Analysis of CBIC Notifications issued in respect of Jammu & Kashmir detailing the Migration Plan from Erstwhile State of J & K to UTs of J & K and Ladakh

As per Jammu and Kashmir Reorganisation Act, 2019, the State of J & K has been divided between Union Territories, namely, UT of J & K and UT of Ladakh. The appointed date for the same was 1^st October 2019.

Now, in order to give effect to the changes brought by Jammu and Kashmir Reorganisation Act, 2019, the CBIC has issued Notification No. 62/2019-Central Tax dated 26^th November 2019 which Seeks to notify the transition plan with respect to J & K reorganization w.e.f. 31.10.2019.

The Notification prescribes a special procedure for those persons whose principal place of business or place of business lies in the erstwhile State of Jammu and Kashmir till the 30th day of October, 2019; and lies in the Union territory of Jammu and Kashmir or in the Union territory of Ladakh from the 31st day of October, 2019 onwards. This special procedure is to be followed till 31^st December 2019.

The significant takeaways of the Notification are as follows:

• Tax Period:

For the month of October 2019 and November 2019, the tax period would be as follows:

• Appropriate Applicable tax to be paid in return u/s 39:

Irrespective of the particulars of tax charged in the invoices, or in other like documents, raised from 31st October, 2019 till the transition date, pay the appropriate applicable tax in the return under section 39 of the said Act

• Option to transfer Input Tax Credit to New GSTIN:

The registered person has an option to transfer the input tax credit (ITC) from the registered Goods and Services Tax Identification Number (GSTIN), till the 30th day of October, 2019 in the State of Jammu and Kashmir, to the new GSTIN in the Union territory of Jammu and Kashmir or in the Union territory of Ladakh from the 31st day of October by following the procedure as below:

1. Intimation to Jurisdictional tax officer: The registered person shall intimate the jurisdictional tax officer of the transferor and the transferee regarding the transfer of ITC, within one month of obtaining new registration;
2. ITC to be transferred in the ratio of turnover: The ITC shall be transferred on the basis of the ratio of turnover of the place of business in the Union territory of Jammu and Kashmir and in the Union territory of Ladakh;
3. ITC to be transferred and claimed through GSTR-3B: The transfer of ITC shall be carried out through the return under section 39 of the said Act for any tax period before the transition date and the transferor GSTIN would be debiting the said ITC from its electronic credit ledger in Table 4 (B) (2) of FORM GSTR-3B [ ITC Reversed – Others] and the transferee GSTIN would be crediting the equal amount of ITC in its electronic credit ledger in Table 4 (A) (5) of FORM GSTR-3B [ITC Available – All Other ITC].

• Balance of SGST of Person having a principal place of business in Ladakh from the 31st day of October, 2019 shall be transferred as the balance of Union territory tax in the electronic credit ledger.

• Exemption from taking registration under GST:

The persons making inter-state supplies between UT of J & K and UT of Ladakh from 31^st October 2019 till the transition date (31^st December 2019) would not be required to take compulsory registration u/s 24(i) of the CGST Act, 2017.

Analysis

1. As per the Notification, it looks like that an existing registered person may have to take another registration in UT of J & K and UT of Ladakh. There will be separate state codes for UT of J & K and UT of Ladakh. As Jammu and Kashmir Reorganisation Act, 2019, J & K GST Act, 2017 has been made applicable to the UT of J & K and UT of Ladakh.
2. As per clause 2(ii) of the Notification, Irrespective of the particulars of tax charged in the invoices, or in other like documents, raised from 31st October, 2019 till the transition date, the registered person shall pay the appropriate applicable tax in the return under section 39 of the said Act. The term ‘appropriate applicable tax’ leaves a room for interpretation. As per the beneficial construction of the statute, it may imply that in case of local supply SGST / UTGST may be paid as per the new GSTIN. It is not clear that in case of stock transfer from UT of J & K and UT of Ladakh, if no tax was charged earlier than also it needs to be paid.
3. The registered person has an option to transfer the input tax credit (ITC) from the registered Goods and Services Tax Identification Number (GSTIN), till the 30th day of October, 2019 in the State of Jammu and Kashmir, to the new GSTIN in the Union territory of Jammu and Kashmir or in the Union territory of Ladakh from the 31st day of October 2019. In our view, the balances of both CGST and SGST has to be transferred to new GST registration.
4. The Notification is silent about the transfer of Electronic Cash Ledger balance to new GST registration. In that case, it may have to be claimed as a refund.
5. New GST Registration numbers of customers have to be reported in November 2019, GSTR-1 otherwise it will not be reflected in the GSTR-2A of new GST registration.
6. Similarly, taxpayers shall be required to report their new GST registration numbers to their suppliers so that they can mention the new GST number while filing their GSTR-1.

Extension of Dates

CA Chitresh Gupta is FCA, LL.B and B.com(Honors). He has completed his graduation from Delhi University. He is a member of Indirect Taxation Committee of PHD Chamber of Commerce.

CA Shilpi Gupta is a Fellow Chartered Accountant (qualified in May 2004) and an Indirect tax professional. She has completed her graduation and post-graduation from the prestigious Shri Ram College of Commerce, Delhi University.