Action points before filing September GSTR-3B of 2020 w.r.t transaction of FY 2019-20
In this article, the paper writer has summarized the various provisions under the GST law including notifications, circulars, etc. for list of key action points for September 2020 GSTR-3B and 1 before filing the same.
A. Revenue view
Revenue reconciliation as per books, GSTR-1, GSTR-2A and GSTR-3B filed, treatment of differences etc
B. Input tax credit [to be check transaction wise]
Please ensure that the following conditions are satisfied for availing ITC. If not, then the company would be required to reverse ITC along with interest 18% [Interest is applicable when ITC was utilised from credit ledger and not for only availing i.e. to say interest to be calculated form date of utilisation]
> Possession of tax invoice, debit note, bill of entry (in case of import of goods), self-invoice (in case of RCM supplies from URD);
> Receipt of goods or services or both;
> Payment of GST by the vendor or the client [if RCM] to the Government;
> Filing of GSTR-3B by the vendor and the client; and
> The consideration and tax payable on such supplies to be paid within 180 days from the date of issue of invoice by the supplier [other than the supplies on which tax is payable on RCM by Company, related party transactions and inter-branch transactions].
C. Restriction to avail ITC to the extent of eligible ITC appearing in GSTR-2A + [20% introduced w.e.f. 09.10.2019 to 31.12.2019 and 10% w.e.f. 1.01.2020] or as per books whichever is lower
Rule 36(4) of CGST Rules provides restriction on availment of eligible ITC wherein the recipient could avail eligible ITC in GSTR-3B, not in excess of 20% [from 09th October to 31st December 2019] or 10% [from 01st January 2020] as applicable of eligible ITC appearing in the GSTR-2A of such recipient.
The restriction is applicable only on those invoices or debit notes which are to be uploaded by the supplier under section 37(1) of CGST Act i.e., in his GSTR-1 but which have not been uploaded by him. Therefore, Vajram could avail full ITC of the GST paid on the following:
> IGST paid on the import of goods;
> IGST paid on the import of services under RCM;
> ITC distributed by ISD availed on the basis of ISD invoice; and
> ITC of the GST paid under RCM by client on the procurements which are taxable under RCM availed on the basis of RCM document i.e., self-invoice [for ex., legal services, GTA services, etc.].
D. Recent amendment [Relaxation]: The restriction of ITC on invoices not appearing in GSTR 2A to the extent of 10% of eligible ITC appearing in GSTR 2A shall now apply cumulatively for the period February to August 2020 and the return in form GSTR 3B for the tax period September 2020 shall be furnished with cumulative adjustment of input tax credit for the said months. This provision is w.e.f. 03rd April 2020 [Notification no. 30/2020-CT dt. 03rd April 2020.
Period February 2020 to August 2020: The circular [Circular No. 142/12/2020- GST dated 9th October 2020] have been issued to clarify the above which seeks to provide further clarity on specific aspects of the said notifications further clearing the confusion of the taxpayers.
The mechanism would be as follows
a. Total eligible ITC availed in GSTR-3B for the period February 2020 to August 2020
b. [Total eligible ITC as per GSTR-2A for the period February 2020 to August 2020] *110% Eligible ITC would be Whichever is lower of a. or b.
Where ITC availed in GSTR-3Bs for said period was excess when compared to b. then the excess availed needs to be reversed in table 4(B)(2) in September GSTR-3B.
Failure to reverse such excess availed ITC on account of the cumulative application of rule 36(4) of the CGST Rules would be treated as availment of ineligible ITC during the month of September 2020.
Period September 2020: However, for September GSTR-3B the normal rule of 36(4) would be applicable i.e. Maximum eligible ITC to be availed in GSTR-3B would
a. Total eligible ITC as per books or
b. Total eligible ITC as per GSTR-2A for September month * 110%
Eligible ITC to be availed in table 4A of GSTR-3B would lower of a. or b. above
E. Computation of annual reversal required under Rule 42: [Manner of ITC availment in case of taxable and exempt supplies]
Rule 42 of the CGST Rules, 2017 provides that reversal of input tax credit (common credits) 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.
Hence, the registered person engaged in making taxable, as well as exempted supplies, are required to work out the reversal requirement for the FY 2019-20 on or before the end of the due date of filing of Return of the month of September 2020 and avail/reversal the differential input tax credits based on the finalized annual aggregate turnover.
Note:
> Where the amount of ineligible ITC to be reversed in FY on the basis of the annual reversal is more than the total of ineligible ITC reversed every month, then the company would be required to reverse the differential ITC along with interest at the rate of 18%.
> Where the said ITC was availed but not utilized against any output tax liability, then the company would not be liable to pay interest on such reversals.
> Where the amount of ineligible ITC to be reversed in a FY on the basis of the annual reversal is less than the total of ineligible ITC reversed every month, then company could avail the differential ITC.
