GST Council in its 28th meeting – Press Note

Press Note on Simplified GST Return
GST Council in its 28th meeting held on 21st of July, 2018 in New Delhi, approved the new return formats and associated changes in law. It may be recalled that in the 27th meeting held on 4th of May, 2018 the Council had approved the basic principles of GST return design and directed the law committee to finalize the return formats and changes in law. The formats and business process approved today were in line with the basic principles with one major change i.e the option of filing quarterly return with monthly payment of tax in a simplified return format by the small tax payers.
2. All taxpayers excluding small taxpayers and a few exceptions like ISD etc. shall file one monthly return. The return is simple with two main tables. One for reporting outward supplies and one for availing input tax credit based on invoices uploaded by the supplier. Invoices can be uploaded continuously by the seller and can be continuously viewed and locked by the buyer for availing input tax credit. This process would ensure that very large part of the return is automatically filled based on the invoices uploaded by the buyer and the seller. Simply put, the process would be “UPLOAD – LOCK – PAY” for most tax payers.
3. Taxpayers would have facility to create his profile based on nature of supplies made and received. The fields of information which a taxpayer would be shown and would be required to fill in the return would depend on his profile.
4. NIL return filers (no purchase and no sale) shall be given facility to file return by sending SMS.
5. Council approved quarterly filing of return for the small taxpayers having turnover below Rs. 5 Cr as an optional facility. Quarterly return shall be similar to main return with monthly payment facility but for two kinds of registered persons – small traders making only B2C supply or making B2B + B2C supply. For such taxpayers, simplified returns have been designed called Sahaj and Sugam. In these returns details of information required to be filled is lesser than that in the regular return.
6. The new return design provides facility for amendment of invoice and also other details filed in the return. Amendment shall be carried out by filing of a return called amendment return. Payment would be allowed to be made through the amendment return as it will help save interest liability for the taxpayers.
7. 93% of the taxpayers have a turnover of less than Rs 5 Cr and these taxpayers would benefit substantially from the simplification measures proposed improving their ease of doing business. Even the large taxpayers would find the design of new return quite user friendly.

PRESS NOTE
July 21, 2018
Recommendations made during the 28thmeeting of the GST Council held in New Delhi on 21st July, 2018*
Amendments to the CGST Act, 2017, IGST Act, 2017, UTGST Act2017, and GST (Compensation to States) Act, 2017
1.​The GST Council in its 28th meeting held today at New Delhi has recommended certain amendments in the CGST Act, IGST Act, UTGST Act and the GST (Compensation to States) Act.
2.​The major recommendations are as detailed below:
1. Upper limit of turnover for opting for composition scheme to be raised from Rs. 1 crore to Rs. 1.5 crore. Present limit of turnover can now be raised on the recommendations of the Council.
2. Composition dealers to be allowed to supply services (other than restaurant services), for upto a value not exceeding 10% of turnover in the preceding financial year, or Rs. 5 lakhs, whichever is higher.
3. Levy of GST on reverse charge mechanism on receipt of supplies from unregistered suppliers, to be applicable to only specified goods in case of certain notified classes of registered persons, on the recommendations of the GST Council.
4. The threshold exemption limit for registration in the States of Assam, Arunachal Pradesh, Himachal Pradesh, Meghalaya, Sikkim and Uttarakhand to be increased to Rs. 20 Lakhs from Rs. 10 Lakhs.
5. Taxpayers may opt for multiple registrations within a State/Union territory in respect of multiple places of business located within the same State/Union territory.
6. Mandatory registration is required for only those e-commerce operators who are required to collect tax at source.
7. Registration to remain temporarily suspended while cancellation of registration is under process, so that the taxpayer is relieved of continued compliance under the law.
8. The following transactions to be treated as no supply (no tax payable) under Schedule III:
a. Supply of goods from a place in the non-taxable territory to another place in the non-taxable territory without such goods entering into India;
b. Supply of warehoused goods to any person before clearance for home consumption; and
c. Supply of goods in case of high sea sales.
9. Scope of input tax credit is being widened, and it would now be made available in respect of the following:
a. Most of the activities or transactions specified in Schedule III;
b. Motor vehicles for transportation of persons having seating capacity of more than thirteen (including driver), vessels and aircraft;
c. Motor vehicles for transportation of money for or by a banking company or financial institution;
d. Services of general insurance, repair and maintenance in respect of motor vehicles, vessels and aircraft on which credit is available; and
e. Goods or services which are obligatory for an employer to provide to its employees, under any law for the time being in force.
10. In case the recipient fails to pay the due amount to the supplier within 180 days from the date of issue of invoice, the input tax credit availed by the recipient will be reversed, but liability to pay interest is being done away with.
11. Registered persons may issue consolidated credit/debit notes in respect of multiple invoices issued in a Financial Year.
12. Amount of pre-deposit payable for filing of appeal before the Appellate Authority and the Appellate Tribunal to be capped at Rs. 25 Crores and Rs. 50 Crores, respectively.
13. Commissioner to be empowered to extend the time limit for return of inputs and capital sent on job work, upto a period of one year and two years, respectively.
14. Supply of services to qualify as exports, even if payment is received in Indian Rupees, where permitted by the RBI.
15. Place of supply in case of job work of any treatment or process done on goods temporarily imported into India and then exported without putting them to any other use in India, to be outside India.
16. Recovery can be made from distinct persons, even if present in different State/Union territories.
17. The order of cross-utilisation of input tax credit is being rationalised.
3.​These amendments will now be placed before the Parliament and the legislature of State and Union territories with legislatures for carrying out the amendments in the respective GST Acts.

