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The Sword of Damocles Hanging Over Head - 30th September, 2018

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The Sword of Damocles Hanging Over Head - 30th September, 2018
By: Anuj Bansal
September 11, 2018
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Apart from regular compliances and deadline in GST, do you know that one more deadline is there i.e. 30th Sept., 18? May be said date is going unnoticed by many professional, but it has a big relevance from ITC point of view. Even the GSTR 9 Notified by the govt. vide notification 39/18 CGST requires us to report the details of ITC for previous Financial Year i.e. 2017-18 considered till 30th Sept., 18 and same is for the reason that after 30th Sept., 18 credit pertaining to previous FY 2017-18 will lapse and lapse means a financial loss. Now the question is; have we determined the expected lapse of credit on 30th Sept., 18? What are recourse to save yourself from such Financial Loss?

Considering the above, in this article, an attempt has been made to analyse the issues and actions required to mitigate the loss on account of lapsing of credit. Following are the points which are required to be taken care off before filing return for Sept., 18 i.e. by 20th Oct, 18 (it is assumed in this article that Annual Return is not filed till 20th Oct,18):

1. Credit pertaining to Financial Year 2017-18 will lapse if not considered in return for Sept., 18.

In regard to above, we refer Section 16(4) of the CGST Act. As per the said section a registered person shall not be entitled to take input tax credit for supply of goods or services or both after the due date for furnishing return under section 39 of CGST Act for the month of Sept. of following year.

It is required to reconcile the credit considered in Financials / Books of Accounts with the credit available in GSTR 2A i.e. on online portal. In case it is found that any credit is available in GSTR 2A which is not considered in the Books of Accounts, fate of same shall immediately be checked and if eligible, same shall be considered in books of accounts vis-a-vis credit shall also be considered in GSTR 3B for the month of Sept., 18.  In case it is found that there is certain defect in considering the credit like invoice / debit note is not traceable, the vendor shall be approached for duplicate copy of invoice / debit note otherwise it is going to be loss of credit after Sept, 18.

2. Credit note pertaining to FY 2017-18 shall be issued upto 30th Sept., 18 otherwise, tax amount in the Credit note cannot be reduced from the output liability.

As per Section 34(2) of the CGST Act, any registered person have to declare the value of the credit note in the return in the month in which credit note is issued. However, no such Credit Note can be issued for the previous Financial Year after filing of return for the month of Sept.

Accordingly, in case the supply has been made in FY 2017-18, the credit note is required to be issued in regard to same till 30th Sept., 18 otherwise the reduction in output liability on account of credit note will not be allowed.

3. Corrections in Returns

    (a).      Correction in details of outward supply in GSTR 1 – Refer Proviso to Section 37(3)  

As per above proviso, any person who has furnished details of outward supply in GSTR 1 can rectify error or omission in details for F.Y. 2017-18 upto the date of filing of return for the month of Sept, 18.

Therefore, in case any corrections are required to be made, same shall be made upto Sept, 18. Accordingly, in case the invoices are considered in our books of accounts and also reported in our returns but are not available in online portal i.e. GSTR 2A due to some error like incorrect GSTIN, incorrect taxable value, etc., a request must be made to the vendor to immediately correct the same, otherwise the vendor will have no option to correct invoice for the Financial Year 2017–18, once the return for month of Sept,18 is filed.

     (b).      Correction in details of return in GSTR 3B – Refer Section 39(9)

As per above Section, any person who has furnished a return, if discovers any omission or incorrect particulars in such return, can rectify such omission or incorrect particulars in the return. However, no such rectification can be made after the due date for furnishing of return for the month of Sept.

Therefore, every dealer has to reconcile his return i.e. GSTR 3B with his books of account and in case any omission or error is discovered, same has to be rectified immediately i.e. before filing return for the Month of Sept., 18.