F. Availment of missed Input Tax Credit for the FY 2019-20:
As per section 16 (4) of the CGST Act, the input tax credits on any inward supply of goods or services for the financial year 2019-20 may be taken on or before the due date of filing of GSTR-3B for the month of September 2020.
As the due date of filing of GSTR-3B for the month of September is 20th October 2020, there is an urgent need for every business to evaluate if any credits have been missed out till date. If yes, the same has to be availed before the due date so that there is no loss of credit to the company.
G. Missed liability of FY 2019-20: The last date to pay or adjust the taxes in relation to the supplies made and invoices issued in FY 2019-20 would be the due date of filing GSTR-3B of September 2020.
Post that, it should not pay the missed liability of FY 2019-20 through GSTR-3B but is to be paid through the FORM DRC-03. However, ITC availment time would lapse post 20.10.2020 [GSTR-3B sept due date]
H. Declaring missed invoices of FY 2019-20 in GSTR-1: The due date to declare or amend the invoices issued in FY 2019-20 for the supplies made in 2019-20 or debit notes or credit notes issued till 30th September 2020 in relation to the above invoices would be the due date to file GSTR-1 of September 2020. Post that, it cannot declare such documents in its GSTR-1.
I. Credit notes: The last date to issue credit notes with GST impact in relation to the invoices issued in FY 2019-20 is also 30th September 2020 Post that cannot issue a credit note with GST for the invoices issued in FY 2019-20.
It should be noted that a credit note with GST can be issued only when the taxable/tax value charged is excess; or where goods/services are deficient; or where goods are returned by the customer; or where any post-supply discount is given to the customer as per the terms of the agreement which was existing at or before the time of supply
J. ITC reconciliation: ITC reconciliation as per books and GSTR-3B filed to be done at earliest
> Where any doubtful ITC consultant with experts then take decisions, if any missed same to be availed in GSTR-3B.
> Where any ineligible ITC availed but not utilised, then reverse without interest
> Where any ineligible ITC availed but utilised, then reverse with interest – Interest from date of utilisation till date of reversal
K. The following could be action plan w.r.t. to ITC of FY 2019-20:
> Reconciliation with GSTR-2A with the Input Tax Credits availed in the GSTR-3B;
> Reconciliation of GSTR-2A with the ITC as per books of account;
> Review and validation of all expenses and capital assets ledgers to ensure that all eligible credits have been availed;
> Review the input tax credit register maintained by the company with the credits figures reported in the periodical GSTR-3B;
> Review of all credits which have not been availed by the company considering in the nature of ineligible credits to re-examine if any of those are eligible and hence could be availed;
> Review of ITC register to ensure that no ineligible credits have been taken;
> In case of doubtful credits, evaluate the option of availment of credits and its subsequent reversal under protest so that the ITC does not become time bar due to delay in availment [for example, construction services capitalized to immovable property in BoA];
> Review of transactions of the FY 2019-20 liable under RCM {both under section 9 (3) and 9 (4) of the Act} and availment of credits thereon;
> Review of final computation of Input Tax Credits under Rule 42 and Rule 43 based on annual turnover so that the differential credits, if any, can be availed before the filing of September month Return;
> Review of final computation of Input Tax Credits under Rule 42 and Rule 43 based on annual turnover so that the differential credits, if any, can be reversed before within time
> Ensure availment of ITC of invoices dated before 09th October 2019 are availed even if they are not available in GSTR-2A, if all the conditions for availment of ITC are satisfied;
> Ensure ITC has been availed as per Rule 36(4) for invoices dated from 09th October 2019 [GSTR-2A + 20% or 10%] and check GSTR-2A for the previous months for the subsequent updating of invoices by the vendor, if any, and availed such ITC in the present month.
> Availment of eligible credit related to taxable/exported supply of goods/services;
> Reversal of credit related to exempted supplies of goods/services [where such supplies done locally in India] every month and also final calculation for reversal at the end of the year;
> Input tax credit for the year ended 2019-20 to be availed by earliest of following-due date of return for Sept 2020 or filing of annual return of 2019-20;
> Reconciliation of the GSTR 3B returns must also be performed with that of GSTR 1 and books, any discrepancies need to be rectified;
> Reconcile the value of input tax credit availed with the books of accounts and Form GSTR-2A. This would also help to identify credits which have not been availed in GSTR-3B and avail the same;
L. Credit notes under GST
Issuance of Credit note in respect of all supplies made in the FY 2019-20:
The last date to issue credit notes in relation to the invoices issued in FY 2019-20 is 30th September 2020. Post that company cannot issue a credit note with GST for the invoices issued in FY 2019-20. Therefore, any credit notes with GST to be issued for the below following reasons, [provided recipient have reversed ITC if availed] within 30.09.2020.
Section 34 (2) of the CGST Act, 2017 provides that credit note in respect of the supplies made in the previous FY shall be declared in the Return for the month of September of next FY. Hence, credit notes in respect of transactions of FY 2019-20 may be issued only till the end of September 2020. No tax adjustment would be allowed for any credit note issued after the end of September 2020.
