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Advisory note for GST Compliance to check before finalization of Books

Advisory note for GST Compliance to check before finalization of Books

1. Reconcile your GST Input Tax Credit Claimed with Online GSTR -2A. If the credit claimed does not match with credit available online. GSTR -2A online credit can be viewed now.

  • Excess: There may be some purchases and expenses which you have not accounted or ITC Claimed. Account and claim ITC.
  • Shortage: Your supplier may not have paid GST and not filed GST Return. Ask him to pay and file the Return. Even if your supplier filed the return, he may not have correctly quoted your GST No. Ask him to correct it in the subsequent months return Before September 2018, by way of Debit Note in your name
    by referring to the old invoice Number.

What happens if not done: IF online credit is not available, then you have to pay the ITC as tax along with 24% interest p.a.

2. Similarly, while filing GSTR-1, we may also have wrongly quoted some of our customers GSTIN. Correct it before September 2018.

3. Any mistake if rectified before 30.09.2018 that will attract only 18% Interest. You can take ITC also. Any mistake, if made after 30.09.2018, will attract 24% interest. No ITC Available.

4. Supplier Payment not made with 180 days:

If payment to the supplier is not made within 180 days from the date of the bill, then ITC availed on it should be reversed in the monthly return when the 180 days expires (for July bill it is January return). With 18 % interest for 6 months. ITC can be again taken when payment to the supplier is made later.

5. Samples Invoice:

If the invoice is being sent to the foreign buyer for sampling purpose and money is also being received against such sampling Invoice, then an invoice needs to be prepared for receiving such money charging the tax of IGST. It will not be treated as an export. The tax should be charged and paid to the Government as per applicable provisions.

6. Quarterly Return for Job work details is required to be filed:

The Form is ITC -04. If this form is not filed, then the goods sent will be treated as ‘supply’ and GST has to be paid. If the goods from 01.07.17 is not received within 1 Year, then that will be treated as ‘deemed supply’ and GST has to be paid. Similarly for Machinery sent the time limit is 3 years.

7. Self-Made Invoice for Reverse Charge Expenses:

Every month consolidated self-made invoice is required to prepare in the format for Reverse Charge Paid Expenses. Penalty leviable.

8. RCM on Import CIF:

Vide Notification No.10/2017(IGST) 5% RCM is payable on Ocean Freight Paid on CIF purchase, for Import. 10% of CIF value is the value of Ocean Freight. If we pay voluntarily before 30.09.18, then ITC available. If taxed later, No ITC. Interest 18%. Air freight exempt.

9. Bank Charges:

ITC on bank charges is available Only with Credit available Online and Bill Issued by Banker. If no bill issued by Banker then ITC cannot be taken. Get monthly bill from the bank. Inform of your GSTIN to bank through a letter. Confirm online credit and monthly bill.

10. Tax Paid vs. Return Filed:

Even If you paid the Tax. But if you have not filed the return. Then you will be required to pay 18% interest on the full tax till the date of filing return.

11. ITC on Passenger Vehicle and Building Maintenance expenses:

Since ITC is not available on the purchase of passenger vehicle and Building construction. (Should be reversed after 30.09.18 with 24% interest). ITC on repairs and maintenance of passenger vehicle and building maintenance is also doubtful. You can claim at your own risk.

12. Reverse ITC on Stock lost/ destroyed:

Whenever the stock is lost, destroyed (fire accident), ITC availed on the purchase has to be reversed to that extent. Ensure stock Cost + Tax value so that insurance can be claimed for full value.

13. Canteen and Other recoveries from employees Taxable:

01.07.17 to 17.02.18 12% GST with ITC. From 18.02.2018 5% GST without ITC. For other recoveries 18% GST. For free services without any recovery annual Rs. 50000 is exempted per employee. No ITC available.

14. From 01.10.18 Online Credit Only: 

The system will not allow us to feed the ITC based on the invoice in hand. So from now ensure that your suppliers properly pay GST and file return. Reconcile and Rectify every month. From doubtful suppliers, keep pending the GST value until online credit is available. GSTR-2A available. 15 In the Income Tax Return, we estimate some personal expenses in General Expenses, Telephone Expenses, and Travelling Expenses. In the monthly return, on the ITC availed of these expenses 5% has to be reversed for personal expenses.

16. Turnover for the Purpose for Registration:

Taxable Supplies, exempted supplies, export of goods and services. For Example, an Individual is having Rs. 3,00,000 commission receipts (taxable), Rs. 5,00,000 commercial rent (taxable), Rs. 5,00,000 residential rent (exempt), Rs. 5,00,000 agricultural income (exempt) and Rs. 5,00,000. In total Rs. 23,00,000. They had to register and pay tax on the taxable supplies.

17. Registered Persons having turnover below Rs. 20 lacs:

If a person is already having the registration under VAT and migrated to GST but his aggregate turnover is below Rs.20 Lacs. He has to pay tax on the taxable suppliers even if the turnover is below Rs. 20 lacs. Every person having GST number is required to pay GST on taxable sales.

