Is there any practical way out to the ITC restriction of 20% - Rule 36(4)

TWO YEARS OF GST IMPLEMENTATION

GST completed two years since its implementation from 01.07.2017. Initially the GST was proposed to be implemented from 01.04.2010. However, due to lack of political consensus the GST could not be implemented by 2010.

Brief History as available in www.gst.gov.in is reproduced herewith for knowledge purpose: On 19th December, 2014, The Constitution (122nd Amendment) Bill 2014 was introduced in the Lok Sabha and was passed by Lok Sabha in May 2015. The Bill was taken up in Rajya Sabha and was referred to the Joint Committee of the Rajya Sabha and the Lok Sabha on 14th May, 2015. The Select Committee submitted its report on 22nd July, 2015. Thereafter, the Constitutional Amendment Bill was moved on 1st August 2016 based on political consensus. The Bill was passed by the Rajya Sabha on 3rd August 2016 and by the Lok Sabha on 8th August 2016. After ratification by required number of State legislatures and assent of the President, the Constitutional amendment was notified as Constitution (101st Amendment) Act 2016 on 8th September, 2016. The Constitutional amendment paved way for introduction of Goods and Services Tax in India.

After GST Council approved the Central Goods and Services Tax Bill 2017 (The CGST Bill), the Integrated Goods and Services Tax Bill 2017 (The IGST Bill), the Union Territory Goods and Services Tax Bill 2017 (The UTGST Bill), the Goods and Services Tax (Compensation to the States) Bill 2017 (The Compensation Bill), these Bills were passed by the Lok Sabha on 29th March, 2017. The Rajya Sabha passed these Bills on 6th April, 2017 and were then enacted as Acts on 12th April, 2017.

Thereafter, State Legislatures of different States have passed respective State Goods and Services Tax Bills. After the enactment of various GST laws, GST was launched with effect from 1st July 2017 by Sh.Narendra Modi, Hon'ble Prime Minister of India in the presence of Sh.Pranab Mukherjee, the then President of India in a mid-night function at the Central Hall of Parliament of India.

Challenges: In the last of week of June 2017, CBIC had released 38 notifications regarding rate, exemption amongst other. In 2017, the GST was to be implemented from 01.04.2017  but it got postponed by three months. There was total chaos among taxpayer. However, taxpayer embraced GST and slowing started understanding it and adopting it. The taxpayer had to make changes in the Tax invoice format, update their billing software with the GST rates, update GSTIN of the supplier and the customers in system. At first instance the GSTIN were required to be collated from the suppliers and the customers. Some service provider came up with a service of calling the parties and collate GSTIN . GSPs GST Suvidha Provider came in to the play. They assisted the big company with filing of return.  

Compliance: GST TRAN-1 was the return to be filed to carry forward the unutilized input tax credit of the erstwhile tax regime. The credit which was appearing as carry forward credit in the last return of the previous tax regime was allowed to be carry forwarded to the GST through GST TRAN-1. Also, the Central Excise duty involved in the closing stock which was lying with the trader as on 30.06.2017 was allowed to be carry forward through GST TRAN-1 return. Also, GSTR TRAN-2 was to be filed by the dealer declaring the outward supply of the stock which was declared and credit was claimed on the CGST payable.

Thereafter GSTR-3B was introduced to be filed as a summary return furnishing outward supply and inward supply and compute the tax and pay the tax before filing of return. GSTR-1 was also filed on a monthly/quarterly basis by the taxpayer. GST refund was also linked with filing of return in GSTR-3B and GSTR-1. GSTR-2 & GSTR-3 did not came into effect.

Scrutiny of transitional credit: The transition provision allowed full credit if the stocks lying as at the trader place is supported by Central Excise invoice. Otherwise the credit was restricted to 60% /30% of the duty. Many manufacturer had their stock lying at various depots where the goods did not directly received from their factory. The stock travelled from factory to main depot and then to regional depot and then to local depot. Thus the stock at local depot will not have duty paying document but they have duty component in them. Hence, company claimed full credit but department did not allowed.

Amendments to GST Law: I did counted the number of notification, circulars etc in the CBIC website as on 26.07.2019. In total 716 notification, circular, orders were published by CBIC.

GST Council: GST Council consists of Union Finance Minister as Chaiperson, The Union Minister of State, in-charge of Revenue, Min. of Finance as members, The Minister In-charge of Finance or Taxation or any other Minister nominated by each State Government as members. GST Council ensures the harmonization on different aspects of GST between the Centre and the States as well as amongst the States.

