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Introduction
GST compliance for Freight Forwarding has always been challenging the industry enters into many complicated transactions. Therefore, GTA, ITC Reversals, LUT, etc. has to be appropriately in compliance with GST Laws. This is a basic checklist for FF Industry which should be followed in order for FF Companies to be compliant with GST Laws.
Checklist of GST Compliance for Freight Forwarding Industry
| Sr No. | Section / Rule | Related to | Remarks (Legalities) |
| RCM on Goods Transportation Services Received from Goods Transport Agency under Notification No. 11/2017 | |||
| 1 | Section 9(3) | GST shall be paid under Reverse Charge @ 5% in respect of the GTA who has not paid GST @ 12% | No Input Tax Credit if delayed more than September Return of the next Financial Year or Filing of Annual return, whichever is earlier and Interest @ 18% per annum for delay in payment (to be paid in cash) |
| Proper Self Invoicing against the Bills of Supply provided by the GTA on which GST under RCM is paid and credit is taken. | Non compliance of Documents needed in GST will lead to disallowance of Input Tax credit as the basic condition for taking ITC under Section 16(2)(a) violates | ||
| 17(2) – Inputs or Input Services used partly for Taxable including Zero rated and partly for Exempt purposes | |||
| 2 | Section 17(2) read with Rule 42 | Common Credit i.e. ones used for both Taxable and Exempt Supplies needs to Reversed provisionally every month under Rule 42 proportionately (Exempt Turnover/Total Turnover) | Common Credit i.e. ones used for both Taxable incl. Zero rated and Exempt Supplies if not Reversed provisionally every month under Rule 42 proportionately will lead to later payment or even Show Cause notice under Section 74 in which payment will have to be made with an Interest @18% but not greater than 24% with penalties. |
| 17(2) – Capital Goods used partly for Taxable including Zero rated and partly for Exempt purposes | |||
| 3 | Section 17(2) read with Rule 43 | Capital Assets i.e. ones used for both Taxable and Exempt Supplies needs to Reversed Provisionally every month for 60 months, which is considered as life of any asset as per GST under Rule 43 proportionately (Exempt Turnover/ Total Turnover) with Interest payment @ 18% in cash every month on the amount of Reversal from the date of availing ITC to the date of reversal. In this case, general suggestion to clients is to not take ITC Credit as the interest every month is unnecessary expense to the company which can be avoided by taking GST as cost of Capital Asset and then taking Depreciation on the Asset under Income Tax Act. | Capital Assets i.e. ones used for both Taxable incl. Zero rated and Exempt Supplies if not Reversed provisionally every month under Rule 43 proportionately will lead to later payment or even Show Cause notice under Section 74 in which payment will have to be made with an Interest @18% which may exceed not greater than 24% with penalties. |
| Note: The above monthly reversals of Common Credit and Capital goods are provisional reversals, which needs to be checked with Turnover of complete financial year during March Return. And the difference to be adjusted in the subsequent months but not later than September. | |||
| General Relevent points (which can get skipped by management) | |||
| 4 | Monthly filing of Returns with proper Disclosure of NIL Rated Sales. | As on the Basis of this disclosure, computation of Reversals of Common Credit and Common capital Goods takes place. | |
| 5 | Check for filed Letter of Undertaking(LUT) for Export without Payment of Tax. Ask for reasons for the payment of Taxes after filing of LUT, if any | This would not lead to any Non Compliance but if LUT is filed then the payment of taxes can lead to disadvantage to Company. | |
| 6 | Proper issue of Credit Notes/ Debit Notes instead of changing/revising the Invoices. | GST Law does not permit changing the invoices once prepared and sent to client. However, relevant changes of increase and decrease in amount of Invoice can be made by issuing Debit or Credit Note respectively. | |
| 7 | Monthly GST Input Tax Credit to match with monthly GSTR 2A. Though GST council has given a 20% relief of additional ITC keeping in mind the quaterly filing Taxpayers, Client should not take the ITC haphazardly as after taking the ITC, keeping the track of the Companies who have given credit to the client and the amount of Credit given is not possible | Differences in credit in Annual Return and GST Audit will lead to Payment of Tax difference with the Interest of 18% which may exceed not more than 24% per annum or can a loss result in Show cause notice which will result in both Interest and Penalty. | |
| 8 | Sec 2(6) | Export Definition: Export of Service means the supply of Service when (a)Supplier is located in India (b)Recipient is located outside India (c)Place of Supply is outside India and (d)Payment of such service is made in Foreign Currency and (e) The Supplier and Recipient are not merely Establishments of same person. | It is seen that, generally when the condition a, b, d and e are satisfied, Clients tend to consider the Sales as Export and do not charge GST on the same. But Place of Supply under Sec 13 determines that the outward Supply is export or not along with the other four conditions. Major attention is to be kept on these kind of Transactions. |
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