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
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
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.
As we all know that GST was implemented wef 01/07/2017 hence during financial year there will have to be prepared two Financial statements one for three months for the period 01/04/2017 to 30/06/2017 and another for the remaining 9 months.Starting from this post we will try to explain various steps required to prepare the accounts under GST era
Preparing the accounts for the Pre GST period of 3 months:
Dealers were required to file trans 1 wherein it was required to declare the amount of direct and indirect taxes involved in the closing stock as on 30/06/2017 which we presume that maximum would have filed and if not filed for whatsoever reason now it is deemed to never have been filed so first thing to be considered is that the figures declared in TRANS 1 must match with the books of accounts .Just to recall we reproduce TRANS 1 below:
Now based upon the columns given in TRANS 1 above we have tried to explain the accounting entries required to be passed as also where no entries have to be passed
Please note that these entries will be passed in the books of accounts starting on 01/07/2017 and no entries will be passed in books closed on 30/06/2017
Reconciliation of GST ITC as on 31/03/2018 with that in system populated GST as on 31/03/2018
Though the GST was meant to tally with that populated by the portal but due to technical glitches the system is yet not fully operational so it becomes even more important that the reconciliation part is looked into with utmost care.
Reversal of Input Tax credit in case of non payment beyond 180 days:
Section 16 of CGST Act, 2017 says:
(1) Every registered person ……………..
(2) Notwithstanding anything …………………
Provided that …………………………….
Provided further that where a recipient fails to pay to the supplier of goods or services or both, other than the supplies on which tax is payable on reverse charge basis, the amount towards the value of supply along with tax payable thereon within a period of one hundred and eighty days from the date of issue of invoice by the supplier, an amount equal to the input tax credit availed by the recipient shall be added to his output tax liability, along with interest thereon, in such manner as may be prescribed
that is if Recipient of goods/services fails to pay to the supplier (Including Taxes), within 180 days from the date of issue of invoice, the Input Credit shall be reversed.
In terms of accounting it means that one has to observe age wise creditors and then find those whose outstanding is beyond 180 days .The input credit related to them on account of purchases has to be reversed.Not only this interest also has to be paid.
The relevant rules are appended below for reference:
Provisions under Rule 37 of the Central Goods and Services Tax (CGST) Rules, 2017 relating to “Reversal of Input Tax Credit in the case of Non-payment of Consideration”, as per CGST (2nd Amendment) Rules 2017 notified by CBEC on 28 June 2017, applicable w.e.f. 1st July 2017, are as under:
(1) A registered person, who has availed of input tax credit on any inward supply of goods or services or both, but fails to pay to the supplier thereof, the value of such supply along with the tax payable thereon, within the time limit specified in the second proviso to sub-section (2) of section 16, shall furnish the details of such supply, the amount of value not paid and the amount of input tax credit availed of proportionate to such amount not paid to the supplier in FORM GSTR-2 for the month immediately following the period of one hundred and eighty days from the date of the issue of the invoice:
Provided that the value of supplies made without consideration as specified in Schedule I of the said Act shall be deemed to have been paid for the purposes of the second proviso to sub-section (2) of section 16.
(2) The amount of input tax credit referred to in sub-rule (1) shall be added to the output tax liability of the registered person for the month in which the details are furnished.
(3) The registered person shall be liable to pay interest at the rate notified under sub-section (1) of section 50 for the period starting from the date of availing credit on such supplies till the date when the amount added to the output tax liability, as mentioned in sub-rule (2), is paid.
(4) The time limit specified in sub-section (4) of section 16 shall not apply to a claim for re-availing of any credit, in accordance with the provisions of the Act or the provisions of this Chapter,that had been reversed earlier.
The rule also provides such reversed amount is available for re-credit once the payment for the supplies is made.
Accounting entries to be passed if payment not made within 180 days :
Debit the CGST Reconciliation a/c and GST Reconciliation a/c and Credit the corresponding GST liability account.