The Constitution (One Hundred and First Amendment) Act, 2016 provides that every decision of the GST Council shall be taken at its meeting by a majority of not less than 3/4th of the weighted votes of the Members present and voting. The vote of the Central Government shall have a weightage of 1/3rd of the votes cast and the votes of all the State Governments taken together shall have a weightage of 2/3rd of the total votes cast in that meeting. One half of the total number of members of the GST Council shall constitute the quorum at its meeting.

So far 36 GST Council meetings has taken place. Tax rate were reduced on several products.

E-way bill: E-way bill was introduced from June 2018 on compulsory basis in all India level. The threshold limit common to all State was ₹ 50,000/-. But later on States on their own increased the limit to ₹ 100000/-. E-way bill is required for invoice value more than ₹ 50,000/- or ₹ 100000/-. The website for e-way bill is https://www.ewaybill.nic.in/

Annual Return: GST annual return in Form GSTR-9, 9A and 9C is required to be filed by the taxpayer subject to conditions prescribed in the GST provision. The annual return for the very first year 2017-18 consisting 9 months period is to be filed by 31.08.2019.

New Return: New return in GST RET-1, 2, 3 is going to come in phased manner from October 2019. The prototype of new return is given in www.gst.gov.in

Benefit of GST: Freedom from number of taxes and their Act, Rules etc. Each State had their own Value Added Tax Act and Rules, Each States website was required to be checked every day to see if any changes has come or not. There was problem with entry tax law which is applicable to certain product. There was Local body tax as well which was applicable on movement of goods from one municipal limit to another municipal limit. The taxpayer has to liason with Central Excise Department, Value Added Tax Department, Service Tax officers, Entry tax Officer etc. Taxpayer had to issue / collect statutory forms.

All these difficulties of liasoning with different department is done away with. Refer each State Act, Rules is also not required now. The GST has given relief to the consultant, taxpayer and the GST officer. In fact GST has widened the scope of GST consultant. Now consultant can give opinion to client in another State as the law is same. SGST Act, Rules are replica of CGST Act, Rules.

More challenges to come: Once new return comes in to effect the taxpayers will get fully occupied with inward supply reconciliation. Taxpayer will have to co-ordinate with the supplier, concern purchase team member within the organization. Technical difficult is ought to come. Need to see how far the information technology is ready for online reconciliation of inward supply by all the taxpayers on a continuous basis. A dedicate person will be required in a big organization to take care of GST reconciliation where the transactions are in huge in numbers.

Further, requirement of Invoice Reference Number (IRN) is going to come in near future. The taxpayer will have to fill up the form in GSTN and upon submitting the details a reference called IRN will be generated. The same number will have to be shown on the face of the invoice. Once this comes into effect the requirement of e-way bill will be done away with

 

CA BIJU P, FCA

GST NEW RETURN PROTOTYPE IN GSTN

The existing return in GSTR-1, GSTR-2 & GSTR-3 is going to be replaced by new return in FORM RET-1 consisting of ANX-1, ANX-2. In addition to this return in FORM GST RET-2 and GST RET-3 is also be going to be come into effect in a phased manner. The prototype of the new return (trail) is being made available in www.gst.gov.in for the taxpayer to walk through the return and get an idea as to how the new return template would look like. In order to go through the prototype one does not required login credential. It is available in the homepage itself. It has two option 'New Return Prototype' and 'Offline Tools for New Return (Trial)'. The taxpayer can give his feedback on the return prototype to the email id Feedback.NewReturn@gstn.org.in

The first option of new return is online mode of filing return. A taxpayer can fill up the details of outward supply in an online mode. And in case of inward supply he has to accept, reject, keep pending the invoices auto populated in ANX-2 based on the ANX-1 filed by the suppliers. The prototype gives an idea as to how the return would  look like and how the taxpayer would file the return one it comes into force. The second option is an offline method where the taxpayer will have to fill up the template in section wise validate it and then upload it in the GSTN.

This is a second attempt of the Government to bring everything online so as to have a transparent view on the transactions affected by the taxpayer. The tax liability of the taxpayer on outward supply, inward supply liable to reverse charge, import of goods or service is determined once ANX-1 is filed. He has to pay tax on the supplies furnished in ANX-1. Presently, tax payment by the taxpayer is on self assessment basis in GSTR-3B.

The tax eligibility in new return is based on acceptance of the invoices populated in ANX-2. Once the invoices are accepted by the recipient it becomes an eligible credit. Also, when the invoices uploaded by the supplier is accepted by the recipient the  outward supply of the supplier gets locked and then he has to pay tax on that invoice. This make a two way check. One that ensures that supplier has paid the tax and second the taxpayer has claimed the credit correctly.

