A Trader’s Guide to Goods & Service Tax

The tax structure of our country is going to witness a huge transformation, a reform that is sure to mark itself in the pages of financial history. Why? This is because for the first time in Indian history, there is a tax regime that would unify the country into one economic market. And undoubtedly, from government to people, everyone is awaiting the implementation of GST because of the advantages of GST. Whether it is a manufacturer, trader or a service provider, the realm of GST is going to cover one and all.

If you are a trader, GST is an essential thing to learn about because of the effect of GST on Indian traders’ trade structure.

Mentioned below are the effects, benefits and liabilities of the traders based on different scenarios:

Condition 1:

A trader registered under VAT

  • If you are registered under VAT, you can carry forward the closing balance of input tax credit, prior to the date on which GST is implemented, as SGST Input Tax Credit.
  • The last VAT return should show the closing balance of credit.

Condition 2:

A trader is registered under Excise

  • Excise duty is not allowed as input tax credit i.e. trader registered under Excise is not eligible to claim ITC on closing stock.

Condition 3:

A trader not registered under VAT

  • If you are not registered under VAT, CST regime but liable to GST registration, ITC can be claimed.
  • The closing stock must pertain to taxable supplies.
  • If you are a taxpayer under GST composition scheme and not a regular taxpayer, no ITC can be claimed.
  • Invoice and other supporting documents of the closing stock must be present.

Condition 4:

A trader registered under VAT selling exempted goods

  • If the tax on exempted goods is taxable under GST, you could carry forward the input VAT credit held in the closing stock.
  • If you were eligible under VAT credit, but engaged in the sale of exempted goods, ITC cannot be claimed.

Well, if GST evolves as it is hoped, it is going to prove immensely beneficial not just for traders but for the entire lot of taxpayers, delivering the necessary revenue growth for the government as well.

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