Welcome to A To Z Efiling Solutions a place where we will try to explain legal provisions related to various laws primarily GST and Income tax in language that is understood by common man.It will be our endeavour to explain the concepts of various laws in plain simple language understandable by a common person.
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Under GST there are three types of Audit wherein an audit of books of accounts involve thorough checking of books of accounts and their related documents which involves but is not limited to invoices, bank statements ,third party verifications as well
a) Mandatory Audit:
this involves the Audit by CA or ICWA depending upon the turnover threshold as required under the GST Act which says each registered person if his turnover crosses a threshold (currently it is 2.00 Cr) then has to get a GST Audit under sec 35 done by any CA or ICWA of his choice and to submit the audit report to the department.
Turnover has been defined in GST as follows:
sec 2(112) says
“turnover in State” or “turnover in Union territory” means
1) the aggregate value of all taxable supplies (excluding the value of inward supplies on which tax is payable by a person on reverse charge basis)
2)And exempt supplies made within a State or Union territory by a taxable person,
3)And Exports of goods or services or both and inter-State supplies of goods or services or both made from the State or Union territory by the said taxable person
4)but excludes central tax, State tax, Union territory.
To put it simply it is
Total Turnover less Reverse chargeable turnover including exempt and inter state supplies less any taxes
Commissioner can get the books of a registered person audit by departmental officer under sec 65
c)Special Audit: An officer not below the rank of Asst Commissioner can appoint a CA or ICWA if he feels fit a case in case of technical complexity under sec 66
Basis difference is that in first case the Audit though mandatory can be get done by the CA or ICWA of registered person’s choice but in other two cases the Audit is done by the persons appointed by the department.Summarised provisions are as under:
Any Law has three components compliance requirement , effect of non compliance, ways and means to get the compliance done
First part is the law itself which says such and such needs to be done
Second Part says if such thing is not done then this will be the effect .this effect is in form of punishment or prosecution .Punishment is generally in terms of money in revenue laws whereas prosecution is generally in the nature of imprisonment etc.
Now in GST law prescribes following
a) when is GST levied
b)How to inform the turnover
c)which return is to be filed
d)which books and documents to be maintained
e)Verification of documents
f)Carriage of goods
g)Audit and Appeal
Second part entails offences and penalties therein.
We produce in this post various offences and penalties contained in GST
In case of any clarification please feel free to drop a mail at email@example.com or leave a comment
As a part of compliance and information drive to stop the misuse of a persons documents and identity by paper companies as has been done in past MCA has asked for all Directors whose DIN was in “Approved” status as on 31/03/2018 to get their KYC done as a one time exercise before 31/08/2018 by filing form DIR-3 KYC
All new DIN KYC will be mandatory once every year by 31st March .
1)The Unique Personal Mobile Number and Personal Email ID would have to be mandatorily indicated and would be duly verified by One Time Password(OTP)
2)The form should be filed by every Director using his own DSC
3)The form thus filed should be duly certified by a practicing professional (CA/CS/CMA).
4)Filing of DIR-3 KYC would be mandatory for Disqualified Directors also.
5)After expiry of the due date by which the KYC form is to be filed, the MCA21 system will mark all approved DINs (allotted on or before 31st March 2018) against which DIR-3 KYC form has not been filed as ‘Deactivated’ with reason as ‘Non-filing of DIR-3 KYC’.
6)After the due date filing of DIR-3 KYC in respect of such deactivated DINs shall be allowed upon payment of a specified fee only
7)Any other action for non compliance may be taken
8) Documents required are PAN, Aadhaar, Passport (Though not mandatory) any one address proof is mandatory but technically since DSC is required which says that it has to be linked to same PAN used to get DSc
Last week saw many amendments in the GST laws with a hint that more will follow as GST council was to meet on 22/07/2018 to propose many further amendments or tweaks major being rates relaxation in many items.We will update you about the tweaks as and when done.Right now let us look at the amendments brought in as of now.
Amendment in sec 2(102) definition of services
‘securities’ is outside the ambit of GST since it do not falls under the definition of ‘goods’ and ‘services’ , but facilitating or arranging transactions in securities is liable to GST so in order to remove any doubts
For the removal of doubts, it is hereby clarified that the expression “services” includes facilitating or arranging transactions in securities
Schedule -III is for enlisting those activities or transactions which shall be treated neither as a supply of goods nor a supply of services
Out of scope/ Out and Out Supplies:Following items added in the list
Supply of goods from a place in the non-taxable territory to another place in the nontaxable territory without such goods entering the taxable territory
Supply of warehoused goods to any person before clearance for home consumption.