A Provisional credit would also be allowed to the recipient on inward supplies received but the invoices not uploaded by the supplier. Then the recipient will have to follow up with the supplier to ask him to upload the invoices in ANX-2. The follow up procedure is going to increase a lot. A dedicated person will be required in a big company to do the follow up job. This will increase the job requirement in the market as many of the small company may wish to delegate this kind of work

 

CA BIJU P

Recent Updates in GST

RECENT UPDATES IN GST

An Article By: - CA Biju P

June 19, 2019

 

The Budget exercise is on and we may have Union Budget 2019 on 5th July, 2019 preceded by the Economic Survey. Pre-budget consultations are to commenced from 11th June, 2019. This will include State Governments trade bodies, chambers, economists, banks etc. The Budget session starts from June, 17th till 26th  July, 2019. In the back drop of short revenue collection, it is being expected that fiscal deficit may remain at 3.4%. There may also be some manifesto promises being taken care of.

GST Council is expected to meet on 20th June, 2019, for first time after recent elections. It is expected that it may fix ₹ 50 crore turnover threshold for e-invoices, consider scaling down of GST collections targets owing to rate cuts, finalize new returns from July, 2019 etc.  MOF has laid down road map for implementation of new GST returns system including transition mechanism on trail basis from July, 2019.

It is also expected that on some more items, tax rates may be reduced including some items being shifted from 28% slab and 18% slab. These may include motor vehicles, FMCG goods, construction sector etc and area where growth is slowing down. Decisions on e-invoicing, discounts, simplification of returns, fate of anti-profiteering provision, ITC issues etc are some other issues which may be addressed.

So far as GST collections are concerned, the revenue has surpassed ‘one lakh crore’ mark yet again in May, 2019, third month in row, which indicates stabilization of revenue collection. It has been ₹ 1,00,289 crore as against ₹ 94,016 crore in May, 2018. April, 2019 saw an all time high collection ₹ 1,13,000 crore with GST targets for financial year 2019-20 being higher by 35% over previous year (₹ 4.5 trillion in 2019, ₹ 6.10 trillion in 2020). Tax Collectors are expected to be rough and tough with tax evaders. Income tax and GSTN have already entered into a MOU for sharing of information.

Recent Updates on GST

5. Transition plan to the new GST Return

• The GST Council in its 31st meeting decided to introduce a new GST return system which shall have three main components:- one main return (FORM GST RET-1) and two annexures (FORM GST ANX-1 and FORM GST ANX-2)
• In May, 2019 a prototype of the offline tool was been shared on the common portal.
• From July, 2019 to September, 2019, users under a trial program would be able to:

• upload invoices using the FORM GST ANX-1 offline tool
• view and download the inward supply of invoices using the FORM GST ANX-2

• This trial would have no impact at the back end on the tax liability or input tax credit and the taxpayers would continue to fulfil their compliances by filing FORM GSTR-1 and FORM GSTR-3B.
• From October, 2019 onwards, FORM GST ANX-1 shall be made compulsory and FORM GSTR-1 would be replaced by FORM GST ANX-1.
• Large taxpayers would upload their monthly FORM GST ANX-1 from October, 2019 onwards and small taxpayers would upload their quarterly (October to December, 2019) FORM GST ANX-1 in January, 2020.
• For October and November, 2019, large taxpayers would continue to file FORM GSTR-3B on monthly basis. They would file their first FORM GST RET-01 for the month of December, 2019 by 20th January, 2020.
• The small taxpayers would stop filing FORM GSTR-3B and would start filing FORM GST PMT-08 from October, 2019 onwards. They would file their first FORM GST-RET-01 for the quarter October, 2019 to December, 2019 from 20th January, 2020.
• From January, 2020 onwards, all taxpayers shall be filing FORM GST RET-01 and FORM GSTR-3B shall be completely phased out.

[Source: CBIC Press release dated 11.06.2019]

