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March 30, 2021

All GST activities you need to carry on for the new financial year

by CA Jessica Nagaonkar in GST

All GST activities you need to carry on for the new financial year

Adhering to tax-related compliance proposed by the Indian government is mandatory for taxpayers in India. Non-compliance with due dates of GST return filing as well as GST related rules may result in imposing of heavy penalties by the government for taxpayers in India. Tax compliances have been difficult especially in the COVID period where importance for foremost given to human health and safety. Given below are all the GST related compliances to be adhered to for the year end of FY 2020-21. This article will aid in providing information of the required compliances to be filed, thus making your life a little bit easier this new financial year.

GST e-invoicing mandatory for turnover of minimum Rs 50 crore

  • GST e-invoice is basically a digital invoice for goods and services provided by the business firm generated at the government GST portal.
  • ‘E-invoicing’ or ‘electronic invoicing’ is a system in which B2B invoices are authenticated electronically by GSTN for further use on the common GST portal.
  • Under the proposed e-invoicing system, an identification number will be issued against every invoice by the Invoice Registration Portal (IRP) to be managed by the GST Network (GSTN).
  • All invoice information will be transferred from this portal to both the GST portal and e-way bill portal in real-time.
  • Mandatory details like supplier and receiver’s names, address, registration number, date and time of supply, invoice date, applicable rate of GST and HSN number for the goods, among others, must be provided for generation of the electronic invoice.
  • E-invoicing becoming mandatory for entities with a turnover of Rs 50 crore and more from 1st April for business-to-business transactions will be the third phase of e-invoicing roll out.

Selection of frequency of Return Filing

  • Quarterly Return Monthly Payment Scheme or QRMP as it is called is a recently introduced initiative by the Government in its initiative to simplify compliance for taxpayers.
  • The Central Board of Direct Taxes (CBDT) issued notification 82/2020, 83/2020, 84, 2020 and 85/2020 Central Tax dated 10-11- 2020 and Circular 143/2020 on 10th November, to allow certain taxpayers to furnish their GST returns on a quarterly basis along with monthly payment of tax under QRMP Scheme, with effect from 1st January, 2021, i.e. from last quarter of FY 2020-21.
  • All taxpayers whose aggregate annual turnover (PAN based) is up to Rs 5 Crore in the current financial year and the preceding financial year (if applicable) and have already filed their last due Form GSTR-3B return, are eligible for the QRMP scheme.
  • Time limit for opting OUT of the QRMP Scheme for Quarter 1 ending June 2021 is by 30th April, 2021 (if opted IN for Jan – Mar 2021)

Companies using accounting software will have to compulsory maintain log of changes for each transaction

Rule 3 of the said rules pertained to Manner of books of account to be kept in electronic mode. According to Sub Rule 1, the books of account and other relevant books and papers maintained in electronic mode shall remain accessible in India so as to be usable for subsequent reference. The Central Government has now added a new proviso to Rule 3(1).

According to the said proviso, for the financial year commencing on or after the 1st April, 2021, every company which uses accounting software for maintaining its books of account, shall use only such accounting software which has a feature of recording audit trail of each and every transaction, creating an edit log of each change made in books of account along with the date when such changes were made and ensuring that the audit trail cannot be disabled.

Application or Renewal of Letter of Undertaking (LUT)

  • A LUT is a document that exporters can file to export goods or services without having to pay taxes.
  • LUT has to be filed /submitted online before exporting the goods/services in case an exporter wants to export without payment of taxes.
  • It can be applied for a financial year and need to be re-applied for every financial year.
  • This is one of the best mechanisms by which an exporter can restrict its cash flow situation.
  • However, any person who has been prosecuted for tax evasion for an amount of Rs. 2.5 crore or above under the act is not eligible to furnish LUTs, instead bonds should be furnished if the export is being made without payment of IGST.
  • Application or renewal for Letter of Undertaking (LUT) for 2021-22 on GSTN Portal should be done by the current year end

Taxpayers to mandatorily declare HSN codes in tax invoices

Harmonized System of Nomenclature or the HSN code is a system that was introduced for the systematic classification of goods all over the country or world. With the HSN code acting as a universal classification for goods, the Indian Government had adopted the use of HSN code for classification of goods under GST and levy of GST.

