Finally, after facing every step of hurdle during past one year of journey of GST, passing through more than 400 changes in form of Notifications, Circulars, Press Releases and Orders, the final goal of every taxpayer is to assess their business records and analyse the mistakes done during the past financial year through the mode of GST Audit (GSTR – 9C) and Annual Return (GSTR - 9) for FY 2017-18.
Undoubtedly, the compliances under the GST law for the month of September 2018 is very critical for all registered persons under GST as many provisions of GST law pertaining to Input Tax credit (“ITC”) availment, issuing debit/credit notes, etc., prescribe last date of corresponding action as earliest of due date of furnishing return for the month of September following the end of FY or furnishing of the relevant annual return (Due date for filing – December 31, 2018).
In this regard, we are summarising herewith key areas that needs due attention before filing of monthly return in Form GSTR-3B for the September month:
I. Identifying ITC availed or not availed or irregularly availed for FY 2017-18:
As per Section 16(4) of the CGST Act 2017 (“CGST Act”), the ITC on any inward supply of goods or services for the FY 2017-18 shall not be available in respect of any invoice or debit note for supply of goods or services or both after the due date of furnishing of the return under Section 39 for the month of September following the end of financial year to which such invoice or invoice relating to such debit note pertains or furnishing of the relevant annual return, whichever is earlier.
Considering that the due date of filing Form GSTR-3B for the month of September is October 20, 2018, it is highly important for every business to check and figure out all such transaction(s) on which ITC has not been availed till date.
1) Work out proper reconciliation of ITC as shown under Table 4 of Form GSTR-3B viz-a- viz ITC as per books of accounts and viz-a-viz ITC as per GSTR-2A:
- Identify the credits which have not been claimed or which have been claimed but not shown by the vendor in their return (GSTR-1) – chase the vendor for needful correction required;
2) Review all expenses and capital assets ledgers to identify if any eligible credit has been missed to be availed;
3) Prepare details of eligible & ineligible credit pertaining to Inputs, Input Services and Capital goods for filing annual return in Form GSTR -9;
4) Recheck ITC register maintained by the company to ensure that no ineligible credits have inadvertently been taken in monthly return Form GSTR-3B.
5) Recheck if GST paid under reverse charge in terms of Section 9(3) of the CGST Act and Section 9(4) of the CGST Act [till October 13, 2017] in FY 2017-18 has been availed as ITC to the extent eligible;
6) Ensure that the invoices of vendors which are not paid within 180 days from date of invoice of supplier, have been duly paid and the amount of credit which was reversed due to such non-payment, are again re-claimed upon payment made to the vendor;
7) Avail the amount of eligible ITC missed to be availed in Form GSTR-3B filed for FY 2017-18 in Form GSTR-3B to be filed for September 2018.
II. Final reversal of common credit used for taxable as well as exempted supply of goods or services for FY 2017-18:
In terms of Rule 42(2) of the CGST Rules, 2017, amount of reversal of common ITC on inputs and input services used for making both taxable and exempted supplies, shall be calculated finally for the financial year before the due date for furnishing of the return for the month of September following the end of the financial year to which such credit relates.
Key Action Points
8) Every registered person engaged in making taxable as well as exempted supply of goods or services are required to work out the reversal of common ITC for the FY 2017-18 based on annual turnover, on or before the end of due date of filing of Return for the month of September 2018:
- Any amount of credit extra reversed can be claimed as ITC in the return to be filed for the September month.
- In case of short reversal made, the differential amount of ITC can be reversed now with interest @ 18% per annum for the period staring from April 1, 2018 till the date of payment.
III. Review of outward supply reported in Form GSTR-1 to check missing invoices and any amendments to be carried out:
As per proviso to Section 37(3) of the CGST Act, any corrections in respect of the details already furnished in GSTR-1 shall be allowed only till furnishing return for the month of September following the end of FY to which such details pertain, or filing of relevant Annual Return, whichever is earlier.
