TaxTMI 
TaxTMI 
08 Jul 2017 
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).
(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:
- 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.
- 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 20th June, 2017 for service to be rendered in July, 2017. The invoice for the service was raised for ₹ 1,50,000/- on 31st July, 2017. Appointed day as 1st July, 2017, GST shall be levied only on ₹ 50,000/-.
- 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 30th 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 1st 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.