Once the payments are made the corresponding entries can be reversed
As is clear from above that a new account by the name GST Reconciliation has to be opened which will carry the figures of GST reversals in any case and further that the balance lying if any in this account should be matched with GSTR 2 for the month in which the balance is created and the reversal should match with the GSTR 1 of the month in which it is reversed subsequently (means in which month the creditor is finally paid)
In next post of this series we will try to analyse finalisation of accounts with manufacturing as activity
Yes the heading may be somewhat confusing but its true considering the outcome of yesterday’s GST council meeting .The provisions are virtually rewritten.Without going into the why ‘s and how’s here are the details
General Changes & Relief for Small and Medium Enterprises
To Analyse the changes brought we provide summary below
a) The Composition scheme threshold is now Rs.1.00 Cr
b) Small Dealer is now upto 1.5 Cr who can file its returns on a quarterly basis except for monthly basis previously
c) GST on services of motor cab at 5% without ITC and 12% with ITC extended to any motor vehicle
d)Persons who were otherwise eligible for composition scheme but becomes ineligible due to reciept of amount on account of exempt services will be now eligible for composition scheme
e)Now a service provider who has turnover below 20.00 lacs if providing inter state services need not register under GST.Earlier it was mandatorily required to be registered if providing inter state services
f) Reverse Charge under sec 9(4) and 9(5) has been DEFERRED (not abolished) till 31/03/2018
g)Small taxpayers will pay tax on quarterly basis though the buyers of these taxpayers can claim ITC on monthly basis.
h)Now Small taxpayers need not pay tax on Advances recieved but the tax will have to be paid once the service is provided
i) TDS provisions deferred till 31/03/2018 and e-way bill provisions deferred till Jan 2018
j) Due dates are also extended for composition dealer for july to sep 2017 to 15/11/2017
k) Invoice rules will also be modified to provide some relief
So if we can see almost all major provisions that had been in vogue have been tweaked thereby rewriting the GST provisions which are definitely a welcome move and a major relief to small tax payers
One important aspect under GST is the carry forward of credit that was available to a dealer under old regime of VAT and Service tax or Central Excise .The former being known as Input Credit or ITC and CENVAT in latter parlance.Please refer to our earlier post on conditions for claiming carry forward credit published in the month of july. For new visitors the link to the post is as under
Further brief provisions of filing claim for Input tax credit or CENVAT credit under erstwhile laws are as under
Common condition for all cases above that are required to file TRANS form (1 or 2)
The goods pertaining to the input credit have to be sold within 6 month of 01/07/2017
In case of registered dealers under old regime details of forms against which the goods have been procured are to be given
Goods on which credit is to be taken should not be used for taxable goods/services in GST
Still two conditions remain
Job work and Transitional Credit
Where goods were sent on job work before 01/07/2017 and brought back after 01/07/2017 then no tax is payable provided the goods are returned within 6 month of appointed day provided that the said period of 6 month may be increased by 2 more month by the commissioner on application made for this effect .Same thing apply for goods returned within 6 month of 01/07/2017 subject to extension for 2 months on goods returned on which duty has been paid then the dealer can claim refund of such duty paid
Filing GST TANS 1 and GST TRANS 2:
For format of both form please see below
Documents required before filing
Last filed return copy
Copy of invoices on the basis of which INPUT VAT and CENVAT cenvat credit is to be claimed
In absence of invoice any other document evidencing payment of duty is required
Details of all forms issued and their details under VAT laws
Details of capital goods on which un availed credit is planned to be claimed
Details of goods sent on job work or goods send on approval basis within 6 month of date of applicability of GST
Details of goods lying with agent or held as agent within 6 month of appointed date
If you have with you all the documents detailed above you can file any of the two forms as required applicable to you with ease however in case of any difficulty you can always drop a mail on our site for assistance
As we know the last date for filing of form GSTR 3B is 20th Aug 2017 but since the form do not contains any column for claiming the credit that was available at the beginning of GST hence there was a confusion which has now been cleared by extending the date to 28th Aug 2017 but still there is confusion .The notification which is reproduced below says that to claim the credit one has to file GSTR TRANS 1 before filing of 3B which is against the spirit of GST as was discussed intially which says the GSTR TRANS 1 can be filed within 90 days of appointed date being First of July 2017 ie as per initial understanding it can be filed by 30th OCT 2017 but now it is to be filed by 28th Aug 2017 but the law today is this notification which it seems is bound to attract litigation.
While preparing the GST return the liability that comes after adjustment of Input credit available in ECl(Electronic Credit ledger) is to be paid through portal only .
The challan is to be generated after login to the portal .Once logged in the system will autopopulate the details and will ask for details such as CGST,SGST ,IGST Additional tax,Interest ,Penalty or Cess as the case may be
Once the details are provided it will ask for payment option which may be following
a) Offline upto amount of Rs 10000.00
b) Online for payments above 10000.00 that may be done by credit card, debit card or NEFT/RTGS
The user has option to pay immediately or can save the incomplete details that will remain valid for 7/30 days (7 in case the payment is to be made without NEFT/RTGS and 30 days in case of NEFT/RTGS).The challan so generated will contain 14 digit no called CPIN
Once paid a CIN will be generated that will contain CPIN as given above plus 3 digits identifying bank MICR code
Given under is the format of challan