In the dynamic landscape of Goods and Services Tax (GST) compliance, navigating details of regulations and optimizing tax positions remain paramount for businesses. As we embark on the fiscal year 2024-25, it’s crucial for SLL to equip themselves with the knowledge and strategies necessary to ensure seamless operations and mitigate potential risks. This comprehensive guide delves into ten essential checkpoints, offering detailed insights and actionable steps to uphold compliance standards and maximize tax efficiency under GST. From filing applications for LUT renewal to reconciling credit balances and assessing eligibility for composition schemes, each aspect I addressed in this article contributes to a robust compliance strategy, safeguarding businesses against penalties and fostering financial resilience in the ever-evolving tax landscape
Here’s the IMPORTANT points WHICH CAN HELP FOR COMPLIANCING AND OPTIMIZING.
- Renewal/Application for Letter of Undertaking (LUT) for FY 2024-25
Businesses involved in exports or supplies to SEZ units must apply for or renew their LUT for uninterrupted tax-free operations.
- Adoption of the Composition Scheme for FY 2024-25
Small taxpayers should consider adopting the composition scheme to simplify GST compliance by filing Form CMP-02 by March 31, 2024.
- Annual Return Submission FORM GSTR-4 for Composition Scheme Filers
Submit FORM GSTR-4 by April 30, 2024, to meet annual reporting requirements for taxpayers under the composition scheme.
- QRMP Scheme Opt-in/Opt-out Decision by April 30, 2024
Assess suitability and decide on participation in the QRMP scheme, allowing for quarterly return filings and monthly tax payments.
- Decision on FCM/RCM for GTA Supplies and Filing of Annexures V & VI by March 31, 2024
Decide whether to opt for the Forward Charge or Reverse Charge Mechanism in the GTA sector and file relevant annexures accordingly.
- Reconciliation of Outward Supplies with GST Returns
Ensure sales and other outward supplies per accounting books match the details filed in GST returns (GSTR-1 and GSTR-3B).
- Rate-wise Reconciliation between Books and GSTR-1, Including Tax Ledgers vs GSTR-3B for RCM
Perform thorough rate-wise reconciliations between books and GST filings to maintain compliance and accuracy.
- Verification and Reconciliation of Credit and Cash Balances on GST Portal
Regularly check and reconcile credit and cash ledger balances on the GST portal against company books.
- Invoice-level Reconciliation of GSTR 2B with ITC Register
Track and reconcile Input Tax Credit as recorded in GSTR 2B with the company’s ITC register to ensure accuracy and completeness.
- Optimization and Follow-up of Pending ITC Claims
Identify and address any pending ITC claims, ensuring corrections in vendors’ GSTR-1 filings where necessary.
- Verification of Temporarily Reversed Credits
Review any temporarily reversed Input Tax Credits to decide if they should be reclaimed or considered permanently ineligible.
- RCM Compliance: Verification of RCM Paid Matches ITC Claimed
Ensure accuracy in the tax paid under Reverse Charge Mechanism matches the Input Tax Credit claimed.
- HSN Code Consolidation and Verification in GSTR-1 and Books
Accurately report and verify Harmonized System of Nomenclature codes in both GST filings and accounting books.
- Management of Electronic Credit Ledger for Reversals and Re-credits
Keep the Electronic Credit Ledger updated to accurately reflect any ITC reversals and subsequent recredits.
- Reconciliation of E-way Bills with GSTR-1
Ensure that all E-way bill data is accurately reflected and reconciled with the details filed in GSTR-1.
- Reconciliation of E-Invoices Issued with Tax Invoices
Match all E-Invoices generated with the corresponding tax invoices to ensure compliance and accuracy.
- Physical vs. Book Inventory Reconciliation
Conduct regular reconciliations between physical stock and inventory records in the books to identify discrepancies.
- Confirmation from Customers on Reversed ITC Due to Credit Notes
Obtain confirmations from customers regarding any ITC reversed due to credit notes issued, ensuring synchronization.
- Issuance of GST Debit/Credit Notes for Adjustments or Returns
Manage and issue Debit or Credit Notes timely for any adjustments or returns, aligning turnover with GST liabilities.
- Compliance with Section 18(6) for Transfers/Sale of Plant and Machinery
Check compliance when transferring or selling plant and machinery, ensuring proper reversal of ITC.
- GST Implications on Supplies of Old Vehicles
Review and apply GST rules on the supply of old vehicles, particularly the profit margin scheme under Notification No. 8/2018-CT.
- Review of Tax Utilization Entries in Accounting Books
Regularly review tax utilization entries to ensure alignment with liabilities and credits in the electronic liability ledger.
- Debtors Aging Report Review for Tax Implications
Analyze the debtors aging report to assess potential tax implications, especially regarding the eligibility for ITC.
- Review of Outstanding Amounts Related to Exports
Scrutinize outstanding amounts associated with exports to ensure all receivables are correctly accounted for GST refunds.
