Though, GST is implemented w.e.f. 1st July 2017, still it is not being implemented in the same way, which was desired due to technology as well as problems faced by taxpayers. Meantime, while resolving the issues more conflicts have been arisen. Taxpayers have to adopt frequent changes and ensure they are GST compliant and also do not lose on account of interest & Penalty and blockage of working capital due to delayed refund.
Following is the check-list for taxpayer:
- Reconciliation of GSTR-3B and GSTR-1 for Tax liability:
Taxpayers were required to file GSTR-3B and GSTR-1 from 1st July 2017. However, no utility was provided to make the correction in GSTR-3B for any errors and omissions. Tax payable shown in Table 3.1(a), 3.1(b) of GSTR-3B should be reconciled with Table No. 4A, 4B, 4C, 6A, 6B, 6C, 5A, 5B, 9B, 7, 11A read with 11B of GSTR-1. Similarly, 3.1(c) & 3.1(e)of GSTR-3B should be reconciled with 8A, 8B, 8C, 8D of GSTR-1.
Correct tax liability to be ascertained from the analysis of each accounting entry appearing on the credit side of ledgers, which needs to be reflected as outward supply and proper reconciliation is required to be done with general ledgers, GSTR-3B and GSTR-1. No books of accounts can be closed for the year without such reconciliation. If there is excess tax paid and reported in GSTR-3B, refund application to be made under Section 89 of CGST Act 2017. If there is a short payment of tax, it has to be reported as other debit.
- Reconciliation of GSTR-2A with goods and services inwards and invoices booking:
CBEC has issued Circular vide F. No. 349/164/2017/-GST dated 01st September 2017, advising to reconcile GSTR 2A with GSTR 2. However, GSTR 2 is discontinued and responsibility is casted on the tax payer who is availing Input tax credit. ITC only will be allowed in the following circumstances: –
- Tax invoice is in possession
- Supplier has uploaded the invoice on GSTN and reported in its GSTR 1.
- Such invoices of respective suppliers are appearing in 2A of the tax payer and there is 100 % with respect to invoice number, GST number, quantity, taxable value, tax amount and tax type.
- Supplier should pay the tax and file the return 3B.
- Receipt of Goods and services.
- Payment has been made with 180 days.
Therefore, tax payer will have to ensure 100% matching after removing the mismatch with the support of supplier. If this exercise is not done, then such ITC will be treated as provisional credit and if mismatch is not removed by September end then reversal of ITC credit and interest @ 24% is to be paid. However, at the time of finalization of accounts, statutory auditors may insist for making appropriate provision and until reversal is made GSTR 9B mat not get certified Chartered Accountant/ Cost Accountant.
- Reversal of Input Tax Credit:
- Reversal of ITC is required in the following circumstances: –
- Reversal on account of Section 17(5) of CGST Act which is produced below
(a) motor vehicles and other conveyances except when they are used––
(i) for making the following taxable supplies, namely:—
(A) further supply of such vehicles or conveyances ; or
(B) transportation of passengers; or
(C) imparting training on driving, flying, navigating such vehicles or conveyances;
(ii) for transportation of goods;
(b) the following supply of goods or services or both—
- food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery except where an inward supply of goods or services or both of a particular category is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as an element of a taxable composite or mixed supply;
- membership of a club, health and fitness centre;
- rent-a-cab, life insurance and health insurance except where––
(A) the Government notifies the services which are obligatory for an employer to provide to its employees under any law for the time being in force; or
(B) such inward supply of goods or services or both of a particular category is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as part of a taxable composite or mixed supply; and
- travel benefits extended to employees on vacation such as leave or home travel concession;
(c) works contract services when supplied for construction of an immovable property (other than plant and machinery) except where it is an input service for further supply of works contract service;
(d) goods or services or both received by a taxable person for construction of an immovable property (other than plant or machinery) on his own account including when such goods or services or both are used in the course or furtherance of business.
Explanation: For the purposes of clauses (c) and (d), the expression “construction” includes re-construction, renovation, additions or alterations or repairs, to the extent of capitalisation, to the said immovable property;
(e) goods or services or both on which tax has been paid under section 10;
(f) goods or services or both received by a non-resident taxable person except on goods imported by him;
(g) goods or services or both used for personal consumption;
(h) goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples; and
(i) any tax paid in accordance with the provisions of sections 74, 129 and 130.