Supply of goods as high seas sales
Schedule -II is for enlisting those activities to be treated as supply of goods or supply of services
Following items added to this list through an amendment in sec 7 by introducing a new sub clause (1A) to section 7 of CGST Act
Certain activities or transactions, when constituting a supply in accordance with the provisions of sub-section (1), shall be treated either as supply of goods or supply of services as referred to in Schedule II.
Earlier an activity listed in Schedule II would be deemed to be a supply even if it does not constitute a supply as per section 7 (1) (a) or (b) or (c)
Supply by Unregistered Person
Scope reduced by removing sec 9(4) and introducing new section as follows
“The Government may, on the recommendations of the Council, by notification, specify a class of registered persons who shall, in respect of taxable goods or services or both received from an unregistered supplier, pay the tax on reverse charge basis as the recipient of such goods or services or both, and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both.”
Tweaks in Composition scheme:
The limit is being raised from Rs. 1 crore to Rs. 1.5 crore
At present manufacturers and traders supplying services are unable to opt for the scheme even if its percentage is very small as compared to the supplies of goods. Therefore, a new proviso is being added in order to allow them to be eligible for the scheme even if they supply services of value not exceeding 10% of the turnover in the preceding financial year in a State/Union territory or Rs. 5 lakhs, whichever is higher.
Amendment in sec 16(2)(b) :ITC
There was a deeming fiction which says that if goods are delivered to a third person on the instructions of registered person by the supplier then the dealer can avail ITC.No such fiction was there for “services” .Now it is being introduced.
Payment of Interest by the buyer in case of non payment to supplier beyond 180 days:
Now no interest will have to be paid by the buyer.
Sec 17(3) :
This section says no Input tax credit can be availed on exempt services and services scheduled in Schedule III .Now it is proposed to exclude these services from out of exempt services for the purpose of ITC
Input tax credit would now be available in respect of dumpers, work-trucks, fork-lift trucks and other special purpose motor vehicles.
Input tax credit would be denied only in respect of motor vehicles for transport of persons having approved seating capacity of not more than 13 persons (including the driver), vessels and aircraft when these are used for personal purposes.
ITC will not be denied in respect of motor vehicles if they are used for transportation of money for or by a banking company or a financial institution.
ITC in respect of services of general insurance, servicing, repair and maintenance in respect of those motor vehicles, vessels and aircraft on which ITC was not available under clause (a) of Section 17(5)
Following sub-clause to be inserted
(aa) services of general insurance, servicing, repair and maintenance in so far as they relate to motor vehicles, vessels and aircraft for which the credit is not available in accordance with the provisions of clause (a)
Section 17(5)(b) : Provision of facilities to employee No ITC up till now was creating a problem for employers and was a stopper now no longer the case:
In those cases where the provision of food and beverages, health services ,travel benefit to employees etc is obligatory for an employer to provide under any law now ITC will be allowed to employer
Sec 17(5)(a) provides that no ITC to be claimed in respect of following
(i) when they are used for making following taxable supply
(a) motor vehicles and other conveyances except when they are used––
(A) for further supply of such vehicles or conveyances
or (B) for transportation of passengers
or (C)for imparting training on driving, flying, navigating such vehicles or conveyances
(ii) for transportation of goods
Now a new clause 17(5)(aa) is introduced that says that no ITC on services of general insurance, servicing, repair and maintenance in reference of above supplies will be admissible.
Sec 34 (1) & 34 (3)- Credit/Debit Notes:
At present credit/Debit Invoices are to be issued only in reference to individual invoice which creates problems while filing returns or otherwise in reconciliations.Now a dealer can issue consolidated credit / debit notes in respect of multiple invoices issued in a Financial Year without linking the same to individual invoices
Visit Aadhar self service update portal Click Here
Enter the Aadhar to be updated
There are two options
OTP or TOTP
For TOTP click here
If you select OTP a code is send to the registered mobile no
On entering the code received you will be taken to the modification page where you the details to be modified
After selecting the details to be modified you have to upload scanned images of proofs of the details required to be modified.For list of valid documents Click Here
Once uploaded press submit
Do remember to save the receipt generated for future reference
Only demographic details that is Name,Address,DOB etc can be updated .For other you have to visit Aadhar Enrolment centre
What is TOTP:
TOTP stands for Temporary One time password and is unique for a profile.For this one has to download mobile App as m-android and create a profile.then there you will get option of generating TOTP which when generated is valid for 30 seconds.
