GST action points before end of FY 2023-24

The last 6+ years have seen more than 1000 notifications, circulars, and instructions for taxpayers and adjudicating authorities, thus opening up the GST law to interpretation by taxpayers and authorities alike. This interpretation has given rise to the ever-increasing case laws across various judiciaries and writ petitions being filed before various High Courts of India to seek relief against the action of GST authorities.

To ensure timely and accurate compliance with the provisions of GST law, it is necessary that before the financial statements are finalized for FY 2023-24 and the taxpayer transition to FY 2024-25, various checks and reconciliations are undertaken by the business. Below are some of these key action points for the taxpayers in this regard-

1. Important Registrations And Opt-In / Opt-Out For FY 2024-25 And Onwards:

• Register for e-invoicing on https://einvoice1.gst.gov.in/ if aggregate turnover exceeds INR 5 crores in FY 2023-24.
• File letter of undertaking for FY 2024-25 on or before 31^st March 2024.
• Opt-in for composition scheme by filing CMP-02 on or before 31^st March 2024.
• In case of transition from regular to composition taxpayer, ITC-03 is to be filed within 60 days from commencement of financial year i.e., on or before 30^th May 2024.
• Opt-in our Opt-out of QRMP scheme for FY 2024-25 on or before 30^th April 2024. The QRMP allows the taxpayer with aggregate turnover below INR 5 crores to file their returns on quarterly basis with monthly payment of tax liability.

2. Outward Supplies:

• Reconcile the revenue from operations, other income as per financial statement and sale of fixed assets as per financials with GSTR-1 and GSTR-3B. In case of any differences, do appropriate correction in the books of accounts or disclosure in the GST returns, as the case maybe.
• Reconcile the debit notes and credit notes as per books with GSTR-1 and GSTR-3B and differences, if any, shall be accounted for accordingly.
• In case of exempt supplies, ensure bill of supply is issued and reported in GST returns.
• In case of supply between related parties, verify whether provisions of Section 15 – Valuation of CGST Act, 2017 read with Rule No 28 of CGST Rules, 2017 is followed by the taxpayer.
• Reconcile the invoices / credit notes / debit notes as per books with e-invoice portal to ensure that IRN is generated for all B2B, exports and SEZ supplies. The non-generation of e-invoice will render the tax invoice invalid, resulting in possible loss of ITC to the purchaser.
• The government has made it mandatory to generate e-invoice within 30 days from the date of invoice.
• In case of goods, reconcile the tax invoice data with e-way bill data to identify discrepancies, if any.
• In case of export of goods, reconcile the shipping bills details with GSTR-1. This is necessary for claiming the refund of unutilized ITC / GST paid on export.
• In case of supply of services, reconciliation of advances received and adjusted as per financials with details disclosed in GSTR-1 and whether applicable tax has been discharged / adjusted in respect of same. In case of any difference, the tax shall be promptly discharged / adjusted on such advances, as the case maybe.
• Calculate the aggregate turnover of the Company as per GST law and reconcile the same with aggregate turnover generated by system on GSTN portal. Any difference therein can be updated on the GSTN portal.
• Aggregate turnover is also crucial for various other GST provisions such as applicability of e-invoice provisions, Composition Scheme, QRMP scheme, number of HSN / SAC codes applicability etc.

3. Inward Supplies:

• Reconcile the ITC available as per GSTR-2B with ITC availed as per financials and GSTR-3B. If any differences, appropriate action (availment or reversal) shall be undertaken.
• Communicate the vendors for supplies not reflecting in the GSTR-2B of the Company. ITC in respect of invoices not reflected in GSTR-2B is not allowed.
• If there is any exempt income undertaken during the financial year, ITC reversal shall be re-calculated and considered in accordance with Rules 42 and 43 of CGST Rules at the end of year. Any additional reversal required shall be accounted for in GSTR-3B of March 2024 or thereafter. Alternatively, if excess ITC has been reversed by the Company during the year, such excess ITC can be reclaimed in March 2024 GSTR-3B or thereafter.
• Verification of creditors aging report to identify invoices wherein payment is due for more than 180 days and ITC claimed in respect of supplies from such vendors shall be reversed in Table 4B of GSTR-3B. The ITC reversed by the Company can be re-claimed upon making payment to the vendor in subsequent GSTR-3B.
• To identify the ineligible ITC recorded in books and ensure same is expenses off or capitalised (as the case maybe). If such ineligible ITC has been availed and utilized, same shall be reversed along with interest @ 18%. Further, it must be ensured that all ineligible ITC is correctly declared in Table 4B(1) of GSTR-3B.

4. Reverse Charge Mechanism Supplies:

• To identify all expenses subject to RCM (director sitting fee and legal expenses etc.) and reconcile the same with RCM liability discharged in GSTR-3B. The differential liability if any shall be discharged along with interest as per time of supply provisions.
• Reconcile the foreign expenditure as per financials with import details disclosed in the GST returns.
• To verify the self-invoices issued for supplies received from unregistered person and subject to RCM.
• ITC availed in respect of RCM transactions shall be equal to or less than GST liability discharged under RCM. Where the ITC is disallowed in respect of the RCM discharged by the taxpayer, such ITC shall be disclosed in Table 4B(1) of GSTR-3B.

5. Additional Points For Consideration:

• Reconcile the closing balance of ITC in financials with balance in electronic credit ledger on the GSTN portal.
• Review the list of HSN / SAC codes used during the financial year and make necessary corrections required, if any.
• Adopt new document series unique for FY 2024-25 preferably separate series for each GST registration to ensure easy identification and verification.
• In case of year end discounts given by the taxpayer to its agents, the GST impact of same is duly accounted for in the books and GST returns.
• To verify whether export proceeds are received in convertible foreign exchange accompanies by FIRCs or BRCs.
• Ensure that export proceeds are realized within the time limit specified by the Foreign Exchange Management Act, 1999.
• In case of goods sent for job work, ensure job work challan and e-way bill was generated for movement of goods. In case the inputs are lying with job worker for more than 12 months or capital goods for more than 3 years, GST needs to be discharged on same.
• Reconcile the GST receivable or payable as per financials with the closing balance as per electronic credit ledger on the GSTN portal. Similarly, reconcile the GST cash ledger in the financials with electronic cash ledger on the GSTN portal.
• Identify the common expenses incurred for related or distinct persons on which ITC has been availed by the taxpayer. The taxpayer needs to cross-charge such expenses to the respective entities / GSTIN of the same entity on the basis of turnover (or such other reasonable method of allocation as applicable to the industry).

Note: As per the proposed amendment in Finance Act 2024, for the purpose of distribution of ITC pertaining to common expenses, Input Service Distributor registration will become mandatory for taxpayers having 2 or more GSTIN on same PAN.

• To ensure that place of supply provision have been complied with in respect of supplies undertaken by Company.

Also Read: GST action points before closing financial statements of FY 2022-23

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Disclaimer: The above article is based on the author’s understanding and view of the tax laws, tax rules, the relevant circulars, and notifications. Please refer to the latest law and consult the author before forming any opinion basis the information provided above as tax laws are subject to frequent changes. The author is not responsible for any issues arising because of opinion based on the above article without consultation. In any manner whatsoever, the views expressed in this article should not be construed as the views of the firm, the author is associated with. The author can be contacted at [email protected].