify whether 'A' contention is correct or not ????? if not, suggest him with required legal provision.

[CASanjay Kumawat]

Contention "A" is right. You need not to pay tax on advance amount on which you have already paid service tax. In section 142(11)(b) of the CGST Act, 2017, the term "leviable", i.e., to the extent service tax leviable.

Therefore, in GST, GST is to be paid only on balance 10,000.

[VAMSI KRISHNA]

Sir thanks for your immediate response,

as per 142(11)(b) notwithstanding anything contained in section 13, no tax shall be payable on services under this Act to the extent the tax was leviable on the said services under Chapter V of the Finance Act, 1994;

sir, i requested your attention to use of word payable in 142(11)(b), the aforesaid clause given relief from payment of GST as per time of supply, but the section is silent about the levy of charging section on the same.

so in my view even through 'A' discharged tax under service tax regime, again GST also levied on said amount but the payment of the same is waived by inserting section 142(11)(b).

if my contetion is correct, then guide me how to issue invoice in GST regime, i.e how much taxable value, how much GST and what is the total invoice value ???????

Thanks

[CASanjay Kumawat]

Value of supply - 20000

Taxable value of supply - 10000

GST -1800

Invoice value - 21800

[VAMSI KRISHNA]

Sir,

as you said earlier, Total value of supply is 20,000 Rs, out of that 10,000 termed as taxable value, what about remaining value of supply in invoice???? how to treat it in invoice???? whether non taxable, exempted or nill rated ???????

Thanks

[Samir kumar]

Sir,

If any contract come under Section 142(11)(B)

but by mistake we treat under section 142(11)(c) ,than can govt can charge us any penalty?

[sagar mohite]

Dear Sir,

I Have one Query,

In Section 142 (11) (c) it was mentioned that,

Every person to whom the provision of clause (c) of sub-section (11) of section 142 applies, shall within a period of ninety days of the appointed day, submit a declaration electronically in FORM GST TRAN-1 furnishing the proportion of supply on which Value Added Tax or service tax has been paid before the appointed day but the "supply is made after the appointed" day, and the Input Tax Credit admissible thereon

Further As prescribed in Rule 118

118.Declaration to be made under clause (c) of sub-section (11) of section 142.-Every person to whom the provision of clause (c) of sub-section (11) of section 142 applies, shall within [the period specified in rule 117 or such further period as extended by the Commissioner, submit a declaration electronically in FORM GST TRAN-1 furnishing the "proportion of supply on which Value Added Tax or service tax has been paid before a period of ninety days of the appointed day” appointed day but the supply is made after the appointed day, and the Input Tax Credit admissible thereon."

based on the above my doubt is mentioned below:

Service tax Paid on Advances Before 30.06.2017 ₹ 10,00,000/-

Proportion of supply made till date is ₹ 2,00,000/- (Rest of the supply will be made after filing of Trans 1 Form)

The dealer is liable to Get Credit of ₹ 10,00,000/- or ₹ 2,00,000/-

[CASanjay Kumawat]

Dear Mr. Samir,

Government cannot charge penalty unless a case is falling under section 74 of CGST Act, 2017 i.e,. There must be fraud or intention to evade taxes etc.

If you have wrongly claimed then reversed it or pay equal amount of it along with interest , if applicable.

[CASanjay Kumawat]

Dear Mr. Sagar,

For the purpose of applicability of section 142(11)(c) of the CGST Act, 2017, payment of Vat as well as Service Tax is must.

In your case, you have paid service tax only on advances received. Therefore , your case is falling under section 142(11)(b) instead of 142(11)(c) .

Accordingly, you need not to pay GST on ₹ 10,00,000.

[Vineet Jhabak]

Asked by Mr. VAMSI KRISHNA

For example, 'A' is a service provider who received advance for to provide service on 01-06-2017 amounted 10,000 (actual service value is 20,000 as per contract) and he paid service tax under service tax regime on advance receipt of 10,000 (agreed to be provided also taxable on receipt basis). and 'A' provided service on 29-07-2017 and issued invoice dated 31-07-2017, as like follows:

Taxable value: 20,000

Tax: 1,800 (say tax rate is 18%, 10,000*18/100)

​Invoice value is 21,800

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Replied by CASANJAY AITHAN

Value of supply - 20000

Taxable value of supply - 10000

GST -1800

Invoice value - 21800

======================

Urgent Support Required.

Sir,

as you said earlier, Total value of supply is 20,000 Rs, out of that 10,000 termed as taxable value, what about remaining value of supply in invoice???? how to treat it in invoice???? whether non taxable, exempted or nill rated ???????

How to reflect the same in GSTR-1 & GSTR-3B

Can you kindly reply as I am facing the same problem. My company have lot of members and they have paid in advance for 4-5 years in service tax regime. So how I issue invoice in GST regime as we have not issued Invoice at Service tax regime but have deposited Service tax to the Govt.??

