Introduction
A stich in time saves nine! In this present landscape where distrust begets distrust, it is better than the taxpayer has ensured his compliance well in advance of possible departmental interventions in the future which could ultimately lead to a SCN or harassment.
In this article we have highlighted 50+ GST checkpoints that one may consider for the financial year end, i.e. March 2023 as a safeguard.
Reconciliations
1. Outward supplies as per books and GST returns (Books vs GSTR-1 vs GSTR-3B). This may help indicate if any amendments are required to be made in GST returns. [Turnover + Taxes]
2. Rate wise reconciliations – Books Vs GSTR 1 (incl. tax ledgers vs 3B for RCM)
3. Reconciliation of balance of credit and cash as per GST portal with balance appearing in books. Variance indicates monthly entry error, or possible missed out/excess claimed ITC.
4. GSTR 2B Vs ITC Register (books) – Invoice-level tracking of eligible and ineligible ITC in books of accounts and reconciliation to ITC disclosures in GSTR 3B for the FY. Spill over transactions to be specifically tracked.
5. RCM paid matches to RCM ITC claimed? (other than ineligible ITC)
6. HSN consolidated thru GSTR 1 Vs Books value [T/o + Taxes]
7. E-way bill reconciliation with GSTR 1. In case EWB not required against supply can be specifically confirmed.
8. Books inventory Vs physical inventory – assess if ITC reversal to be required, or may indicate accounting lapse + missed out ITC.
Most of the above would also prove useful while preparing Form GSTR 9 & 9C due in December 2023.
Outward (liability)
9. Verify if any GST DN / CN should be issued for any value short/excess charged or any sales returns by the customer. Time limit applicable only for CN (latest by 31st October). Verify agreement clauses on discounts to be provided and requirement to issue CN.
10. Verify compliance of section 18(6) for transfers/sale of Plant & Machinery (P&M). Consider valuation check in case of related party transactions.
11. Review of tax utilization entries passed in books of accounts vis a vis electronic liability ledger.
12. Reviewing the debtors ageing report – Tax implication on customers, i.e. their ITC would not be eligible until payment + MSME non-compliance (useful for realization).
13. Amendments to GSTR 1 – Changing the outward supplies from B2C to B2B or the type of tax – Passing on the credit to the customers before time limit. (can issue standard instruction – changes not accepted beyond FY end)
14. Ensure tax liability against receipt of advances (services) and adjustment thereof to derive at unadjusted advances [recently clarified refund voucher in GSTR-1 Adv Adj.]
15. Cross charge to distinct person and related parties for supply of common services
16. Verify CGST/SGST paid instead of IGST and vice-versa. Understand if sec 77 (CGST Act) / sec 19 (IGST Act) would be applicable (no interest implication).
17. Verify Income from other sources – if any liable/not liable under GST. Tax position to be clear [Ex: employee recoveries not payable recently clarified; Incentive Vs Discounts; GST Interest on delayed payments receipts]
18. Reconciliation of E-Invoices issued during the year viz a viz tax invoices generated.
19. Standard terms in contracts to avoid future disputes:
20. ITC w.r.t Credit note (if any) issued would be considered as reversed.
21. We are in compliance with GST laws.
Inward (ITC)
22. To verify whether ITC has been reversed on entries passed due to writing off inventories, assets, theft, samples, destruction, obsolete, etc.
23. Rule 37 – Check for ITC reversal required on account of non-payment within 180 days or reclaim of any ITC in respect of supplies for which payment has been made. [Recently clarified ITC reversal in table 4B]
24. Timing of availing credit – receipt of goods/service+ Sec 16, RCM credits, credit on advances ineligible etc.
25. Expense + ITC not accounted – identified through GSTR 2B.
26. Accounting of credit where details are not reflecting in GSTR 2B – Deferred input account – re-evaluate before October of coming year and consider charge to vendor and passing of as expenses.
27. Rule 42 – Impact of annualized ITC reversal in case of exempted as well as taxable supplies to be considered (re-computation) [Recently clarified duty scrips not be considered as exempt supply for such computation incl. r43]
28. Rule 43 computation for capital goods as per formula. If performed like r42 impact to be analysed.
29. To verify the correctness of accounting treatment of capital assets prior to closure of books, in order to optimize input tax credits [Building Vs P&M; Motor Vehicles eligibility; civil works w.r.t P&M Vs other civil works – capex?]
