GST Update | Year end activities for FY 2019-20

With the new financial year beginning tomorrow, we wish to provide a brief list of action points to be considered to ensure compliance from GST perspective:

Documentary readiness for FY 2020-21:

1.    In terms of rule 46 of the CGST Rules, 2017 (‘CGST Rules’) the tax invoice series has to be unique for a financial year. In line with such requirement, please ensure that the IT systems are configured to issue invoice, credit notes and debit notes with unique series from 1 April 2020.

2.    Valid Letter of Undertaking (‘LUT’) is required to be obtained for each financial year, for undertaking export of goods and services without payment of IGST. Ensure LUT has been obtained for the period FY 2020-21.

Compliances with respect to input tax credit (‘ITC’):

1.    As per section 16 of the CGST Act, 2017 ITC is required to be reversed if payment is not made to suppliers within 180 days from the date of invoice. Hence, review creditors outstanding, to ensure ITC is reversed where payment to vendors is outstanding beyond 180 days.

2.    In terms of Rule 42 of the CGST Rules, ITC on inputs and input services used partly for taxable and partly for exempt/non-business activities should be re-calculated based on actual turnover for the financial year and be reversed/availed by September of next financial year.

Where the ITC availed exceeds the eligible amount, interest is applicable from 1 April of the next financial year till the date of reversal of excess credit. It is advisable to undertake re-computation of eligible ITC before filing GST returns for March 2020 to avoid interest implication.

3.    Ensure availability of tax invoices bearing the required particulars (such as GSTIN of the supplier, recipient, HSN etc) towards ITC claimed. Review the eligibility of input tax credit availed and reverse credits, if found to be ineligible.

4.    Undertake reconciliation of ITC availed for every registration with books of account and avail/reverse differential ITC, if any. Reconcile ITC availed with details uploaded by the suppliers (as per the GSTR-2A) to ensure the following:

a.    ITC availed from October 2019 to December 2019 on invoices not appearing in GSTR-2A is not more than 20 percent of eligible ITC appearing in GSTR-2A

b.    ITC availed from January 2020 onwards on invoices not appearing in GSTR-2A does not exceed 10 percent of eligible ITC appearing in GSTR-2A

Other points of consideration:

1.    Review expenses in foreign exchange to ensure GST liability is discharged and due credit is availed, as applicable.

2.    E-way bill to GSTR-1 reconciliation.

3.    Review of ISD ratios to ensure proper credit distribution.

4.    Identify any liability that may arise on account of free of cost import of services from overseas related parties, including management/ overview functions. Transfer Pricing report should be reviewed.

5.    Reconcile turnover as per GST returns and cash/ITC balance as per GSTN with books of account.

6.    Companies to ensure that the inputs/ capital goods sent for job work are received within the prescribed time limit of one year/ three years.

7.    Identify expenses incurred by head office/branch offices pertaining to other offices and cross charge the same to the relevant branches.

8.    Review effective rate of GST and ensure that tax is remitted at prevailing rates.

9.    Ensure inclusion of appropriate tax clauses in the agreements/ contracts renewed or due for renewal with vendors and customers.