Fees: For each updation Rs 25.00 has to be paid
Visit any of the Aadhar Enrolment centre
You have to bring original documents with you as also a certified copy of complete set
There you will have to fill an application form
Submit the documents
Pay the fees
Do remember to save the receipt generated for future reference
What if the mobile no is not registered with Aadhar
In this case first you have to visit Aadhar Enrolment centre and get the Mobile No registered then only you can do any further modification.
Modification in PAN details
Fill form for correction of PAN (link given below)
The form contains the fields to be corrected .
Enclose the proofs
If you have Aadhar then nothing else except photograph is required
For offline Correction visit any of the TIN facilitation centres .List of centres can be had from Click here
In case of online correction after filling the form you have to submit scanned documents that are to be self certified and in case of offline correction at TIN centres you have to submit duly filled 49B form with documents at the centre.In both cases fees has to be paid which is Rs 107.00 as on the date of this post .For Form see below
E-way bill is an instrument which ensure that delivery of goods is being trailed via the system.It ensures non intrusive checks which were delaying the delivery of goods as for example each carrier which passes through any check post was checked and kept on hold for petty reasons in past but in new system since the details are on the system it has become almost impossible to undue harass the taxpayer.
E Way bill process is a 5 stage process
Registration in the portal – One time
Providing the details of consignment – Each time
Generating the bill — as and when required
Providing the same to the transporter
Dispatching the goods with E way bill
We will take each step one by one
This is a one time process wherein each dealer /transporter registered under GST if he wishes to carry/deliver goods has to get himself/herself/itself registered with E-Way bill portal at E-Way Bill Portal .The process of registration is given under.
Generating the E-Way bill:
Providing the E-Way bill and Dispatching the goods: Since the E-Way bill is generated online and in almost all cases the transporter can update the vehicle details the bill is generally available with the transporter already.Only thing required is that the E-way bill be present in the system before the goods are moved
Extending Validity of E-Way Bill: The validity of the E-Way bill can be extended.The provision has been provided to the taxpayer to extend the validity of E-way bill, if he / she is not able to reach the destination before the expiry of the validity of e-way bill. The user can extend the e-way Bill few hours before or few hours after the existing validity time of EWB. The few hours available for extending is defined in the web-site. The present transporter of the e-way bill can only extend the validity.
Distance linked validity of E-way bill:Validity of the e-way bill depends upon the distance the goods have to be transported. In case of regular vehicle or transportation modes, for every 100 KMs or part of its movement, one day validity has been provided. And in case of Over Dimensional Cargo vehicles, for every 20 KMs or part of its movement, one day validity is provided. And this validity expires on the midnight of last day.
We have tried to provide a brief process of Registration of user,Generation of E-Way bill and related details in the E-Way Bill Process.We will cover more sections in later posts to come.
We had already discussed the modalities of finalisation of accounts in pre-GST period from 01/04/2017 to 30/06/2017 .Now since the remaining part of the Financial Year 2017-18 will deal with the remaining 9 months hence now we will discuss the details for that period.
a)Opening Balances: Since we had already prepared the balance sheet as on 30/06/2017 hence we will already be having the closing balances as on 30/06/2017 which will be the opening balance as on 01/07/2017
b)ITC as on 30/06/2017 will have to be maintained separately as it can only be claimed if the stock has been sold within 6 months ie upto 31/12/2017 .Any stock if remaining the relevant ITC will have to be reversed which will be termed as
Reversal of Unsold Stock pertaining to PRE GST era on which ITC has been claimed as per GST Trans 1
c)Reversal of ITC arising on account of purchases wherein the payment is still outstanding as on 31/03/2018:
Sec.16 of CGST Act (for a detailed analysis please refer to our post Unpaid Amount ITC
requires that any outstanding amount on account of purchases older than 6 months if remains to be paid then the relevant ITC will have to be reversed.
