Date of Wedding 1 July'17 - Very Emotional and Confused transiting from Bachelor to Married - Bachelor delights in himself, paying tax-on-tax, Married delights in Society - like GST avoiding tax-on-tax, earning more revenues. We do pro-actively plan for Married life - GST needs pro-active planning and work on Last return under Central Excise, Service Tax, VAT and First return under GST. Attempt is made to discuss precautions and steps to be taken during Wedding date.
Taking Stock - Bride & Groom to take stock of Strengths & Weaknesses and Share for, Long happy married life, Sec 167 & 168. Bride & Groom can bring into family their Assets -
i. Sec 167 permits taking Credit in GST of - Cenvat Credit and VAT Credit as per return, immediately before Wedding date, provided it is eligible under earlier law & GST. Ensure VAT returns are filed not later than 90 days from Wedding date.
ii. Sec 168 permits taking Credit in GST of any un-availed but eligible credit on Capital Goods under earlier laws.
Promised to be Bachelor but Married - Sec 169 & Sec 170
Supplying exempted goods / services under earlier laws or not registered under CE / VAT / ST as Credit was not available or availing benefit of Work Contract tax or Importer - Can take Credit of eligible taxes in Stocks and WIP held on Wedding day, provided
- Has valid Wedding certificate ie valid taxable invoices / documents issued 12 months prior to Wedding day (Alert - keep stock levels to minimum)
- Uses Stocks for producing taxable goods / services
- Passes on benefit of tax credit to customers (as per valuation rules prescribed)
Critical - Diligently Compiling of Stock Statement and Valuation at Wedding date.
In absence of invoice or other tax paying document, credit may be allowed at prescribed rate and manner.
Stock in transit - Sec 171 - At Wedding date there would be Stock-in-transit. If Inputs are in transit at Wedding date - Credit can be taken if
- Taxes are paid on Inputs before Wedding date
- Invoice/taxable-document was recorded in books within 30 days from Wedding date
For Happy married life - Avail all Eligible Credits under GST and avoid unjust-enrichment by (Sec 168 to 171):
- Ensuring all Credit that eligible under CE / ST / Vat are included in last returns of CE / ST / Vat
- Compile statement of all Input invoices/documents and Output invoices/documents for which Credit has been taken and Output availed under CE, ST and VAT from 1 Apr’16 to 30 Jun’17
- Compile Stock statement at 30 Jun’17
- Reconcile above statements with
- Returns filed under CE, ST and VAT
- Accounting records
- Identify Credits / Outputs availed and Still to be availed at 30 June’17
- If in doubt/ambiguity of applicability of CE / ST / Vat, pay the same and come into GST as Credit will be available to Customer in case of B2B transaction (Alert - if Supplier has not given C / F forms by Wedding date do not take credit)
- Has valid Wedding certificate ie valid taxable invoices / documents
- Ensure Credit is not claimed twice - Once in earlier laws & Again under GST
- Ensure Accounting records reflect All Balances of Credit under earlier laws and GST.
- Ensure last returns to be filed under earlier laws are filed on time.
GST is very fair (provided Spouses are fair) :
- Permits taking Credit, for tax paid under earlier laws in Stocks and WIP held on Wedding date, if moving from Composition scheme (Sec 172)
- No tax is to be paid, if not payable under earlier laws and GST, if Exempted goods returned - were removed within 6 months prior to Wedding date and returned within 6 months after Wedding date (sec 173)
- Refund of duty paid under earlier laws, if goods are returned - provided goods were supplied within 6 months prior to Wedding date and returned within 6 months after Wedding date (sec 174)
- No tax is to be paid, on Inputs / WIP / Finished-goods sent for Job work were returned to principal within 6 months after Wedding date, provided Principal and Job Worker had declared details of Inputs / WIP / Finished-goods held for Job work (Sec 175 to 177).
- Take/Give Credit for revision of prices after Wedding date provided Contract of Supply is entered prior to Wedding date (Sec 178)
- Permits distribution tax by Input Service distributor even if invoices are received after Wedding date
- Can Transfer Cenvat Credit under Centralized registration, if return is filed within 3 months from Wedding date to any RTP having same PAN (Sec 191)
- Compliance with Point-of-taxation rules - Ensure all removals upto 30 June’17 are shown in last return of Central Excise; Ensure invoices completed services are shown in last return of Service tax upto 30 Jun’17; Ensure similar compliances under VAT of specific State. (Sec 188 & 189)
Keeping your married life Peaceful (Sec 185) - If after Wedding date
- Any duty / penalty / interest recoverable under earlier laws same shall be recovered as Arrears of tax under GST and would not be eligible for Credit under GST.
- Any amount becomes refundable under earlier laws same would be paid in cash under earlier laws.
Diving a little deeper - Planning for first month of Wedding - Understanding returns filed under GST would help in precautions to be taken for transfer all Credits from Bachelor life to GST life (Sec 32 to 42 & related rules).
GST Tax payers being Married on 1 Jul’17, should be Young and comfortable in keeping all data in Electronic form with third-party (i.e. GSTIN network)
Wedding Laundry List in brief : Returns to be filed in brief for first month
- GSTR-1 - Outward Supplies - Supplier should file/upload by 10th of succeeding month - Details of outward Supplies including Invoice, debit notes, credit notes and revised invoices issued during tax period.
- GSTR-2A of the Customer would be auto populated with details from GSTR-1; Customer will have to accept / reject input auto populated entries;
- GSTR-2 - Inward Supplies - is Input tax credit claimed by Customer populated from GSTR-2A to be filed after 10th but before 15th of succeeding month
- GSTR -1A of Supplier - Supplier may accept / reject changes made by Customer thru GSTR-2A before 17th of succeeding month. GSTR-1A would form final base for Output credit-availed and Input Credit.
- GSTR-3 - compute net tax pay / carried forward - Monthly return to be filed by 20th Succeeding month.
Important Note - Till tax is paid return is not deemed to have been filed
- No provision for revision of returns - Credit & Debit notes to be used
- B2B transaction - Matching to be done at Invoice level i.e. GSTIN, Invoice No. & date, Value, Description, rate of tax and value of Tax
- B2C transactions - matching only for transactions above specified limits
- Service invoices - HSN code to be used
Ensure your Spouse is not cheating you: It is Receivers / Buyers responsibility to ensure Sellers upload their returns correctly and pay the taxes.
- Inward supply furnished by a receiver to be matched with details of output supplies
- Not accepted by Receiver but not corrected by Supplier - tax liability would be adjusted to Output tax liability of Receiver
- Receiver may reclaim Credit after Supplier has rectified in his return; time limit for Rectification is 20 Oct of following FY or filing of Annual return whichever is earlier.
Buyers may have to include a warranty clause in PO’s for reimbursement of losses incurred due to Sellers not uploading their returns or paying tax within due dates.
Need for pro-active planning
- Credit of IGST, CGST and SGST of one state cannot be used to set-off against Output liability of IGST, CGST and SGST in another state; Pro-active planning is required to ensure funds are not blocked.
- Accounting / ERP systems need to be aligned to requirement of GST returns and Electronic record-keeping of GSTIN.
New couple need to unlearn (no automatic entitlement) and learn (need to empower) at a granular level. Organizations to empower employees to ensure organization thinks pro-active to reap full benefits of GST. GST does not Entitle Organizations to benefits; GST requires Organizations to Empower themselves to reap benefits.