4. Credit relating to exempted supplies is required to be reversed as per Rule 42 of CGST Rule and final calculation shall be done by Sept., 18

As per Section 17 of CGST Act, credit relating to exempted supplies is required to be reversed in Books of Account as well as in GST Returns. The reversal of credit is done as per Rule 42(1) of the CGST rules which states that common ITC relating to exempted and taxable supplies shall be reversed in the ratio of exempted turnover to total turnover. Such calculation is done on monthly basis and reported in monthly returns. However, as per Rule 42(2), ITC pertaining to exempted supplies has to be re-determined on the basis of total turnovers of the financial year before filing return for Sept. and effect of the same has to be considered in the return of Sept..

Accordingly, it is stated that the persons who are determining ITC relating to exempted supplies as per Rule 42(1) of the CGST Rules are required to re-determine tax as per Rule 42(2) of the CGST Rules before filing return for the month of Sept, 18.

5. Credit relating to tax under RCM must be considered in our return for Sept, 18.

As per Section 13 of CGST Act, point of taxation in case of RCM is the earlier of the two events i.e. payment date or sixty days from date of issue of invoice. Further, ITC is available to the recipient only after payment of tax. Further, as per Section 16(4) all invoices which belong to FY 2017-18 must be considered till filing of return for the month of Sep,18. Therefore, it is suggested that tax on all the invoices relating to financial year 2017-18 must be paid and credit is to be considered in the return for the month of Sept,18. 

6. Section 16(4) v/s. Section 16(2) of CGST Act are tangled with each other

As per Section 16(4) of the CGST Act, credit relating to Invoice and Debit Note for a Financial Year can be considered latest by filing return for the month of Sept., 18. However, Section 16(2) prescribes some qualifying conditions for availing credit. The conditions mentioned in Section 16(2) of the CGST Act are that (i) a person must be in possession of an Invoice, (ii) He has received the goods or services, (iii) tax charged by supplier has been paid to the govt. and (iv) return has been furnished. Further, proviso to above section states that payment should have been made to the vendor within 180 days otherwise credit is required to be reversed and the same can be reclaimed after making of payment to the vendor. Certain situations are being given hereunder as illustration where invoice has been received but credit could not be claimed due to non-compliance of the above conditions provided in Section 16(2).

S No.

Situations

Example

Remarks

1.

Invoice has been received in 2017-18 from the vendor but services are not received till Sept,18.

Suppose Air-ticket is booked in Mar, 18 for travelling in Oct, 18. Services are received after Sept., 18.  In which month credit in this case can be claimed?

As per Sec 16(2)(b), credit shall be available in Oct, 18 i.e. at the time when the services are received. However, as per Section 16(4), credit cannot be considered in return after Sept,18 for the invoices pertaining to F.Y. 2017-18. There are contradictory provisions in this regard. In this situation credit should be claimed in the month of Sept, 18, if not considered at the time of issuance of invoice i.e. in Mar,18.

2.

Invoice has been received from vendor in 2017-18 but vendor has paid the tax to the govt. after Sept, 18

Suppose invoice is received from the vendor in Mar,18. The vendor has also reported details in his GSTR 1 for Mar,18. But vendor has paid tax in Oct,18. In which month credit in this case can be claimed?

As per Sec 16(2)(c), credit shall be available in Oct, 18 i.e. at the time when payment of tax is made by vendor. However, as per Section 16(4) the credit cannot be considered in the return after Sep,18 because invoice pertains to Mar,18. There are contradictory provisions in this regard. Credit should be considered in the return for Sept, 18, if not considered at the time of issuance of invoice i.e. in Mar,18.

3.

Invoice was received from vendor in 2017-18 reversal of credit on account of 180 days done and reclaim on payment after 180 days.

Invoice was received from the vendor in Feb,18. Payment was not made to vendor within 180 days therefore credit reversed. Payment is made in Oct, 18. Therefore, credit has to be reclaimed in Oct,18.

As per Proviso to Sec 16(2) , credit shall be available in Oct, 18 when payment is made. However, as per Section 16(4) the credit cannot be considered in return after Sep,18 because invoice pertains to Feb,18. There are contradictory provisions in this regard. Credit should be considered in such cases at the time when payment is made i.e. in Oct, 18.

Hence, it is stated that 30th Sept., 18 is an important date which needs preparations in advance otherwise there is going to be big financial loses of credit.

 

By: Anuj Bansal - September 11, 2018

 

 

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