Reverse charge was in vogue from 01/07/2017 to 15/10/2017 hence a detailed summary of expenditure incurred during this period on which no GST has been paid (Meaning if the bill issuer of service has not paid GST) in those cases for the aforesaid period GST liability was that of service receiver hence in all those cases if any liability exists then it has to be paid along with interest.
e)Stock: The beauty of GST is that if everything is in ideal condition then stock will be automatically accounted for.But as we know that GST is not fully implemented as of now hence the department has no perfect details of stock.But in the coming times the details will be definitely matched hence one should be very cautious in maintaining stock.To maintain stock the modus operandi should be as follows:
f)The purchases made should be vouched from purchase bills as well as from party statements
g)The inward stock as ascertained above should be adjusted for all credit notes issued as in GST returns the details of all credit notes issued will be automatically accounted for
h)The outward stock shall be ascertained from sales bill as crossed also from the party statements
i)The outward stock as ascertained above shall be adjusted for all the debit notes issued as in GST returns the debit notes shall be automatic accounted for .
Any wastage should also be accounted for.
One will ask that all these adjustments were also in pre GST era then why so emphasis now.
True it is that these adjustments were in vogue in Pre GST era but then the department had no such readymade information at its disposal so the variance in stock went unnoticed .Now in GST era all the variance will be tracked by the system itself if not now then in coming years.Remember any case can be reopened within 4 years in normal scenario in GST
j)All the additions to assets used in business it should be decided whether one wants to claim depreciation or if wants to claim ITC then the same will be claimed in 60 instalments.This should be declared in the purchase returns in GST
k)All the services which have been availed in the course of business ITC on them should have been availed.
l)Any entries that are generally accounted for at the end of year in PRE GST era will now have to taken care as they arise.This type of transactions covers Incentives,Scheme Discount or any type of incentive given or received during course of business based upon quantum of turnover.
m)any advance paid should be separately checked as initially there was also liability to pay GST on all advance payments received.
n)Even if anything remains on account of ITC then the same can be corrected by filing the annual return under GST by filing GSTR 9 the due date being 31st December for Financial year 2017-18.
The crux is that now one will have to calculate profit and loss and trading account on an ongoing basis.Generally big corporate houses or to some extent the companies run by professionals still do these things but medium businesses and small ones do not do this on an ongoing basis rather they prepare the final accounts once in a year. These will have to adapt new practice or else they will be in a big trouble.
E-verification is the process which confirms that the taxpayer has ob its own filed the return and further that he/she/it is fully aware of the facts disclosed in the return unless the return is filed by a TRP it is the assessee’s responsibility of the consequences of filing of return.This is similar to the fact that unless any document is signed by the declarant it has no evidentiary value.E-Verification also is the proof that the department has accepted the return for processing subject to any discrepancy noticed afterwards which may treat the return as defective.For defective return please refer to our earlier post on the subject.
Now Income tax has following methods of validation of returns:
DSC ie Digital Signature Certificate: In this method nothing else is required after filing of return as the return itself is digitally verified.
Aadhaar Verification: In this method as soon as the return is filed an OTP is sent to the registered mobile no of the assessee which has to be entered into the portal .As soon as the OTP is entered the return is validated.The time limit for expiry of OTP is 10m minutes after which fresh OTP has to be generated.So for the assessee who need to get the return verified by Aadhaar should get their valid mobile numbers in their AAdhaar. For linking the mobile no with AAdhaar see our relevant post.
Demat Account verification:This is a lesser known and used form of verification as not every assessee might be having demat account.But if you have one you can everify your return by providing the demat account number wherein an OTP is sent to the registered mobile no. which when entered into the portal the return is verified
Bank Account verification:In this form of verification you can everify your return by providing the bank account number registered under your name wherein an OTP is sent to the registered mobile no. which when entered into the portal the return is verified
In all the cases of everification the most important thing is that you must have a valid mobile no which should be linked to the device used for verification(Aadhaar, Demat account,Bank Account)
Why is E-Verification Important: The process of filing of return is incomplete without everification since any declaration filed or document submitted is incomplete unless signed by the declarant/filer.Now since the return is filed online hence it is important that an express consent is obtained from the declarant’s/filer’s end is obtained that the return has been filed and originated from it’s end .E-verification does the same.Moreover it is in the taxpayer’s interest that he/she/it must have knowledge that the return has been filed when and by whom(in those cases when the return is being filed by his tax consultant) so it is in their interest also.
Consequenses of Non-Everification:
Unless the return is everified the return will not be deemed to have been filed and after the expiry of 120 days which is generally the time period allowed ,the return will be deemed invalid and will be removed from the portal and hence will attract all consequences of non filing
Any person may receive a notice that has originated from Income tax department.In this post we will discuss various notices under Income tax act and how to deal with them.
