Handling Purchases and Expenses with Care under GST

by CA. Sandeep Choudhary

The following points need to be taken care of while purchasing goods or incurring any expenditure:

1. Reverse Charge

Whenever you receive any supply of goods or services from any Unregistered person, you need to pay tax on it by self-invoicing yourself.

Suppose you are getting some documents photocopied for Rs. 10/- and the person photocopying is not registered. So now you need to pay tax on reverse charge basis by raising an invoice on yourself.

Essentially, for every expenditure (other than employee benefits and purchase of real estate) in your books, you need to pay tax on reverse charge basis if the supplier is Unregistered.

The tax has to be paid in cash, you cannot utilize input credit for the same.

Details of Reverse Charge obligation needs to be provided monthly.

You can claim credit for tax on reverse charge, subject to payment. As such, this provision is cumbersome but does not have a high monetary impact for most businesses. (There will be some impact to the extent credit is denied.)

In a perverse way, it dramatically increases liability for registered persons dealing in exempted goods, as they will not be able to take credit. Similarly, composition dealers will find their tax liability shoot up.

2. Inwards from Registered supplier

Make sure that your GSTIN is quoted correctly by your supplier in the Tax Invoice. Print your GSTIN in your visiting card and share the same for every small purchase or service received from any registered person. If your supplier does not mention the supply against his GSTIN, you cannot claim credit.

3. E-way Bill

This is required for every movement of goods above Rs. 50,000/-. If your supplier is Unregistered, you should generate the e-way bill. Even for registered supplier, you can generate the e-way bill.

4. Timing of credit

Input Tax Credit on goods upon receipt of goods and invoice. Thus, where goods are in transit at the end of the month, credit will be be available in the month when goods are received.

Similarly, where you have given advance to the supplier and the advance has been taxed, you cannot claim credit to goods are received along with Tax Invoice.

For services, credit is available when service is completed. Thus, for AMCs, credit will be available at the end of annual cycle even though tax may have been paid in the beginning.

Credit is not available after filling of annual return. This provision will force AMC companies to review their business model.

Credit is fully available immediately. It is not staggered for capital goods in GST (except in some specified industries).

5. When Credit is not available

Credit is denied for certain items such as motor vehicles (except where you are in business of selling them or in transport business etc), etc.

Credit will also not be available if you have an intra- state bill of a state in which you are not registered. This will typically be the case when services are consumed outside the state.

6. Proportionate credit

If you deal in both exempt and taxable items, credit is allowed only for input tax relatable to taxable items. Input Tax paid in relation to exempted goods (such as tax on packing material for exempted goods) will not be eligible for credit.

There may be some expenses for business as a whole where it is not possible to say that this expense was only for taxable items or only for exempt items. In such cases, input tax will be allocated in the ratio of turnover of exempted and taxable, and credit will be denied on input tax allocable to exempt goods.

7. Non-payment

Credit is denied if you don't pay your supplier within 180 days.

8. Monthly GSTR-2A and GSTR-2

Based on GSTR-1 returns filed by your suppliers monthly by 10th of next month, the portal will auti-populate GSTR-2A on 11th. You have to compare this with your books and correct errors and omissions. The corrected return for inwards is called GSTR-2. It has to be filed by 15th.

Where the inward transaction is reflected correctly, you will not make any correction and the transaction will get matched.

Where the supplier has made any mistake, you can correct the same in GSTR-2. Your tax credit is PROVISIONALLY based on your claims in GSTR-2 and not as per filing by your suppliers. However, this is provisional. Final credit is allowed only if your supplier has recorded the transaction, paid taxes for the month and also filed monthly returns for that month.

If your supplier accepts corrections pointed out by you by 17th, the transaction gets matched in the same return cycle. Alternatively, supplier may accept error in the next monthly return (Each return has separate columns for correcting mistakes of preceding returns). However, if supplier does not accept your claim in next monthly return also, provisional credit given earlier will be added to output tax of next month.