Reverse Charge

GST Group of Ministers(GoM) recommends Deletion of Section on Reverse Charge and Deferment of Discounts for Digital Payments under GST by a year

GST AUDIT CIRCULAR: GST SPECIAL PROCEDURES TO BE FOLLOWED

GST AUDIT CIRCULAR GST SPECIAL PROCEDURES TO BE FOLLOWED :
1
Reconcile your GST Input Tax Credit Claimed with Online GSTR-2A. If the credit claimed does not match with credit available online. GSTR-2A online credit can be viewed now.
 Excess : There may be some purchases and expenses which you have not accounted or ITC Claimed. Account and claim ITC.
 Shortage : Your supplier may not have paid GST and not filed GST Return. Ask him to pay and file the Return. Even if your supplier filed return, he may not have correctly quoted your GST No. Ask him to correct it in the subsequent months return Before September, 2018, by way of Debit Note in your name by referring the old invoice Number.
What happens if not done : IF online credit is not available, then you have to pay the ITC as tax along with 24% interest p.a.
2
Similarly, while filing GSTR-1, we may also have wrongly quoted some of our customers GSTIN. Correct it before September, 2018 by Submitting online Debit note.
3
Any mistake if rectified before 30.09.2018 that will attract only 18% Interest . You can take ITC also. Any mistake if made after 30.09.2018 will attract 24% interest. No ITC Available.
4
Supplier Payment not made with 180 days : If payment to supplier is not made within 180 days from the date of bill, then ITC availed on it should be reversed in the monthly return when the 180 days expires (for July bill it is January return). With 18 % interest for 6 months. ITC can be again taken when payment to supplier is made later.
5
Stock Held with Jobworker As on 30.06.2017 : As per the GST Act, stock held with jobworker as on 30.06.2017 should have been declared in TRAN-1 Form. If Not declared, the subsequent receipt of goods from the jobworker will be treated as purchase from unregistered person and GST RCM has to be paid (upto 12.10.17). Now prepared a list of Goods and machinery held with jobworker as on 30.06.2017 (Details of jobworker and details of goods), with a covering letter submit to the Jurisdictional Assessing Officer (CTO) (by post). Goods held with jobworker as on 30.06.2017 should be received within 1 year from 01.07.17. Machinery held with jobworker as on 30.06.2017 should be received within 2 years from 01.07.2017. If received lately, that will be treated as purchase.
6
Quarterly Return for Job work details is Compulsorily required to be filed : The Form is ITC-04.
If this form is not filed, then the goods sent will be treated as ‘supply’ and GST has to be paid. If the goods from 01.07.17 is not received within 6 months, then that will be treated as ‘deemed supply’ and GST has to be paid. Similarly for Machinery sent. The time limit is 3 years.
7
Self Made Invoice for Reverse Charge Expenses. Every month consolidated self made invoice is required to prepared in the format for Reverse Charge Paid Expenses. Penalty leviable.
8
RCM on Import CIF. Vide Notification No.10/2017(IGST) 5% RCM is payable on Ocean Freight Paid on CIF purchase, for Import. 10% of CIF value is value of Ocean Freight. If we pay voluntarily before 30.09.18, then ITC available. If taxed later, No ITC. Interest 18%. Airfreight exempt.
9
Bank Charges : ITC on bank charges is available Only with Credit available Online and Bill Issued by Banker. If no bill issued by Banker then ITC cannot be taken. Get monthly bill from bank.
Inform your GSTIN to bank through a letter. Confirm online credit and monthly bill.
10
Tax Paid vs. Return Filed. Even If you paid the Tax. But if you have not filed the return. Then you will be required to paid 18% interest on the full tax till date of filing return.
11
ITC on Passenger Vehicle and Building Maintenance expenses : Since, ITC is not available on purchase of passenger vehicle and Building construction. (Should be reversed after 30.09.18 with 24% interest). ITC on repairs and maintenance of passenger vehicle and building maintenance is also doubtful. You can claim at your own risk.
12
Reverse ITC on Stock lost/ destroyed. When ever stock is lost, destroyed (fire accident), ITC availed on the purchase has to be reversed to that extent. Insure stock Cost + Tax value so that insurance can be claimed for full value .
13
Canteen and Other recoveries from employees Taxable. 01.07.17 to 17.02.18 12% GST with ITC. From 18.02.2018 5% GST without ITC. For other recoveries 18% GST. For free services without any recovery annual Rs. 5000 is exempted per employee. No ITC available.
14
From 01.10.18 Online Online Credit Only. System will not allow us to feed the ITC based on invoice