There can be following notices under Income tax act
Demand /Investigation Related/Defective return
Section under which the notice is issued
This is an assessment based upon the return submitted .Basically this is only an intimation that your return has been processed
Notice for Regular Assessment and Initiation of Proceedings respectively.
Department selects cases for detailed investigation based upon various criteria .This is called Scrutiny assessment in general parlance
Notice for assessing the Income which has escaped assessment
In certain cases some income is left to be assessed either due to not being reported by the assessee or due to any other reason .This is called escaped from assessment.
Basically this is for third party verification
During the course of assessment of an assessee there are instances when any transaction is found recorded that has its origin in third party hence to verify that transaction that third party is called for
Issued for old outstanding demand to be adjusted against any refund
Best Judgement Assessment
Basically this is a letter of intent issued by the Assessing officer when the Assessee is not co-operating wherein the Notice says that the department now intends to assess the income on the basis of records available with it.This is called Ex-parte assessment in general parlance
Intimation of Demand/Refund in case of TDS
This intimation is issued after processing of TDS returns
Intimation of Demand/Refund in case of TCS
This intimation is issued after processing of TCS returns
Intimation of Defective Return
When there is any defect noticed after filing of return by any assessee the this intimation is issued and the assessee is given time to rectify the defect
Recourse on receipt of notice given above:
Generally the notices are classifiable under two catagories one is for an assessment to be made and another is post facto assessment.
Pre assessment cases:
One should consider the notice in totality
The reason given for the notice is generally given in the notice itself except when an intended notice of assessment is there in which case also details are provided by the department if asked
After the receipt of notice one should prepare the true affairs of its accounts, income declared etc and file the same with the department along with proper supporting backed by documents such as bank statements, confirmations ,sale and purchase details etc.
Although in all cases of assessments the department sends a detailed questionaire which contains all details required by the department hence once should prepare the documents based upon it.
It is advisable in cases of assessment to consult an expert as many legal issues are to be considered though an assesse can always present its case on its own
In cases of investigation/third party confirmation the reply should be filed with complete details within due time with acknowledgement obtained.
In cases of sec 147/148(Income escaping assessment) if the return has been filed earlier and the assessee feels that the income declared was correct then a statement of such intent should be filed.However if no return is filed then it should be now filed and copy of such return filed should be given with reply.
In cases of sec 144 generally the notice contains a detailed computation which the Assessing officer calculates and intends to impose a tax .In this case the reply should strongly oppose the calculation and should contain your own computation backed with own Income .
Cases of demand adjustment generally arises due to the tax paid by the assessee but not updated in portal.In these cases the proof of tax paid should be provided with the reply.
Post Facto Assessment cases:
The notice generally contains the details which should be checked for the reason of demand
if it is found that the demand is correct it should be paid and the reply filed with proof of deposit.Any delay in paying the demand attract interest from the date of demand due which is generally after 30 days of order by which the demand is created.
If it is found that the demand is wrong as per assessee then proper reason should be filed with the department with an acknowledgment of the reply filed.
In cases of defective return the defects should be removed by filing the revised return and filing a reply to the notice online
Defective return under Income tax act is covered under sec 139(9) which says that
If there is any discrepancy/proof not provided in reference to the income filed and contextual taxes credit claimed or if in those cases where books are said to be maintained but the details are not filled then the return shall be deemed as defective.
From last year this DEFECTIVE RETURN has attained significance as lots of returns have been considered defective on these accounts.Actually it so happened that before this time the department utility was not having inbuilt checks due to which many discrepancies went noticed which now are not ignored.
What happens when there is a defective return?
As soon as the defects are noticed the department sends a notice online/offline to the assessee and provides a reasonable time(generally 15 days) to rectify the defect.
How to remove the defects?
Now a days the notice contains a sheet with defect and their impact .It is only required by the assessee generally to accept of decline the adjustment advised .If the assessee agrees or disagrees then in both cases the response sheet is to be submitted which thereby results into removal of defect.
What happens if the defect is not rectified?
If the defect is not rectified within the given time the assessing officer shall treat the return as invalid return and then it shall be deemed that the return was never been filed Hence all consequences of non filing of return will be attracted
are you facing any such case? Feel free to write us about your problem we will assist you