Change of Tax rate during Mid of the year

[PANKAJ SINGH]

Dear Expert,

Please share your view on following :

The tax payer is providing ' rental services of transport vehicles with operators' to the State Govt. As per notification no. 08/2017 dated 28th June 2017, the taxpayer can pay Tax @5% without availing ITC or pay @12% with ITC. The business was started during FY 2019-20 and the taxpayer has opted 2nd option i.e. 12% with ITC.

Now taxpayer wants to shift tax rates option from '12% -with ITC' to '5%-without ITC' from October 2021 onwards. In this regards, please share your view on following :

1. Whether it can be done in mid of the year ? please also share relevant notification, if any.
2. If option one is not doable, can it be done in beginning of the next financial year i.e. April 2022? please supportings, if any
3. Please also suggest procedure if any for informing, change in option to GST deptt, if any required.

Thanks ,

Regards,

Pankaj Singh

[Rajagopalan Ranganathan]

Sir,

The Notification does not prohibit changing from one rate of tax to another rate in the middle of the financial year. However, if you change from 12% to 5% then you have the reverse credit available in your electronic credit ledger on the date of switching over from 12% to 5%.

[Rajagopalan Ranganathan]

Regarding question No.2 you can switch over from 12% to 5% at the beginning of the financial year 2022-23. Here also you have to reverse the credit available in your electronic credit ledger. You can inform the Department through a simple intimation letter regarding your option to change from 12% to 5%

[PANKAJ SINGH]

Thanks Sir....please share any notification or reference to rules/law form which suggest that changes can be opt from beginning of the year ...

[Rajagopalan Ranganathan]

Sir,

As per the Notification, there is no condition that the option to avail 5% tax without ITC or 12% tax ITC can be exercised only at the beginning of the financial year. Hence no notification or circular has been issued. It is your option to avail of the benefit either at the mid-year or at the beginning of the financial year.

[Shilpi Jain]

In this case the rate of tax is based on each transaction unlike in the case of a GTA. So you can simultaneously have 2 different transactions with different rates of GST. The rate of tax is based o the conditions in the rate notification

[KASTURI SETHI]

SH.PANKAJ SINGH Ji,

Practically better option for a change is next financial year i.e. in the month of April, 22. If you opt for in the mid stream, you will face various difficulties in accounting matters i.e. audit, refunds, cost basis certificate etc.. To change in the middle is not a visionary step.

[PANKAJ SINGH]

Thank you so much everyone for your time and advise.

AI Summary

GST rate change: a taxpayer may switch between with ITC and without ITC options mid year but must reverse input credit. The notification does not prohibit switching between the with ITC option and the without ITC option mid year; switching from with ITC to without ITC requires reversal of the electronic input tax credit balance on the date of switch. The change may alternatively be effected at the start of a financial year, the department may be informed by a simple intimation letter, and tax is determined transaction wise so different transactions may be taxed under different options, though practical accounting difficulties may favour an annual switch.