Key Action Points
Further, in terms of Section 34(2) of the CGST Act, any credit note in respect of the supplies made in the previous FY shall be declared in the return for the month during which such credit note has been issued but not later than September following the end of the financial year in which such supply was made, or the date of furnishing of the relevant annual return, whichever is earlier, and the tax liability shall be adjusted accordingly.
9) Reconcile the reporting made in Form GSTR-1 for FY 2017-18 with books of accounts and Form GSTR-3B, to identify if any invoice is missed to be declared or incorrectly declared;
Also, raise the invoice for the FY 2017-18 in respect of pending transaction, if any;
10) Send mailers to clients/ customers to receive feedback if they have observed any missing invoices or deficiencies/defects in the invoice issued by the company to them;
11) Similar precautions are also required from inward supply perspective – check from GSTR-2A if the supplier has failed to upload any invoice or uploaded incorrect particulars, or kept any invoice pending for transaction executed in FY 2017-18 etc.
12) Reconcile the account balance with all the vendors and customers to ensure that correct reporting has been made by the vendors as well as by the Company.
13) Any tax adjustment required to be made on account of credit notes issued/ to be issued to be completed before filing Form GSTR-3B for September month.
IV. Road ahead and preparation for filing Annual Return:
In terms of Section 44(1) of the CGST Act, every registered person, other than an Input Service Distributor, a person paying tax under Section 51 (TDS Collector) or Section 52 (TCS Collector), a casual taxable person and a non-resident taxable person, shall furnish an Annual Return for every financial year on or before the 31st day of December following the end of such financial year. The Government vide Notification No. 39/2018 – Central Tax dated September 4, 2018 has notified the format of Annual Return Form GSTR-9 (for normal taxpayers) and Form GSTR-9A (for composition taxpayers).
Further, every registered person whose aggregate turnover during a financial year exceeds INR 2 crores is required to get his accounts audited and furnish a copy of audited annual accounts and a reconciliation statement, duly certified, in FORM GSTR-9C, format of which is also notified vide Notification No. 49/2018 – Central Tax dated September 13, 2018.
14) The format of Annual Return (GSTR – 9) and GST Audit (GSTR – 9C) is designed in such a way that it requires major data to be picked up & reported from the periodic returns filed. Hence, it is highly important that all reconciliations between GSTR-1, GSTR-3B, GSTR-2A are executed properly in September month along with carrying out necessary correction, as may be required. This will pave the way for correct data flowing in Form GSTR-9 & GSTR-9C.
15) Further, separate details of all the adjustments made in the period April, 2018 to September, 2018 related to FY 2017-18 is also required to be maintained viz. credit note issued after March 31, 2018, ITC availed or reversed, adjustments made etc. Hence, the same must also be recorded properly for reporting in Annual Return.
Challenges & Critical Issues for filing Annual Return Form GSTR – 9:
Considering the complexity of Form GSTR-9 under the given time frame of 3 months for due date of 31st December, Mr. Bimal Jain, Chairman, Indirect Tax Committee, PHD Chamber of Commerce, had highlighted critical issues therein which the taxpayer may face and which requires immediate attention of the Government along with highlighting key issues demanding extension of due date for filing Annual Return, in the Mega GST Conclave held on September 26, 2018 at PHD House.
You can access the complete video of his theme presentation “Challenges & Critical Issues for filing Annual Return Form GSTR - 9 by Bimal Jain” at following link:
New beginnings are often considered as dreadful since it entails lots of challenges and practical trauma. Initial hiccups of new indirect taxation regime of GST also created teething problems in filing returns, capturing correct data and availing correct ITC either due to lack of knowledge or due to interpretation issues of the still-settling law. But as British proverb says “All is well that ends well..”, it is crucial time when we can correct the discrepancies of our past returns and surface the way for smooth filing of annual return for FY 2017-18 with least reconciliations issues.
DISCLAIMER: The views expressed are strictly of the author and A2Z Taxcorp LLP. The contents of this article are solely for informational purpose. It does not constitute professional advice or recommendation of firm. Neither the author nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this article nor for any actions taken in reliance thereon.