Goods & Service Tax. Mega Seminar on GST The Institute of Chartered Accountants of India. August 31, Discussion by: CA Gaurav Gupta

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1 Goods & Service Tax Mega Seminar on GST The Institute of Chartered Accountants of India August 31, 2018 Discussion by: CA Gaurav Gupta FCA, LLB, DISA Author GST Law & Practise - Service Tax Law & Practise

2 GST Reconciliation Agenda Highlights for FY Prerequisites for GST Audit Reconciliations to be Done Important points in Balance Sheet and Profit and Loss Account Important Issues in GST Year end Procedures CA Gaurav Gupta 2

3 FY Highlights for FY Year divided between old regime and new regime Old liabilities are done. No pending balance should remain in Balance sheet Transitional entries to be reviewed properly, especially carry forward of earlier balances, Stock with job workers, Stock lying with branches, continuing contracts etc Pending debtors to be examined in case of Cash based liabilities Opening advances from customers and to vendors to be examined for credits Anti profiteering Examination not only in transition but during the year as well Study of Financials CA Gaurav CA Gaurav Gupta Gupta 3 3

4 Prerequisites for Audit GSTIN wise Trial Balance Output Liability Register Input Credit Register Stock Register Form 3B GSTR 1 GSTR 2A Reverse charge Registers Cash / Credit Ledgers for last year Books of Accounts Study of Financials CA Gaurav CA Gaurav Gupta Gupta 4 4

5 Reconciliations to be done GSTIN Level Reconciliation Revenue as per P&L + Asset sale v GSTR 3B Revenue as per P&L v Form 26AS Yearly rate wise computation of output tax and its disposal GSTR 3B v GSTR 1 GSTR 1 v Sales Ledger Closing Balances on Advances received as per TB v GSTR 1 Input register v GSTR 3B Input register v GSTR 2A Input register v Expenses in TB + Addition in Fixed assets Study of Financials CA Gaurav CA Gaurav Gupta Gupta 5 5

6 Reconciliations to be done Input register v Form 26Q Cash Ledger as per portal v Books Credit Ledger as per portal v Books Reverse Charge Register v Expenses + Addition in Fixed assets Reverse Charge Register v Form 26Q Reconciliation of Interunit / Related party Cross charges as per different TB (Income for one and expense for other) Closing Balances of Liability as per Books and returns of April of subsequent year Expenditure in Foreign currency Study of Financials CA Gaurav CA Gaurav Gupta Gupta 6 6

7 Balance Sheet Implications on Balance Sheet S.No. Item in Financial Implications 1. Share Capital - Any share capital in kind requires GST analysis including sweat equity 2. Long Term Loans - Any charges paid outside India / Corporate guarantees are subjected to GST 3. Trade Payables - Creditor ageing to be analysed for more than 180 days pending balances and reversal thereof 4. Fixed Assets - Ensure ITC has been taken on purchase of Fixed asset - Ensure reversal of ITC as per Rule 43 as required - Tax has been paid on sale of fixed assets esp. vehicles - Look out for goods written of as reversal of ITC availed on such goods is required Study of Financials CA Gaurav CA Gaurav Gupta Gupta 7 7

8 Balance Sheet Implications on Balance Sheet S.No. Item in Financial Implications 5. Capital Work in progress - Capital Work in progress to be examined for any unavailed credit 6. Trade Receivables - Export customers are to be examined in case of services as export realisation is a pre condition for Export of Services - No reversal of GST in case of Bad debts 7. Inventories - GST should not be included in the value of inventory - Excise duty on Stock as on exempted but with conditions - Look out for goods written of as reversal of ITC availed on such goods is required Study of Financials CA Gaurav CA Gaurav Gupta Gupta 8 8

9 Stock on Excise Exemption CBEC has by way of Notification No. 12/2017-CE (effective July 1, 2017) has exempted all excisable goods other than those on which excise is still continued, from whole of excise leviable thereon under Central Excise Act, subject to following conditions: Goods should have been manufactured on or before Appropriate GST is paid on such goods when cleared post Study of Financials CA Gaurav CA Gaurav Gupta Gupta 9 9

10 Balance Sheet Implications on Balance Sheet S.No. Item in Financial Implications 8. Other Current Liabilities 9. Other Current Assets - Advances from customers to be checked for pending GST liability (in case of services) - Ensure no credit is taken on advances paid to vendors even if tax invoices are raised Study of Financials CA Gaurav CA Gaurav Gupta Gupta 10 10