The Ministry of Finance vide Notification No. 78/2020 – Central Tax dated 15th October, 2020 and Notification No. 06/2020–Integrated Tax dated 15th October, 2020, notified that a registered person has to mandatorily mention the HSN Digits of the HSN Code in tax invoices for the all products sold as follows:

Aggregate Turnover in the preceding FYNumber of Digits of HSN Code
Up to Rs 5 crores4
more than Rs 5 crores6

The said notifications will come into effect from 1st April, 2021.

Avail GST ITC for FY 2020-21

  • Input Tax Credit (ITC) basically means reducing the taxes paid on inputs from taxes to be paid on output.
  • When any supply of services or goods is supplied to a taxable person, the GST charged is known as Input Tax.
  • According to Section 16(1) of the CGST Act, every registered taxable person shall, subject to such conditions and restrictions as may be prescribed and within the time and manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person.
  • Reconcile ITC as per Books of Accounts and avail any ITC not claimed earlier in GSTR 3B (Specially when ITC is being availed on the basis of GSTR 2A or GSTR 2B)
  • Check the missed ITC to be claimed is populated in GSTR 2A or 2B
  • Follow up with suppliers to report transactions in their GTSR 1 so that same may get populated in your GSTR 2A/2B
  • Any missing ITC for FY 2020-21 to be claimed on or before filing of GSTR 3B for September 2021
  • Review if any ineligible ITC (Blocked credit/ ITC on exempt supplies) is not availed. If such ITC is availed, reverse such ITC along with interest.

Review payments to suppliers to verify of ITC is not availed if payment is done after 180 days

  • Review payments to suppliers are not pending beyond 180 days from the supplier invoice.
  • If such ITC is availed and same is not paid within 180 days from date of invoice, then reverse the ITC along with interest.
  • Credit of such ITC can be availed on subsequent payment to supplier (even post-filing of Return for September 2021).
  • Even proportionate amount is pending to be paid on supplier invoice; proportionate reversal of ITC is to be made on unpaid portion.
  • Check if any supplier is registered under Composition scheme and collected GST. Reverse such ITC along with interest.
  • In case registration of supplier is cancelled for non-payment of taxes or non-filing of returns, send communication to such supplier to that effect
  • Avail any missing ITC on RCM paid (Reconcile RCM paid and ITC availed on such payment)

Some Important Areas to be checked w.r.t GST

  • Reconcile turnover (Taxable, Exempt and Non GST supply) with books and Accounts, GSTR 1 and GSTR 3B filed.
  • Reconcile Taxes paid with books and Accounts, GSTR 1 and GSTR 3B filed.
  • Verify the invoices and e-way bill compliance (cases where e-way is required but not generated)
  • Check if IRN is generated for all B2B, Export Invoices and Debit/Credit Notes where E-Invoice provisions are applicable
  • Reconcile Invoices issued to customer with GSTR 1 filed. Remember post filing of GSTR 1 for September 2021, no amendment can be made (Amendment to GSTIN, Invoice Number, Invoice Date, Taxable Value, taxes, etc can be made till filing of GSTR 1 for September 2021)
  • Identify and report any Credit or Debit notes to be reported
  • Pay tax if not paid or short paid along with applicable interest
  • Adjust GST paid on advance with subsequent liability and report same in GSTR 1 and 3B (Applicable on Services)
  • Check if GST is paid on other Income and sale of motor car, assets, etc
  • Reconcile and pay RCM liability
  • Check and reconcile materials sent for Job work (Time limit for return – Inputs – 1 year and Capital goods – 3 years)
  • File Quarterly ITC 04 returns for Job Work
  • Ensure to prepare Self Invoice for payment made for RCM
  • Check if place of business is correctly reported in GST Registration Certificate
  • Review disclosures on Invoice, Delivery Challan, Receipt Voucher, other documents, etc are as per GST Rules, 2017
  • Reclaim any ITC reversal for suppliers on their subsequent payment
  • Check if Accounts and Records are maintained as per GST Laws
  • Calculate and pay GST under RCM on import of Services, sitting fees paid to directors, GTA, Security Services, Rent a Cab, Advocate fees

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