30. Check if any reversal required against purchased goods rejected and returned or other credits to the expense ledgers (ensure the impact of the same has been considered in GST returns)
31. Verify compliance with ISD provisions. Where not done, whether cross charge can be complied to ensure procedural lapse only can be examined.
32. Credit – CGST/SGST availed as IGST or vice-versa.
33. Credit availed in a different GSTIN of the same assessee (PAN)
34. Eligibility of ITC – re-verify ITC masters and conditions used for classification.
35. Vendors credit note reflected in GSTR 2B requiring reversal of Input tax credits [Recently clarified, such CN to auto-populate in 4.A.5 (net), tracking and verification is harder]
36. Import of goods-BOE Vs ICEGATE Vs GSTR 2B – Check periodically to ensure no missed out.
RCM
37. Accounting of entries passed for transactions covered under reverse charge. Some systems do not allow compound entry in direct expenses (Ex: Freight RCM).
38. RCM liability on foreign associated enterprises based on provision entry in books.
39. Analyze GST provisions by verifying expenses:
- Freight & transportation Payments (recently FCM @ 5% allowed)
- Residential dwelling by commercial entities w.e.f 18.7.22 (48th Council meet – personal not liable)
- Advocate Payments – Legal Expenses
- Security services (not applicable when provider is body corporate)
- Renting of motor vehicle from non-body corporates (refer sl 15 in GST Circular 177/09/2022 for clarity)
- Import of services (with or without consideration) (useful sources – Form 27Q & Form 15CA/CB)
- Sponsorship/Advertisement & marketing
- Fees & licences to various Governments (by CG/SG/LA only, various exemptions available in NN 12/2017-CTR)
40. Analyze GST on Section 9(4) expenses – Real estate sector only
Note – GST returns for a FY can be amended with above corrections/deletions or modification latest by 30th November 2023, i.e. October 2023 GST returns.
Others
41. File application for / renewal of LUT for FY 2023-24
42. Any person who wishes to opt for composition scheme for financial year 2023-24 should file form CMP-02 on the common portal on or before 31st March 2023
43. A registered person who has opted for composition scheme for FY 22-23 should file FORM GSTR-4 on or before 30th April 2023
44. Time limits to apply for QRMP scheme to opt-in or opt-out by 30th April 2023
45. Exports proceeds e-BRC receipt within 9 months can be verified (linked to FEMA). If not eligibility of ‘zero-rated supply’ questionable.
46. Filing of application for refund claims. Time limit to be considered for the purpose of filing of refund application in view of SC decision on extension of time limit
47. Track status of goods sent on job work or goods sent on approval whether all the goods have been received back within the due time period. (1+1 yr inputs/ 3+2 years CG). If not received in time, invoice must be raised appropriately.
48. Verify year-end accrual/provision entries for transactions with related parties and evaluate the GST implications. (import of service possibility)
49. HSN 6 digit level – mandatory requirement from 01.04.2021. Ensure correctness and display in tax invoice. (T/o > Rs. 5 cr)
50. Obtaining GST registration in other States where supplies are made. Compliance with concept of fixed establishment, supply, etc.
51. Interest to be paid on utilisation of ITC only, that too at 18% p.a. (applicable tax head wise)
52. Tax paid under protest (pre-notice/dept. visit); ITC reversed under protest – ensure documentation of letter of protest
53. Documentation of notices, letter cover, replies/responses (mail + RPAD) in a separate correspondence file.
54. Maintain data of inward, outward, RCM, EWB, documents (tax invoice, e-inv, vouchers, etc.) for 6 years from annual return due date of FY (ex: for FY 22-23 6 years from 31-12-2023).
Conclusion
GST compliance now, more than ever before requires a higher level of attention. Taxpayers are expected to ensure their vendor compliances alongside their own. This would require implementing strong internal controls, implementation of technology, introduction of an indirect tax SOP and regular training and update to the GST compliance team.
Acknowledgement – This article was first published in KSCAA journal
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