3. Manufacturing Sector - Overview
Manufacturing sector is critical for development of any country and India
presently is a way behind in this sector but catching up.
Uptill now the manufacturing sector in India has been largely impacted by the
complicated tax structure, insufficient infrastructure and administration though it
has the capability and resources to achieve a lot on a global platform. India’s
manufacturing sector has been almost sluggish for almost 20 years and has only
contributed merely 16% to the GDP.
Foreign Direct Investments which would result with the GST implementation can
revive India’s manufacturing sector by simplifying the tax structure and
administration and by also ensuring seamless flow of credit.
GST Impact- Manufacturing Sector Private & Confidential 3
4. Input Tax Credit
What is the change in scope of ITC provisions?
Scope of input tax credit has been broad-based through a liberalised
definition which grants credit of inputs, input services and capital goods
“used or intended to be used in the course of or for furtherance of
GST Impact- Manufacturing Sector Private & Confidential 4
What is the change in availability of input tax credit on capital
Capital goods has been defined to mean goods, the value of which is
capitalized in the books of accounts thereby covering virtually all the
5. Input Tax Credit
GST Impact- Manufacturing Sector Private & Confidential 5
What is the change in blocked credits?
Outdoor catering, beauty
treatment, health services,
cosmetic and plastic surgery,
membership of a club, health
and fitness centre, life
insurance, health insurance and
travel benefits extended to
employees on vacation -
Not Allowed when services
are used primarily for
personal use or consumption
of any employee
Membership in a club, health,
fitness center – Not Allowed
Food and beverages, outdoor
catering, beauty treatment,
health services, cosmetic and
plastic surgery; - Not Allowed
unless in same line of
Rent-a-cab, health insurance
and life insurance except when
mandatory as per any statute or
6. Input Tax Credit
GST Impact- Manufacturing Sector Private & Confidential 6
What are the conditions for taking input tax credit?
• Possession of a tax invoice or debit note or such other taxpaying
• Receipt of goods and/or services;
• Payment of tax due by the supplier and
• Furnished of monthly return
• In case of goods being sent in instalments against a single invoice,
then on receipt of last instalment
In case of non-payment to supplier with in 180 days, credit shall be
reversed with interest and added to the output tax liability.
Input tax credit can be claimed anytime by 20th October of following
year or the actual date of filing of annual return whichever is earlier
7. Reverse Charge
GST Impact- Manufacturing Sector Private & Confidential 7
What is the major change in reverse charge provisions?
Concept of reverse charge was there in service tax wherein only certain
specified services were covered however under GST apart from specified
services even all supplies (except exempt supplies) taken from
unregistered dealers are subjected to reverse charge.
What are the compliance obligations on purchases from
• Self Invoicing on monthly basis
• HSN/SAC Classification of goods and services
• Fixing applicable rate of GST on such supplies
• Reflecting such supplies in your outward supply return
• Payment of appropriate tax
8. Reverse Charge
GST Impact- Manufacturing Sector Private & Confidential 8
How to check whether purchases are with in daily exemption limit?
There is small exemption of Rs.5000 per day given for such purchases
however we need to arrive at this amount considering the time of supply
under reverse charge for goods and services.
Suppose, we want to check the amount for say 21st July, then we need to
do the following:
• List of goods received on 21st July (As per GRN)
• List of payments made on 21st July for either goods or services
• All supplies of goods/ services where payments are not made with in
30/ 60 days from the date of invoice and such period has ended on
Based on above, we need to see the daily limit and if it exceeds, then
reverse charge to be discharged on total amount.
9. Job Work under GST
GST Impact- Manufacturing Sector Private & Confidential 9
What would constitute job work under GST?
Job work has been defined as any treatment or process undertaken by
a person on goods belonging to another registered person. Thus all
activities undertaken on goods would constitute job work.
What shall be the time-lines for return of inputs and capital goods
sent for job work?
Inputs – One Year
Capital Goods – Three Years
Moulds, Dies, jigs, fixtures & tools - No Time Limit
In case, inputs and capital goods are returned back with in time limit,
then no tax shall be payable, however if there is delay then they shall be
treated as supply from original date and tax with interest is required to
10. Job Work under GST
GST Impact- Manufacturing Sector Private & Confidential 10
What are the transitional provisions relating to goods lying with job
worker as on 1st July 2017?
Inputs - If such goods are returned within 6 months i.e.
by 31st December 2017, no tax would be
Otherwise input tax credit availed on such
goods will be liable to be recovered.
For the purpose of these provisions during the transitional period, the
manufacturer and the job-worker are required to declare the details of
such goods sent/received for job-work in prescribed format GST TRAN-
1, within 90 days of the introduction of GST.
11. Transitional Provisions
GST Impact- Manufacturing Sector Private & Confidential 11
Which all credits would be transitioned into GST regime?
1. Closing Balance of CENVAT Credit as per last return - Section 140(1)
2. Unavailed credit on capital goods - Section 140(2)
3. Credit of Excise Duty, CVD, SAD etc for specified persons not
registered under excise - Section 140(3) – First or second Stage
Dealer, manufacturer of exempted goods, traders etc.
1. Closing balance of VAT Input credit as per last return
A declaration to be filed in GST TRAN – 1 with in 90 days to claim this.
12. Transitional Provisions
GST Impact- Manufacturing Sector Private & Confidential 12
Which are other important transitional provisions?
1. Refunds filed before or after 1st July 2017 under earlier laws would
be disposed off as per earlier provisions and no credit would be
permitted under GST in case of rejection/ grant of partial refunds
2. Price revisions made in respect of supplies already effected before
1st July, 2017 can be done with issuance of debit and credit notes
and corresponding adjustments shall be permitted under GST
3. Goods sent on approval basis are returned with in six months i.e.
31st December 2017, then no tax would be payable
4. Applicable forms (C, F, H and I) under state VAT laws to be
submitted for ensuring transition of full input tax credit of VAT.
13. GST Private & Confidential 13GST Impact- Manufacturing Sector Private & Confidential 13
CA Dinesh Singhal
CA Chirag Nagpal
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