in hand. So from now ensure that your suppliers properly pay GST and file return. Reconcile and Rectify every month. From doubtful suppliers, keep pending the GST value until online credit is available. GSTR-2A available.
15
In the Income Tax Return we estimate some personal expenses in General Expenses, Telephone Expenses, Travelling Expenses. In the monthly return, on the ITC availed on these expenses 5% has to be reversed for personal expenses.
16
Turnover for the Purpose for Registration : Taxable Supplies, exempted supplies, export of goods and services. For Example an Individual is having Rs. 3,00,000 commission receipts (taxable), Rs. 5,00,000 commercial rent (taxable), Rs. 5,00,000 residential rent (exempt), Rs. 5,00,000 agricultural income (exempt) and Rs. 5,00,000. In total Rs. 23,00,000. They we have to register and pay tax on the taxable supplies.
17
Registered Persons having turnover below Rs . 20 lacs : If a person is already having registration under VAT and migrated to GST. But his aggregate turnover is below Rs.20 lacs. He has to pay tax on the taxable suppliers even if turnover is below Rs. 20 lacs. Every person having GST number is required to pay GST on taxable sales.
18
Registered Persons having turnover below Rs . 20 lacs but to pay RCM: (RCM on goods and services from unregistered persons (URP) from 01.07.17 to 12.10.17). Even if your total turnover is exempt. Even your aggregate turnover is below Rs. 20 lacs, but if you are having a GST Registration, then you have to pay Reverse Charge GST on taxable goods and services from URP.
19
Compensation from customers : Interest, penal charges, packing charges, transport charges, Reimbursement of Freight from customers in the course of sale of goods are taxable under GST.
20
Liquidated Damages : Liquidated damage charges received from contractors, suppliers is a taxable service under GST. If we deduct any thing from the payment made to contractor/ supplier, then we have to raise a tax invoice @ 18%.
21
Transactions among Related parties : (Group Concerns, firm to partners, business to relatives) Then these transactions may require valuation for deciding market value. One such risk is that, if a building is owned by one of your firm and the same building is the office for other firms, then your first firm will be required to pay GST on estimated rent. Common goods vehicles, Common work force, Machinery sale to group concern will required market value and notional value for tax.
22
Sales Return and Purchase Return : Under GST sale return and purchase return (under VAT period and under GST period) has special procedure to be followed. GST Reversal, Debit Note, Credit Note. Any omissions either by you or by your supplier should be corrected in return before 30/09.
23
Tax on sale of Used Motor Vehicles : Three types of taxes during the year. For vehicles during 01.07.18 to 12.10.2017, at full GST applicable on new vehicle (Example 43% depending on vehicle). For sale from 13.10.17 to 24.01.18, 65% of 43%. For Sales from 25.01.18, 18% on the excess sale value over Income Tax WDV. If the sale value is not above IT WDV, then no GST payable.
24
Assets sold within 5 years from the date of purchase : Any asset purchased on which GST input was taken, if sold within 5 years from the date of purchase, the GST should be reversed/ paid will be higher of tax on the actual sale value or 1/20 th of ITC taken on purchase, for each remaining period in the 5 years. Eg. If an asset was purchase for Rs. 100000. GST ITC taken Rs. 18000. If Sold after completion of 2 years. The remaining period in 5 years is 3 years (12 quarters). If sold for Rs. 30000. The GST reverse/payable on sale will be Maximum of, 18% on 30000 = Rs. 5400 or 18000/20*12 = 10800. Here Rs. 10,800 is the GST Payable.
25
Exporters Refund : Exporters may have purchases in some months but exports in other months only. They have an option to submit quarterly combined application. Club your purchases and exports in a period of continuous 3 months (quarterly), and submit refund application quarterly.
26
GST On advances paid to URP : During the period 01.07.17 to 12.10.17 Reverse Charge is there. GST is applicable on Advances received also. Similarly, for advance paid to Unregistered Persons also RCM is payable. Building construction advance, carpenter advance, section advance, Contractor advance. Depending on the nature of work ITC is available or not.
27
GST Is payable on Advances Received : As per the GST Act, GST is payable on the advances received. Advance Receipt in GST format has to be raised. The tax has to be adjusted in the monthly return when final invoice is raised.
28
Single Invoice, But multiple deliveries : A good or fixed asset may be purchased in a single invoice. But taken delivery in multiple delivery. GST invoice should be raised on the first despatch but ITC