Further the amount of ineligible credit has to be captured from the system and also to be reported in Table No.4 of GSTR3B. The person having ISD registration will have to also distribute ineligible credit along with eligible credit in accordance with prescribed formula.
- Reversal of ITC of Inputs and Input services and Capital Goods in accordance with Rule 42 and Rule 43 of CGST Rule 2017 which is given below:
While calculating Exempted supply and Non-taxable supply, Non-GST Supplies and exempt supplies also needs to be captured from respective ledgers and it has to be ensured that monthly correct reversal has been made, otherwise monthly differential amount to be calculated and reversal needs to be reworked out and payment to be made along with interest or refund to be applied for excess reversal.
Reversal of Credit Rule 42
|Add:||Total Input Tax Credit||T|
|Less:||Exclusive Input Tax Credit||T1||Fully reverse|
|Less:||Exclusive for exempt supplies||T2||Fully reverse|
|Less:||IT not eligible u/s 17(5)||T3||Fully reverse|
|Less:||Other than Exempted Supply||T4||Fully avail|
|Net Common Credit||C||Refer below|
|Less:||Credit attributable to exempt supplies – reverse in t/o ratio of respective state||D1||Fully reverse|
|Less:||Credit attributable to non-business – reverse 5% of C||D2||Fully reverse|
|Net eligible common credit (C-D1-D2)||Fully avail|
Final working by September: Pay differential with interest / claim differential without interest
Reversal under Rule 43 relating to Capital Goods
|Add:||Total Input Tax Credit n CG||T|
|Less :||Exclusive for other than business / exempt supplies||No credit in elec. Credit ledger|
|Less:||Exclusive for taxable supplies||Full credit in elec. Credit ledger|
|Net Common Credit of CG||Tc||Avail equally every month for 60 months|
|Less:||Credit attributable to exempt supplies – reverse in t/o ratio||Te||Reverse every month for 60 months|
Change of use of CG from exempt / non-business / taxable supplies to common use or vice versa, reduce ITC of CG by 5% / quarter
- Reversal of excess credit distributed by ISD registered person in terms of Section 21 of CGST Act, 2017. A registered person who has obtained ISD registration should distribute ISD credit each month without leaving any balance based on the prescribed formulae. It has to be ensured that correct credit is distributed if not proper reversal of input tax credit along with interest has to be made.
- Reversal of ITC if suppliers are not paid within 180 days from the date of invoice. Tax payer has to ensure payment has been made to the supplier within 180days. If not paid, ITC will be required to be reversed along with interest and if paid after 180days still it has to be reversed along with interest and re-credit to be taken when payment is made to supplier.
- While calculating depreciation, it has to be ensured that amount of CGST & SGST / IGST has not been included value of the capitalization otherwise reversal of ITC will be required.
- Reconciliation of material sent on Job Work
CBEC has issued detailed clarification on job work activities vide circular number 38/2018 dtd. 26.03.2018. Tax payers have to ensure that they have filed ITC-04 on monthly basis and reconciled material sent and received from the job worker. Tax payers also will have to ensure when waste & scrap is not brought back from the job worker, they will discharge liability to pay GST on such waste & scrap supplied from the job worker’s premises. They will have to ensure that they are strictly following the provisions of law with clarifications issued by the CBEC.
- HSN Code on the Invoice
GSTR-1 return should contain HSN wise summary of outward supplies in Table 12. It has to be ensure that HSN mentioned on the invoice of the suppliers is also matching with master maintained by the company. Though, at present matching of HSN is not envisaged. It is always better to be ready with the system.
Before preparing first invoice in the new financial year, taxpayers should check the turnover for the year 2017-18. Taxpayers whose turnover is above Rs. 1.5 crores but below Rs. 5 crores shall use 2 digits code and the taxpayers whose turnover is Rs. 5 crores and above shall use 4-digit code. Taxpayers whose turnover is below Rs. 1.5 crores are not required to mention HSN Code in their invoices.
- E-Way Bill
Govt has issued the notification number 15/2018 Central Tax dtd. 23.03.2018 notifying the date making Rule 138 of CGST Rules effective from 1st April 2018. Rule 138 of CGST Rules is applicable for any movement of goods involving CGST as well as IGST including Job Work movements. Surprisingly, GST Council has issued a Press Release after 25th GST Council Meeting held on 18th January 2018, where it has been stated that E-Way bill preparation will be mandatory w.e.f. 1st April 2018 for inter-state movement and by 1st June for Intra-State movement.