11 Profit and Loss Implications on Revenue / Expenses S.No. Item in Financial Implications 1. Sales - GST not to form part of revenue figure and is to be excluded in reflection - Treatment of discounts and credit notes to be examined - Treatment of Composite v mixed supply - Reimbursements / incidental incomes are taxable unless conditions of pure agent are satisfied - Cross charge to other units sensitive analysis of ITC - Unearned Income / Deferred income - Place of Supply on all items - Time of Supply to be examined on deferred income / income accrues but not due - Special attention to rate changes during the year Study of Financials CA Gaurav CA Gaurav Gupta Gupta 11 11

12 Profit and Loss Implications on Revenue / Expenses S.No. Item in Financial Implications 2. Expenses - Netting of Income with amount payable should also be checked as liability of Service Tax does not absolve on netting. The same can be verified from ledger/ credit notes/ debit notes. - Reverse Charge liability on reverse charge mechanism especially on unregistered suppliers upto October 12, Prepaid expenses No ITC if goods / services are not received 3. Purchases - Purchase to exclude all GST costs. BCD to form part of purchases - Personal consumption of Directors / employees to be taken out in certain industries - ITC on samples distributed to be reversed Study of Financials CA Gaurav CA Gaurav Gupta Gupta 12 12

13 GST Issues in Supply - Concept of taxable turnover - Reporting and identification, a worry - Invoice level reporting - Deemed supply situations now rectified - Inter Company supply vs Input service distribution - thinline to walk - LUT Persons who missed to file - Circular No. 37/11/2018-GST - Tax on goods sold in Custom Bonded and duty free shops - Fringe benefit tax revived benefits to employees (related party) - Captive consumption taxable? Place of Supply Gaurav CA Gaurav Gupta Gupta 13 13

14 GST Other Output issues - Place of Supply gone wrong remedy or penalty? - Patterns, dies and tools supplied by recipient, FOC material supplied to contractor supply? - Value includes interest or late fee or penalty for delayed payment of any consideration for any supply taxing the loss - Bad debt Government still insured - Deposits Assessee stuck between GST and Companies act - Requirement for debit and credit notes to adjust output/input tax - Double Taxation in cross border transactions eg. repair Place of Supply Gaurav CA Gaurav Gupta Gupta 14 14

15 GST Issues in Input tax - Trader better than manufacturer - Anti profiteering Devil or robinhood - Payment to be made within 180 days dual collection of taxes - When shall be a credit used for personal consumption - More Credits blocked than required - Reversal under Rule 42 / 43 Place of Supply Gaurav CA Gaurav Gupta Gupta 15 15

16 Items requiring special mention Input Service Distribution A must for all companies having multi locational units Cross charge a must entry for March vs Input Service Distributor Updating chart of Accounts 9 Ledgers per state and reconciliation with registers on GSTN Cross charge a must entry for March vs Input Service Distributor Reconciliation of GSTR 2A and ITC ledger Perquisites and other supplies to employees Bad debts Tax Audit form is being revisited from GST perspective Study of Financials CA Gaurav CA Gaurav Gupta Gupta 16 16

17 Items requiring special mention Bargain agreements Corporate Guarantee Form 3CEB Arms length value with sister concerns Any demand in direct tax on account of disallowed expenditure / unearthered income Prior period Income and Expenses Free of Cost supplies Schemes v gifts / promotional material Study of Financials CA Gaurav CA Gaurav Gupta Gupta 17 17

18 Year End Procedures Invoice Series determination for new year LUT in case of export to be filed 180 day check for Input tax credit to be applied on last date of FY Opting Composition Scheme before FY Opting for Monthly / Quarterly returns Corrections to be made in 3B and GSTR 1 for FY Study of Financials CA Gaurav CA Gaurav Gupta Gupta 18 18

19 Thank you CA Gaurav Gupta Partner MGS & Co. LD- 65, Pitampura, Delhi cagauravmgs@gmail.com Disclaimer This presentation has been prepared for internal use of firm and its clients. The contents of this document are solely for informational purpose. It does not constitute professional advice or a formal recommendation. The presentation is made with utmost professional caution but in no manner guarantees the content for use by any person. It is suggested to go through original statute / notification / circular / pronouncements before relying on the matter given. The presentation is meant for general guidance and no responsibility for loss arising to any person acting or refraining from acting as a result of any material contained in this presentation will be accepted by us. Professional advice recommended to be sought before any action or refrainment.