can be taken only after receipt of the final despatch (when first delivery in one month and final delivery is in another month, then problem arises).
29
Place of Supply : Place of supply is another important aspect for deciding whether to charge IGST or CGST and SGST. When you sell to a registered person having GSTIN of another state, you have to Charge IGST even if you have delivery the goods to him within TN or delivered the goods to his factory or jobworker in TN. Similarly for sale to Unregistered person also if you sell goods quoting his address in another state in your bill, you have to charge IGST even if you have delivery the goods to him on hand on within TN.
Wrong payment of tax will be considered as tax not paid and will be required to pay against.
COMMON GST MISTAKES AND OMISSIONS IN ACCOUNTS : RETURN MISTAKE
1 Book vs GST return reconciliations
2 Non filing, Delay Filing.
WRONG ITC CLAIM
3 Non reversal of ITC on wastage, lost, samples, fire accident, etc
4 Taking ITC on blocked credit and not reversing the same:
passenger vehicle, food items, building material , life insurance.
5 Not reversing ITC on common expenses in proportionate to sales exempted,
6 Not reversing ITC when supplier payment is not made within 180 days. With interest.
7 ITC on composite dealer purchases.
PROCEDURES AND MISTAKES
9 Non maintenance of quantitative register, quantity reconciliations.
10 No payment of GST on used machinery sales, assets sales, vehicle sales, etc.
11 Non submissions of debit note and credit note for subsequent rate difference, quantity diff.
12 Non Reversal of ITC on Creditor Balance Write-Off.
13 Canteen recovery from employees, GST not paid ,
14 No GST number in purchase bills.
15 Actually selling one taxable goods but declaring under exempted goods. Eg. Registered Brand,
Packed Goods, Processed Goods, Cattle Feed,
16 Non payment of GST on industrial estimated buy products, waste production.
17 Regular to composition Change : stock declarations and payment of GST on the Stock.
18 Special issues of composition dealers transfer from regular to composition vice versa.
19 Non submissions of quarterly form ITC-04 form for jobwork movement details.
20 Non Declaration of Stock and machinery with Job workers as on 30.06.2017.
REVERSE CHARGE MECHANISAM
21 Not paying RCM on many 9(4)items. Building labour, Vehicle Maintenance, Rent, (URP)
22 Not paying RCM on 9(3) items advocate, govt services, freight.
23 Selling 100% exempted goods but not paying RCM U/s. 9(4), 9(3),
24 Not Taking ITC on RCM Paid.
25 Not Reversing ITC on RCM Paid on Blocked Credits (building material, labour, etc)
TAX OMMISIONS
26 Non disclosure of discounts , purchase returns in return.
27 No receipt of goods and assets sent on jobwork and returned within specified time 1 or 3 yrs..
28 In house jobworker have crossing 20lakhs and not having GST registration number.
29 Supplier/Service provider issues only bill but not paying GST and not submitting Returns.
30 Initially exempted items but subsequently taxed items but GST not paid. Eg. Cattle Feed.
31 Not Paying Tax on Canteen and Other Recoveries from employees.