There is a conflict with notification and the provisions of the Act & Rules and the decision taken by GST Council for differentiating the effective dates for inter-state movement and intra-state movement. Govt has issued the notification no 15/2018 Central Tax dtd. 23.03.2018 amending the provisions relating to E-Way bill in CGST Rules. Therefore, it is necessary to take the registration under E way bill system before 31st March.
E Way bill have to prepared even for the supplies made before 1st April 2018 but will reach to destination after 1st April 2018 to avoid transit delays, since there is no clear-cut provisions for transitional period.
If anyone wants to change the series for billing in the New Year, then he can do that from 1st April. New numbering should be started form 1st April.
|GSTR-1||Outward||Quarterly||Jan 18 to March 18||30th April 2018|
|GSTR-1||Outward||Monthly||February||10th April 2018|
|GSTR 3B||Summary||Monthly||March||20th April 2018|
|GSTR 4||Composition||Quarterly||Jan to March||18th April 2018|
|GSTR 5||Non-resident||Monthly||March 2018||20th April 2018|
|GSTR 6||ISD||Monthly||July 17 to Feb 2018||31st March 2018|
|GSTR 6||ISD||Monthly||March 18||13th April 2018|
|ITC – 04||Job Work||Quarterly||Jan to March||25th April 2018|
|CMP – 02||Intimation to Opt for composition||One Time||31st March 2018|
|Online||E-Way Bill Registration||One Time||One Time||31st March 2018|
- GSTR TRAN 2:
Last date of filing the TRAN-2 for entitlement of availment of ITC to the extent of 40% or 60% of CGST paid or 20% or 30% of IGST paid at the time of supplies out of the stock declared in TRAN-1 – Table (7a) & (7b) is on 31st March 2018 and not likely to be extended. IT has to be ensured that whatever stock has been declared in TRAN-1 and been supplied through tax invoice, appropriate information has to be filed.
- VAT & CST Assessment:
VAT & CST Assessment for the period ending upto 31st March 2017 are in progress and assessment for the period ending 31st March 2014 to be completed before 31st March 2018.
- Impact of the changes
GST Council was very proactive for understanding of the grievances of the trade & industries and also due to lot of technology problem, it was necessary to issue various notifications for changing the provisions of the Rules and change in rate of Tax. It has to be ensured that tax payers has correctly discharged the tax liability and if short paid then tax has to be paid alongwith interest and if excess paid, appropriate refund claim to be made.
Number of exporters have accumulated ITC on account of exports made under LUT and therefore they will have to apply for refund under Rule 89 of CGST Rules 2017 from the month of July 2017 onwards. Similarly, number of exporters have paid the IGST on exports of goods and their refunds could not be sanctioned on account of various errors including tax invoice and commercial invoice as appearing in the shipping bill is not matching and other errors as elaborately clarified in the Circular Number 5/2018, 6/2018 & 8/2018 CUS dtd. 23.02.2018, 16.03.2018, 23.03.2018 respectively. Number of exporters still not corrected the errors. Until errors are rectified no refund will be granted.
Similarly, where input tax rate is higher than that of output tax rate. In such circumstances tax payer will have to file refund for inverted duty structure under the Rule 89 of CGST Rules 2017.
Section 171 of CGST Act 2017 provides to pass on the benefits accrued on account of higher input tax and benefits on account of reduction of tax rates. Impact analysis will have to be worked out as on 1st July 2017 and it has to be ensured the benefits has been passed on to the consumers.
Similarly, number of notifications have been issued subsequent to July 2018 reducing the various tax rates and therefore it has to ensure that appropriate benefit has been passed on to the ultimate consumer. Proper working has to be preserved to ensure the compliance under Section 171 of CGST Act 2017.
Reconcile Electronic Cash Ledger, Credit Ledger and liability ledger as available on GSTN with books of accounts.
It has to be ensured that electronic ledger reflected on GSTN is matching with state wise / registration wise books of accounts maintained by the tax payers. However, there may be a difference for which reconciliation has to be made with valid reasons. It will also require by the statutory auditors to make appropriate provisions for finalization of accounts.