It should be noted that a credit note with GST can be issued only in the following cases:
> the tax value charged in the invoice is found to exceed the actual tax value chargeable on the supply made;
> the taxable value mentioned in the invoice is found to exceed the actual taxable value of the supplies made;
> where the goods and/ or supplies made are found to be deficient;
> where the goods supplied are returned by the customer or
> where any post-supply discount is given to the customer as per the terms of the agreement which was existing at or before the time of supply.
Whether Financial credit note [no GST effect] is required to be disclosed in GST returns?
Circular 72/46/2018 GST dated 26-10-2018 provides that there is no requirement to declare a financial credit note on the common portal by the supplier as tax liability cannot be adjusted on the same. Thus, there is no need to disclose the same in GST returns.
However, issuance of financial credit notes is not advisable in case of sale returns of goods so that the customer might not face any difficulty in availment of ITC.
There is no time limit to raise a financial credit note [no GST effect]. In other words, a credit notes for say 2019-20 maybe still issued after the said time limit [issued even post-Sept 2020], however, the supplier cannot reduce his output liability in case of a credit note issued after the time limit provided above.
M. Debit notes under GST
Issuance of Debit note in respect of supplies made in the last year: Similar to a credit note, the supplier may issue a debit note for the transactions pertaining to the FY 2019-20 only till 30th September 2020 for the recipient to avail the ITC on such a debit note. If the debit note is issued after 30th September 2020, the buyer shall not be allowed to take input tax credits of the same.
The action plan for debit note could be as below:
Debit note under GST can be issued where the taxable and/or the tax value in the tax invoice is found to be lesser than the actual value/tax on the supply.
Note: The time limit to issue debit note has not be specified, however, section 16(4) prescribes that registered person will not be entitled to take ITC if such debit note is issued after the due of furnishing September return or Annual return whichever is earlier. GST to be paid on the tax value as per the debit note issued.
N. Non-Payment of consideration and tax within 180 days to supplier – COVID relaxation
The Rule 37 i.e. 180 days reversal is a compliance notified under CGST Act and respective States Act consequently the above relaxation provided in NN 35/2020 CT amended by NN 55/2020 CT would also apply to the said rule, where the 180th day from date of invoice on which ITC have been availed by client falls between 20th March 2020 to 30th August 2020 would be extended to 31st August 2020.
Let’s say suppose the
| Sl. No. | Particulars | Amount |
| a. | Date of invoice | 17-01-20 |
| b. | Date of availment of ITC | 15-03-20 |
| c. | 180th day from invoice [Falling in relaxation period] * | 15-07-20 |
| d. | Relaxation due to COVID till | 30-08-20 |
* Compliances falls between 20th March 2020 to 30th August 2020 would be extended to 31st August 2020.
a. ITC is reversed on 31st August 2020 – In the above example interest required to be calculated from date of availment [15-03-2020] till 180th day [15-07-2020] and till 30th August 2020
b. ITC is reversed post 31st August 2020 let’s say on 20th September 2020 – In the above example interest to be calculated from
> Client could still contend it would be liable to interest at 18% by excluding between 20-03-2020 till 30.8.2020 and;
> Pay interest from 31st August 2020 till 20th September 2020
> Dept may dispute above relaxation not available since the date is past 31st August 2020.
Whether the interest is required to be paid from 181st day in above example falling in relaxation period till 30th August 2020?
One should also consider that interest cannot be demanded unless the amount was due and payable. In this context, reference can be made to the landmark judgement of Hon’ble Apex Court in case of Pratibha Processors V/s UOI [1996 (11) SCC 101] wherein it was held that ‘Interest is compensatory character and is imposed on an assessee who has withheld payment of any tax as and when it is due and payable.
When there was no requirement to reverse ITC from 181st day in above example falling in relaxation period till 30th August 2020 then consequently the question of interest of such period could not arise. However, dept may dispute this view and on contrary they themselves did not come out with circulars for clarifying the doubts of industry.
O. Clarification in relation to Auto-populated figures in GSTR 9 (Table 4-7) of FY 2018-19 [Press release dated 9th October 2020]
There were confusions going on in relation to auto-populated figures in (Table 4-7) for the year FY 2018-19 that it also includes data for FY 2017-18. The press release clarifies that taxpayer’s need to report only the values pertaining to FY 2018-19 and values reflected (if any) for FY 2017-18 shall be ignored. Further, it is also clarified that the department will not take any adverse view taken against the taxpayers who have already filed their GSTR 9 of FY 2018-19 considering the auto-populated figures and is having variations with actuals.
P. GSTR-9 and GSTR-9C of FY 2018-19: Further, the due date to file GSTR-9 and GSTR-9C for FY 2018-19 extended to 31.10.2020
For any further clarifications reach at harish@hiregange.com
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