CHECK LIST FOR GST RETURN PREPARATION (GSTR-1 and GSTR-3B) : FROM MAY 2018 DUE DATE FOR FILING GST RETURNS :
1. MONTHLY GSTR-1 (SALES INVOICE DEATILS) SHOULD BE FILED BEFORE 10 OF NEXT MONTH Eg. For May, 2018 month, GSTR-1 should be filed before 10.06.2018.
2. MONTHLY GSTR-3B (Consolidated Payment Return) SHOULD BE FILED BEFORE 20 TH. Eg. For May, 2018 month, GSTR-3B should be filed before 20.06.2018.
SALES :
1. Check Continuation of Sales Bill serial number from previous month. To check whether any additional bill is made last month after filing the GSTR1/3B of last month.
2. Check continuous serial number of sales bills this month. Any omissions in between. Cancellations, omissions in books has to be noted and handled accordingly.
3. Documents issued. Documents Cancelled.
4. Check correct rate of tax is applied. Based on customer GSTN whether correct tax IGST (for other
state GSTN) /CGST & SGST is charged.
5. Break up for registered and unregistered customers.
6. HSN Code of the product.
7. Quantity of the goods sold.
8. Any Exempted Sales. Verify whether it is actually exempted.
9. Whether Sales Tallied with P&L.
OTHER INCOMES :
1. Other Taxable incomes in P&L.
2. Other Taxable Incomes in Capital A/c and Memo of Income.
3. Vehicle Sales, Machinery Sales.
Compulsory RCM :
1. Lorry Freight, Advocate Fees, Etc.
2. If lorry transport is from other state, then Pay IGST RCM.
PURCHASE :
1. Correct GSTN and address in the purchase bill.
2. GSTN of the Seller.
3. Whether Purchases tallied with P&L.
4. Other Purchases and Expenses in the Profit and Loss Account.
5. Whether ITC is taken on all purchases and expenses.
6. ITC on Machinery and Vehicle Purchases in Balance Sheet.
7. Whether ITC Taken on RCM paid.
REVERSAL OF BLOCKED CREDIT :
1. ITC on Purchased used for exempted sales.
2. ITC on Building Material, labour, Passenger Vehicle.
3. ITC on Life Insurance, Food expenses,
4. Proportionate Reversal ITC on of Common expenses on Exempted Sales.
REVERSAL OF ITC ON PAYMENTS NOT MADE TO SUPPLIER WITHIN 180 DAYS :
1. In the suppliers ledger, Every Month check whether are unpaid Purchase more than 180 days.
2. If yes then reverse the ITC Tax (IGST, CGST and SGST correctly)
3. Calculate interest at 18% and
PAYMENT :
1. IGST, CGST, SGST, RCM (against IGST, CGST, SGST), Interest on late payment, late filing,
2. Interest on reversal of ITC on non payment to supplier.

GSTR-1 filing period

GST Council has announced that GSTR-1 filing period for monthly and quarterly return is reduced to 30 days from earlier 40 days.