GSTR-2 will also contain details of credit deferred where stock is in transit or service is not completed. In such cases, you should take care that credit is taken when it is eligible (upon receipt of goods or completion of service).

Handling Sales with care under GST

 by CA. Sandeep Choudhary

The following points need to be taken care of while selling goods in GST regime:

1. Buyer Registered or Not

If your buyer is registered, take his GSTIN (Registration Number) and mention it in the Tax Invoice.

Ask the buyer (called 'recipient' under GST) to check GSTIN twice. Preferably, ask him to put his initials in your copy of invoice as proof of checking his GSTIN. Your recipient cannot take input tax credit unless you mention his GSTIN correctly. In monthly return GSTR - 1, Bill-wise details are required for every supply to Registered person.

If recipient is unregistered, Tax Invoice is mandatory for supply above Rs. 200/-. For smaller sales, you may prepare an invoice for the daily aggregate of such small sales.

You need to mention name and address of unregistered recipient in Tax Invoice if supply exceeds Rs. 50,000/-. However, bill-wise details are not required for supplies to Unregistered persons (except in certain cases discussed later).

2. Intra- state or interstate

If goods will move outside the state, charge IGST. Else, charge CGST and SGST.

In case of interstate supply above Rs. 2.5 lakh to Unregistered person, Bill-wise details are required in monthly GSTR-1. This is in addition to bill-wise details for all supplies to Registered persons (whether intra- state or interstate).

3. HSN code and Tax Rates

Make sure you know the HSN Code (classification) and tax rate of each item. Feed them in your accounting system and mention in Tax Invoice.

Similarly, if you levy additional charges (such as Packing charges, loading charges, delivery charges, transportation, transit insurance etc.), mention their SAC code. Note that such charges are fully taxable as supply of service.

4. E-way Bill

You need a e-way bill for movement of goods above Rs. 50,000/-. E-way bill is mandatory for sale within the state also.

To generate e-way bill, file Part A of Form GST INS-01 providing details of the goods as well as recipient on GSTN portal. Then, file Part B of Form GST INS-02 providing details of the transporter.

GSTN will then generate e-way bill. It is valid for a small period (1day for distance less than 100 km).

E-waybill is required in case of supply by a Composite Dealer also. E-waybill is required whether the goods are taxable or exempt. Even if there is no sale but goods are moved (transfer to godown, job work, etc.), e-way bill is required.
E-way bill may be generated by transporter or recipient also.

5. Tax Invoice

You need 3 copies of Tax Invoice:
a.     Original for Recipient
b.     Duplicate for Transporter
c.      Triplicate for Supplier

No threshold is prescribed, so duplicate for transporter will be required for very small sales also.

Debit Note/Credit Note may be issued for any modification in Tax Invoice.

Transporter must carry a copy of the Tax Invoice and e-way bill/EBN.

Note: In case of Composite Dealer or supply of Exempted Goods, there will be a Bill of Supply in place of Tax Invoice.

6. Payments received

If you have received any advance, you need to pay tax on such advance and to issue a Receipt Voucher. Further, the recipient has to reverse input tax credit if he does not pay you within 180 days. Thus, it is desirable to maintain payment records on bill-to-bill basis.

7. Monthly GSTR-1

This return has to be submitted monthly by 10th of next month. It contains the following bill-wise details:

a. All supplies to Registered persons.

b. Interstate supply above Rs.  2.5 lakhs to unregistered person.

c. All supplies through any e-commerce site.

Further, the following are also required:
a. Supplies to unregistered persons aggregated as per tax slab and state (bill-wise details not required).

b. Advances received and tax on such advance.

c. Debit Notes and Credit Notes

d. Tax invoice Serial number used from... to...

After you upload GSTR-1 by 10th, your registered recipient may point out any error or omission by 15th. You can accept or reject the same by 17th.

If you don't accept such claim, the department will pursue both parties for the mismatch. It will deny credit to the recipient while trying to collect tax from you.

There is no provision for revised return. However, corrections required can be mentioned in next monthly return in separate tables provided for this purpose.