18. Registered Persons having turnover below Rs. 20 lacs but to pay RCM:

(RCM on goods and services from unregistered persons (URP) from 01.07.17 to 12.10.17). Even if your total turnover is exempt. Even your aggregate turnover is below Rs. 20 lacs, but if you are having a GST Registration, then you have to pay Reverse Charge GST on taxable goods and services from URP.

19. Compensation from customers:

Interest, penal charges, packing charges, transport charges, Reimbursement of Freight from customers in the course of the sale of goods are taxable under GST.

20. Liquidated Damages:

Liquidated damage charges received from contractors, suppliers is a taxable service under GST. If we deduct anything from the payment made to contractor/ supplier, then we have to raise a tax invoice @ 18%.

21. Transactions among Related parties: (Group Concerns, firm to partners, business to relatives)

Then these transactions may require the valuation for deciding market value. One such risk is that, if a building is owned by one of your firm and the same building is the office for other firms, then your first firm will be required to pay GST on estimated rent. Common goods vehicles, Common work force, Machinery sale to group concern will require market value and notional value for tax.

22. Sales Return and Purchase Return :

Under GST sale return and purchase return (under VAT period and under GST period) has the special procedure to be followed. GST Reversal, Debit Note, Credit Note. Any omissions either by you or by your supplier should be corrected in return before 30/09.

23. Tax on sale of Used Motor Vehicles:

Three types of taxes during the year. For vehicles during 01.07.18 to 12.10.2017, at full GST applicable on the new vehicle (Example 43% depending on vehicle). For sale from 13.10.17 to 24.01.18, 65% of 43%. For Sales from 25.01.18, 18% on the excess sale value over Income Tax WDV. If the sale value is not
above IT WDV, then no GST payable.

24. Assets sold within 5 years from the date of purchase:

Any asset purchased on which GST input was taken, if sold within 5 years from the date of purchase, the GST should be reversed/ paid will be higher of tax on the actual sale value or 1/20 th of ITC taken on the purchase, for each remaining period in the 5 years. Eg. If an asset was purchase for Rs. 100000. GST ITC has taken Rs. 18000. If Sold after completion of 2 years. The remaining period in 5 years is 3 years (12 quarters). If sold for Rs. 300 00. The GST reverse/payable on sale will be Maximum of, 18% on 30000 = Rs. 5400 or 18000/20*12 = 10800. Here Rs. 10,800 is the GST Payable.

25. Exporters Refund:

Exporters may have purchases in some months but exports in other months only. They have an option to submit quarterly combined application. Club your purchases and exports in a period of continuous 3 months (quarterly), and submit refund application quarterly.

26. GST On advances paid to URP:

During the period 01.07.17 to 12.10.17 Reverse Charge is there. GST is applicable on Advances received also. Similarly, for advance paid to Unregistered Persons also RCM is payable. Building construction advance, carpenter advance, section advance, Contractor advance. Depending on the nature of work ITC
is available or not.

27. GST Is payable on Advances Received:

As per the GST Act, GST is payable on the advances received. Advance Receipt in GST format has to be raised. The tax has to be adjusted in the monthly return when final invoice is raised.

28. Single Invoice, But multiple deliveries:

A good or fixed asset may be purchased in a single invoice. But taken delivery in multiple delivery. GST invoice should be raised on the first despatch but ITC can be taken only after receipt of the final despatch (when first delivery in one month and final delivery is in another month, then problem arises).

29 Place of Supply:

Place of supply is another important aspect for deciding whether to charge IGST or CGST and SGST. When you sell to a registered person having GSTIN of another state, you have to Charge IGST even if you have delivery the goods to him within TN or delivered the goods to his factory or job worker in TN. Similarly for sale to Unregistered person also if you sell goods quoting his address in another state in your bill, you have to charge IGST even if you have delivery the goods to him on hand on within TN. Wrong payment of tax will be considered as tax not paid and will be required to pay against.

30 Other Points for Consideration:

  • Checking AS-9 vs GSTR-1: Conceptual difference to continue
  • State wise Trial Balance for GST Audit and Annual Return
  • Cross Charging vs ISD- Conceptual difference and compliance
  • Writing Off Trade Payable / Loans: Impact of GST @ 18% (Tolerating an Act)
  • Document Series- DN/ CN / Receipt Voucher / DC / Refund Voucher
  • DC Types and Formats
  • E-Way Bill compulsion – Outward (Actual vs Cancellation) vs Inward (with GRN)
  • Document Type in E-Way Bill
  • ITC on Invoice of the Registered Supplier under RCM (Compliance)
  • Long-Term Service Contract- ITC vs Books of Accounts (Matching Principle)
  • Reversal under Rule 42 and 43, developing Table
  • Reversal under Rule 43- Impact on books of accounts- Capital vs Revenue
  • Anti-Profiteering Compliance (Increase in GP Ratio)
  • Turnover Discount vs Incentive
  • HSN Wise Stock Detail and Stock out in the SAP/Tally (Composite Supplies)
  • Payment to Government- RCM Liability
  • Canceled Invoice vs DN/CN
  • Refund of Compensation Cess

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