- Amendments to GSTR-1 as Necessary
Make necessary amendments to GSTR-1, particularly for changes from B2C to B2B transactions or alterations in tax type.
- Update GST Filings Where Recipient/ECO is Liable for Tax
Accurately update GST filings to reflect scenarios where the tax is payable by the recipient or an E-Commerce Operator.
- Management of Tax Liability for Advances Received for Services
Report and adjust tax liabilities arising from advances received for services, including any necessary refunds or adjustments.
- Cross-Charge Mechanism Compliance for Supply of Common Services
Implement and manage a cross-charge mechanism for the supply of common services, ensuring accurate GST handling.
- Verification of CGST/SGST Paid Instead of IGST and Vice Versa
Address any incorrect payments of CGST/SGST instead of IGST, or vice versa, to avoid penalties and ensure compliance.
- Review of Income from Other Sources for GST Liability
Examine all income from other sources to determine the appropriate GST treatment, ensuring accurate reporting and compliance.
- Audit of Expenses Credited in Books Which May Indicate Misclassified Income
Ensure that expenses recorded do not mistakenly include items that should be classified as income, affecting GST implications.
- Matching of GSTR 1 with GSTR 3B for Consistency
Verify that details in GSTR-1 match those in GSTR-3B to avoid discrepancies that could lead to penalties and interest charges.
- Timely Receipt of e-BRC for Export Proceeds Within 9 Months
Confirm receipt of the Bank Realization Certificate for export proceeds within 9 months as per FEMA regulations linked to GST benefits.
- Standardization of GST Terms in Contracts
Incorporate standard GST-related terms in contracts to prevent future disputes, particularly around ITC reversals and compliance.
- Correct Timing for Availing GST Credit
Ensure the timing for availing GST credit is aligned with receipt of goods or services and correctly handle reverse charge credits.
- Compliance with Rule 37 for ITC Reversal if Payment Delayed Beyond 180 Days
Monitor compliance with Rule 37, which requires ITC reversal if payment to vendors is not completed within 180 days.
- Verification Under Rule 37A Whether Vendors Have Filed GSTR 3B
Under Rule 37A, verify if vendors have filed their GSTR 3B, as this affects the eligibility to claim ITC.
- Identification of Unaccounted Expenses or ITC in GSTR 2B
Compare expenses recorded in books with ITC shown in GSTR 2B to identify any unaccounted expenses or ITC.
- ITC Reversal Assessment for Rejected and Returned Purchased Goods
Evaluate the need for ITC reversal for goods that have been purchased, rejected, and returned, ensuring accurate GST filings.
- Accuracy Verification of Vendor Credit Notes Reflected in GSTR 2B
Ensure that all vendor credit notes appearing in GSTR 2B are accurate and correspond to actual transactions for proper ITC management.
- Accounting of Credit for Transactions Not Reflected in GSTR 2B
Manage and possibly defer ITC for transactions not appearing in GSTR 2B, ensuring all credits are claimed by fiscal year-end.
- Annualized ITC Reversal Calculation Under Rule 42 for Exempted Supplies
Annually recompute Input Tax Credit under Rule 42 to adjust for exempt supplies, ensuring accurate tax reporting.
- Rule 43 Computation for Capital Goods Used for Taxable and Exempt Purposes
Apply Rule 43 to calculate ITC on capital goods used for both taxable and exempt purposes, adhering to formula-based distribution.
- Pre-Year-End Verification of Accounting Treatment for Capital Assets
Before fiscal year-end, ensure capital assets are correctly classified and treated for GST, optimizing tax credits.
- Verification of ITC Reversal on Write-Offs, Thefts, Samples, or Obsolete Stock
Confirm accurate ITC reversals for inventory write-offs, thefts, samples, or obsolete stock, maintaining compliance.
- Compliance with Input Service Distributor (ISD) Provisions
For businesses using an Input Service Distributor, ensure accurate distribution of ITC among business units as required.
- Assessment of Cross-Charge Compliance When ISD Not Applicable
Evaluate the necessity and compliance of a cross-charge mechanism when an ISD setup is not applicable.
- Rectification of Misapplied CGST/SGST as IGST and Vice Versa Within Time Limits
Promptly correct any CGST/SGST mistakenly claimed as IGST, or vice versa, adhering to prescribed timelines for adjustments.
- Correction of Credit Availed Under Wrong GSTIN but Correct PAN
Rectify any ITC availed under an incorrect GSTIN but correct PAN by transferring credits to the appropriate GSTIN.
- Periodic Re-Verification of ITC Masters for Classification of Eligible Credits
Regularly review and update ITC masters to ensure that criteria for classifying credits as eligible or ineligible are accurate, optimizing tax benefits.
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Disclaimer: This article is not served as professional advice. You may not rely on the opinion expressed in this article to make a business or regulatory compliance-related decision. If you are looking for professional advice, please consult a professional. Any comments and/or suggestions concerning this article may be sent to [email protected] or can WhatsApp at 8401501004
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