After GSTR-1 is filed by 10th, there are 2 more monthly returns: GSTR-2 for inward supplies and GSTR-3 for tax payment by 20th. Your recipient's Input Tax Credit is finalized only when after GSTR-3 is submitted. These returns will be discussed separately in another post.

How to Make a Sale under GST

 by CA. Sandeep Choudhary

The procedure to be followed before EVERY SALE is as under:

1.     File Part A of Form GST INS-01 providing details of the goods as well as recipient.

2.     Then, file Part B of Form GST INS-02 providing details of the transporter.

3.     GSTN will then generate e-way bill.

a.     E-way bill is mandatory for sale within the state also.

b.     E-waybill is required in case of supply by a Composite Dealer also.

c.      E-waybill is required whether the goods are taxable or exempt.

d.     Only supply below Rs. 50,000/- is exempt from e-waybill.

e.      E-way bill may be generated by transporter or recipient also.

4.     Supplier, transporter and recipient will receive a unique EBN (e-way bill number) on their registered mobile number. Your e-way bill is valid for the following period:

Distance	Validity Period
Less than 100 Km	1 day
100 to 300km	3 days
300 to 500km	5 days
500 to 1000km	10 days
1000 km or more	15 days

Period is calculated from the time at which e-way bill is generated.

5.     Now, prepare 3 copies of Tax Invoice:

a.     Original for Recipient

b.     Duplicate for Transporter

c.      Triplicate for Supplier

Note: In case of Composite Dealer or supply of Exempted Goods, there will a Bill of Supply in place of Tax Invoice.

6.     Traders may please note that additional charges (such as Packing charges, loading charges, delivery charges, transportation, transit insurance etc.) are in the nature of supply of service. Accordingly, GST will be levied on such charges also. The current practice of computing tax and then adding such charges will not sustain in GST regime.

7.     Ensure that the Tax invoice contains all the particulars mentioned in the checklist below. Charge CGST and SGST for supply within the state. Charge IGST for inter-state supplies. 

8.     Issue Debit Note/Credit Note for any modification in Tax Invoice.

9.      Transporter must carry a copy of the Tax Invoice and e-way bill/EBN.

a.     If goods are moved from one vehicle to another, new e-way bill has to be generated by transporter.

b.     If a transporter is carrying several consignments, he must upload all EBNs and generate a consolidated e-way bill (Form GST INS-02).

c.      E-way bill may be cancelled within 24 hours.

d.     Recipient may reject the e-waybill within 72 hours. Else, it is deemed that he has accepted the consignment.

10.             If supplier has received any advance, he is required to pay tax on such advance and to issue a Receipt Voucher. Further, the recipient is required to reverse input tax credit if he does not pay supplier within 180 days. Thus, it is desirable to maintain payment records on bill-to-bill basis.

Checklist for Tax Invoice

a.     Name, address and GSTIN of the supplier

b.     a consecutive serial number

c.      date

d.     name, address and GSTIN of the recipient

e.      name and address of the recipient and the address of delivery, along with the name of State and its code, if recipient is un-registered (not required for sale below Rs. 50,000/=)

f.       HSN code of goods

g.     description of goods

h.     quantity and unit

i.        total value

j.        taxable value

k.     rate of tax (central tax, State tax, integrated tax, Union territory tax or cess)

l.       amount of tax charged (central tax, State tax, integrated tax, Union territory tax or cess)

m.  place of supply along with the name of State, in case of a supply in the course of inter-State trade or commerce

n.     address of delivery where the same is different from the place of supply

o.     whether the tax is payable on reverse charge basis

p.    signature

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GST Premise: You are a Tax Thief

#GST is built on a single, simple premise: You, yes you, are a tax thief.

You will steal taxes in the blink of an eye. So, you must report all your activities to the Govt before you undertake anything.

Before you purchase or sale any goods, file a form online uploading the invoice details.