Thanks

Vineet Jhabak

===========================

[Vineet Jhabak]

Dear Sir,

As per your below article:

 

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Section 142(11) of CGST Act, 2017 (Service Tax/ VAT v. Goods and Services Tax )

In this article, we would like to explain the concept of section 142(11) of the CGST Act, 2017. This transition provision deals with transactions which have suffered tax (Value Added Tax or Service Tax or Service Tax and VAT).

Section 142(11)

(a) notwithstanding anything contained in section 12, no tax shall be payable on goods under this Act to the extent the tax was leviable on the said goods under the Value Added Tax Act of the State;

(b) notwithstanding anything contained in section 13, no tax shall be payable on services under this Act to the extent the tax was leviable on the said services under Chapter V of the Finance Act, 1994;

(c) where tax was paid on any supply both under the Value Added Tax Act and under Chapter V of the Finance Act, 1994, tax shall be leviable under this Act and the taxable person shall be entitled to take credit of value added tax or service tax paid under the existing law to the extent of supplies made after the appointed day and such credit shall be calculated in such manner as may be prescribed.

Accordingly, this section can be divided into 3 parts, are as follows:

1. VAT : When VAT is levied in relation to the supply under VAT then GST will not be levied. Point of taxation for VAT is sale of goods therefore, if sale of goods made as well as invoice raised on or before appointed date then GST will not be levied on the supply to the extent tax was levied under VAT.
2. Service Tax : When Service Tax is levied in relation to the supply then GST will not be levied. Point of taxation for Service Tax is date of invoice(or date of completion of services) or payment, whichever is earlier. Therefore, if invoice is raised or payment received on or before appointed date then GST will not be levied on the supply to the extent tax was levied under Service Tax.

Example: Advance of ₹ 1,00,000/- was received on 20^th June, 2017 for service to be rendered in July, 2017. The invoice for the service was raised for ₹ 1,50,000/- on 31^st July, 2017. Appointed day as 1^st July, 2017, GST shall be levied only on ₹ 50,000/-.

3. VAT and Service Tax : In case where VAT and Service Tax, both have been paid in relation to the supply which is to be made after appointed date then a registered person can claim the credit of taxes paid under existing taxation regime in GST regime. It may be noted that GST is to be paid on full value of supply although tax paid under existing taxation can be claimed as credit. In short, person will have to pay differential tax amount to the Government.

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I like to have your guidance for below example:

First case: Advance recd in ST Regime

CAPEXIL is my company name and is a service provider who received advance for five year (2016-17, 2017-18,2018-19, 2019-20, 2020-21) from x member amounting to ₹ 50,000 (Annual fee is ₹ 10000) + Service tax 14 % on April 2016 and

on that CAPEXIL paid service tax under service tax regime on advance receipt of 50,000 and

Capexil providing services each year starting from first date of financial year.

Now how invoice to be issued in GST regime??

Is the below one is correct?

Invoice dated 01-04-2018

Taxable value: 10,000

Tax: Nil

​Invoice value is 10,000

Where to reflect the same in GSTR-1 & GSTR-3B

What will be the accounting entry??

1/4/16

Bank ............. 50000+GST 7500

To Party.............50000+ GST 7500

1/4/16

Party......................GST 7500

To GST..........................GST 7500

1/4/17

Party .......................10000

To Income 17-18....................10000

1/4/18

Party .......................10000

To Income 18-19....................10000

1/4/19

Party .......................10000

To Income 19-20....................10000

1/4/20

Party .......................10000

To Income 20-21....................10000

In this case how I will issue Invoice for all years??

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Second case: Advance recd in GST Regime

Say if the same amount is received as an advance for five years on 1st Jan, 2018 for FY 18-19 then

Now how invoice to be issued in GST regime??

Is the below one is correct?

Invoice dated 01-04-2018

Taxable value: 10,000

Tax: 1800

​Invoice value is 11,800

Where to reflect the same in GSTR-1 & GSTR-3B

Is the below one is correct?

Have shown advance in January under

11A(1), 11A(2) - Tax Liability (Advances Received)

Now in April will show in :

4A, 4B, 4C, 6B, 6C - B2B Invoices

11B(1), 11B(2) - Adjustment of Advances

What will be the accounting entry in Tally??

Is the below one is correct?

1/1/18

Bank ............. 50000+GST 9000

To Party.............50000+ GST 9000

1/1/18

Party......................GST 9000

To GST..........................GST 9000

1/4/18

Party .......................11800

To Income 18-19....................10000

To GST....................................1800

1/4/18

GST...........................1800

To Party........................1800

(Reverse entry to book above invoice entry so that Invoice can be raised from tally and not manually)

Best Regards,

Vineet Jhabak