GST Compliances in India: Annual Checklist and New Tasks for FY22
- From April 1, 2021, businesses with turnover above INR 500 million must issue e-invoices.
- Starting April 1, 2021, all businesses with turnover above INR 5 billion need to print QR code on B2C supply invoices – a relaxed compliance period is available till June 30, 2021 after which penalty will be levied in case of non-implementation.
- From April 1, 2021, new HSN codes are applicable.
We provide a checklist of important tasks and compliances related to goods and services tax (GST) that must be ticked off on the to-do list to ensure transparency.
Keeping best accounting practices in mind, it is also advisable to maintain suitable documentary proofs readily available for accounting, audit, and assessment purposes.
Below is a list of tasks that must have been completed before the financial year closing March 31, 2021 as well as tasks to pay attention to during FY 2021-22.
To prevent confusion regarding key GST compliances and tax reporting requirements, businesses are welcome to reach out to our professional tax advisors at firstname.lastname@example.org.
- Invoicing: While filing GSTR 1, a unique series of invoices should be raised starting April 1, 2021. It is important to note that the GSTN portal should not catch duplicate or repetitive invoice serial number during the same financial year.
- E-invoicing: The government has mandated e-invoicing for businesses with a turnover above INR 5 billion with effect from October 1, 2020. For businesses with turnover above INR 1 billion, such e-invoicing was mandated with effect from January 1, 2021. From April 1, 2021, businesses with turnover above INR 500 million (in any financial year from FY 2017-18 onwards) are mandated to issue e-invoices.
- ITC not available without e-invoicing: Without e-invoicing, purchaser will not be able to claim input tax credit (ITC).
- QR coding: Starting April 1, 2021, all businesses with turnover above INR 5 billion need to print QR code on B2C supply invoices, failing which, they shall be liable to pay penalty. However, the government has waived off the penalty for non-implementation till June 30, 2021.
- HSN code requirements: From April 1, 2021, new HSN codes will be applicable, and it is imperative for businesses to adopt the new accounting software for HSN implementation. The new HSN rules are as follows:
- Turnover up to INR 15 million – 4 digits
- Turnover from INR 15 million to INR 50 million – 4 digits
- Turnover above INR 50 million – 6 digits
- Aggregate turnover: The aggregate turnover is important for making the following decisions:
- Whether to file GSTR 1 in FY 2021-22 on quarterly QRMP scheme or on monthly basis
- Whether to mention HSN codes or how many digits to be mentioned
- Whether to opt for composition scheme depending on different turnover thresholds
- Debit or credit notes: If there are discrepancies between sales and purchase returns, debit, or credit notes must be raised for the purpose of departmental audit trial.
- Reverse charge mechanism: Reverse charge self-invoices need to be generated for reverse charge paid and input taken on supplies received from unregistered suppliers.
- Update the GST Registration Certificate system: To ensure that the data on the system matches the actual scenario, all the amendments, including products, address etc., need to be updated on the GST RC system.
Tasks related to input tax credit
- ITC Reversal Second Proviso to Section 16(2) of CGST Act: If the recipient/purchaser of goods fails to pay consideration to the supplier within 180 days, an amount equal to the input tax credit availed by the recipient shall be added to their output tax liability, along with interest thereon.
- Restricted ITC as per Rule 36(4) of CGST Rules, 2017: With effect from January 1, 2021, a taxpayer filing GSTR-3B can claim provisional ITC only to the extent of five percent of the eligible credit available in GSTR 2A. Regardless of whether you have the receipt of goods or services available, 95 percent of credit is restricted – or in other words, depends on the number of invoices uploaded on the GSTN portal. For instance, 100 percent of the credit can be claimed only when the supplier has uploaded the invoices – to the extent of 95 percent – on the portal for the particular month. Taxpayers must ensure monthly reconciliation between the purchase ledger and the portal to be able to provide such information during departmental audit or query.
- Blocked credit: In case of goods lost, stolen, destroyed etc., if the companies decide about the writing off any inventory, the ITC attributable to such inventories shall also be reversed. Also, if the ITC is wrongly claimed, such blocked credit also needs to be identified and reversed with interest at the rate of 24 percent.
- Job work: Ensure that the inputs sent out for job work activity have been received back within one year from the date of being sent out and three years in case of capital goods sent for job work. If not received back, the same will be treated as supply for GST payments and would necessitate an interest charge of 24 percent. For job work transactions, invoice details must be filed through Form GST ITC-04 (besides being recorded in Form GSTR 1).
- Reconciliation of GSTR 1 and GSTR 3B: Any deficiency in the turnover filed in GSTR 3B should be identified, and tax with 18 percent interest should be paid on it at the earliest. In case of excess turnover recorded in GSTR 3B, identify the relevant sale invoices, and if extra tax has been paid – take note of it for future adjustments.
- Reconciliation of GSTR 3B with ITC on purchases: If the ITC claimed in 3B is more than the actual purchase invoices, the same need to be reversed and paid back with interest of 24 percent. If the ITC claimed is less, they can be claimed immediately.
- GSTR 3B/GSTR 1 entries v/s accounting entries.
- Reconciliation of e-waybills with GSTR 1 and further with GSTR 3B.
- Reconciliation of GSTR 1/3B sales with balance sheet sales.
- Reconciliation of ITC ledgers.
- Reconciliation of GSTR 2A with the purchase invoices.
- B2B, B2C reconciliations: Business-to-business (B2B) and business-to-consumer (B2C) sales need to be reconciled with GSTR 3B and GSTR 1 with the books of accounts.
- Expense provisioning: There are GST implications under the reverse charge mechanism in case of expense provisioning for import / domestic services with associated entities. If such a provision is made, RCM tax needs to be paid as per the provisions.
- Cross check for income on which zero or partial GST is paid: Take corrective action in case of non/less payment.
- Letter of Undertaking: The Letter of Undertaking needs to be in place for the relevant financial year before April 1, to ensure smooth supply of exports.
- Book stock v/s physical stock: Parity between both will be beneficial during income tax and GST audits.
- GST on advance payments: GST on advances received from customers must have been paid as on March 31.
- Cross charges: They relate to the taxability of activities performed / supplies by the head office to branch offices or vice versa (such as accounting, administrative services, IT system maintenance for units located in other locations etc.). The tax effect is neutral since for one distinct person, it is an output liability and for the other, it triggers an input tax. These cross charges need to be identified and the provision for the same needs to be made. The respective invoice must be raised for common services.
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