Then, file another form uploading the transporter's details. Now, you can generate an e-waybill: Your licence to move those goods once.

There is of course, no difference between intra-state or inter-state: we are One Nation, One Tax. Generate e-waybills for local supplies

Of course, your e-waybill lapses. Within 1 day if you are transporting upto a 100 Kms.

And if you need to change the vehicle, well, a new e-waybill each time.

Buying from a small trader not required to be registered under #GST? The registered recipient will comply all the e-waybill requirements.

Thought you will go under the Composition Scheme for small businesses and escape compliance? Nope, e-waybill required for all inwards and outwards.

There is a small penalty of Rs. 10,000/- for every consignment where you fail to generate e-waybill.

Composition Scheme: Detailed Rules and Procedure under GST

Composition Scheme has attracted much attention in GST. Small traders (Turnover upto Rs. 50 Lakhs annually) have been attracted to the scheme as the taxpayer will have to file one return every 3 months instead of 3 returns per month. 

The attraction increased further when the final GST bills provided a favourable rate of tax. However, suppliers under Composition Scheme have not been exempted from paying tax on supplies received from unregistered persons. 

The GST Council in its meeting on 31st March 2017 finalised the draft Composition Rules. The same were released in public domain on 1st April 2017. It is thus now possible to judge the Pros and Cons of the scheme, as well as the procedure.

Pros:

1. Only one return every 3 months, instead of 3 returns every month. 

2. No need for credit documentation. 

Cons:

1. No input credit for the trader under the scheme as well as the recipient. 

2. Cannot deal in non-taxable goods. 

3. Cannot supply interstate. 

4. Cannot supply through e-commerce operator. 

5. Cannot recover tax from recipient. 

6. Has to pay tax on OPENING to the extent purchased from unregistered persons. 

7. Opening stock should not include any inter-state purchases. 

Common Compliances

1. Pay tax (CGST +SGST) on reverse charge basis on all INWARD supplies of goods and services from Unregistered persons .

2. Upload Invoice-wise details of all inward supplies, including that from Unregistered suppliers.

3. Submit 2 forms to generate e-way bill for every supply above Rs. 50,000/= within the state. 

Tax Rates

2% on Manufacturers (1% CGST, 1% SGST)

5% for Restaurants (2.5% CGST, 2.5% SGST)

1% for Traders (0.5% CGST, 0.5% SGST)

Service providers other than restaurants are not eligible under the Scheme. 

Procedure:

1. File Form GST CMP-01 within 30 days intimating intent of opting for Composition Scheme. 

2. File Form GST CMP-03 within 60 days detailing opening stock, including inward supply from unregistered persons. PAY TAX on OPENING stock purchased from unregistered person. 

3. In Quarterly Return GSTR-4A, file invoice-wise all inward supplies of goods and services, including unregistered supplies. Pay tax on inwards from unregistered persons.

4. If Turnover crosses the limit (Rs. 50 Lakhs), file Form GST CMP-04 within 7 days. If withdrawing from Scheme by choice, file Form GST CMP-04 before withdrawing. 

5. File Form GST ITC-01 within 30 days for credit on stock on date of exit from Composition scheme.

Also Note:

1. If the taxpayer has multiple registrations under the same PAN, either all or none will fall under Composition Scheme. Intimation for one registration is deemed to be intimation for all registrations.  

2. For the limit of Rs. 50 lakhs, total turnover against a single PAN is considered. 

3. Supplier under Composition Scheme will issue 'Bill of Supply' instead of "Tax Invoice'. 

Transition Rules under GST

Finally, the detailed rules for #GST are out, as indicated by Revenue Secretary Hasmukh Adhia 2 days ago.

Time to plan your transition in detail now.

For traders, the suspense on opening CGST credit is now over. Credit will be granted at 40% of CGST rate on opening stock. Of course, if your invoice shows excise element specifically, credit will be for such excise. This credit has to be claimed within 6 months.

C-forms, etc need to be submitted within 60 days for smooth transition of closing VAT credit to opening SGST credit.