5. Clarifications on filing of Annual Return (FORM GSTR-9)

• Input tax credit on inward supplies received in 2017-2018 but availed in April, 2018 to March, 2019 shall be declared in Table 8C of FORM GSTR-9.
• Transactions relating to financial year 2017-18 but declared in returns from  April, 2018 to March, 2019 shall be declared in Part V of FORM GSTR-9.
• The basis of declaring a supply in Part II or Part V of GSTR-9 shall be when tax was paid through FORM GSTR-3B and not when the supply was declared in FORM GSTR-1  i.e.,  if the tax on such supply was paid through FORM GSTR-3B from July ,2017 to March, 2018, then such supply shall be declared in Part II and if the tax was paid through FORM GSTR-3B between April, 2018 to March, 2019 ,then such supply shall be declared in Part V of FORM GSTR-9.
• System generated Form GSTR-9 is a functionality provided to taxpayers for facilitation purposes only and if there is any mismatch between auto-populated data and the actual entry in the books of accounts or returns, taxpayers shall report the data in Form GSTR-9 as per their books of account or returns filed during the financial year.
• Any outward supply which was not declared in Form GSTR-1 and Form GSTR-3B is to be declared in Part II of Form GSTR-9 and additional liability on such outward supply is to  be computed in Part IV and the gap between the “tax payable” and “paid through cash” column of Form GSTR-9 is to be paid through Form DRC-03.
• Payments made through Form DRC-03 for any supplies relating to period between July 2017 to March 2018 shall not be accounted for in FORM GSTR-9 but shall be reported during reconciliation in Form GSTR-9C.

[Source: CBIC Press release dated 04.06.2019]

5. IGST Credit accrued in financial year 2017-2018 not to lapse if not availed

• Form GSTR-9 does not allow a taxpayer to report details of Integrated Goods and Service Tax (IGST) paid on imports made in financial year 2017-18 but credit for the same was availed in financial year 2018-19.
• There were apprehensions that credit which was availed from April, 2018 to March, 2019 but not reported in the annual return may lapse.
• CBIC has now clarified that input tax credit accrued on import of goods by paying GST in 2017-18 shall not lapse even if the taxpayer has not claimed credit in the same financial year and details of entire credit availed on import of goods from July, 2017 to March, 2019 shall be shown in Table 6(E) of FORM GSTR-9.

[Source: CBIC Press release dated 04.06.2019]

5. Additional liability in GSTR-9 and its payment

• Additional liability not reported at the time of filing of Form GSTR-3B for the financial year 2017-2018 can be declared in Form GSTR-9.
• The additional liability so declared is required to be paid through Form GST DRC-03.
• If available cash balance in Electronic Cash Ledger is less than the amount required to offset the liabilities, then additional cash required to be paid by taxpayer is shown in the "Additional Cash Required" column. However, a challan may also be created for the additional cash directly by clicking on the Create Challan button.

 

TIPS FOR FILING ANNUAL RETURN FILING UNDER GST

Hi

All Registered Persons , whetehror not they have made any transactions during the FY 2017-18, should compulsorily file the Annual return in Form GSTR 9 on or before June 30, 2019. Please note this is an extended date and the normal due date is 31st december coming after the end of the relevant financail  year. The due date for FY 2017-18 would have been 31.12.2018.

 

Persons who are having Nil Transactions should file Nil Return

GSTR 9 does not allow any revision after filing the same. So be careful while filing the same

 

GSTR 9 is EDITABLE

Delayed filing would attract Late Filing Fee to the tune of Rs.200(CGST +SGST)

Also chance levying penalty which may extends to Rs.75000/-

GSTR 9 for Registered Regular dealers and GSTR 9A for Composition dealers

CA Biju P, FCA, DISA

 

FAQ ON REAL ESTATE SECTOR

FAQs on real estate - GST

 

F. No. 354/32/2019-TRU

Government of India

Ministry of Finance

Department of Revenue

(Tax Research Unit)

Dated the 7th May, 2019, New Delhi

Subject: FAQs on real estate- reg.

A number of issues have been raised regarding the new GST rate structure notified for real estate sector effective from 01-04-2019. A compilation of Frequently Asked Questions (FAQs) is presented below. The answers to the FAQs have been given in simple language for guidance and easy understanding of all stakeholders in the real estate sector. They do not have force of law. In case of conflict, the gazette notifications, which have legal force, shall have precedence.

S. No.

Question

Answer

1.

What are the rates of GST applicable on construction of residential apartments?

With effect from 01-04-2019, effective rate of GST applicable on construction of residential apartments by promoters in a real estate project are as under:

Description

Effective rate of GST (after deduction of value of land)

Construction of affordable residential apartments

1% without ITC on total consideration.

Construction of residential apartments other than affordable residential apartments

5% without ITC on total consideration.

The above rates are effective from 01-04-2019 and are applicable to construction of residential apartments in a project which commences on or after 01-04-2019 as well as in on-going projects. However, in case of on-going project, the promoter has an option to pay GST at the old rates, i.e. at the effective rate of 8% on affordable residential apartments and effective rate of 12% on other than affordable residential apartments and, consequently, to avail permissible credit of inputs taxes; in such cases the promoter is also expected to pass the benefit of the credit availed by him to the buyers.

2.

 

What is an affordable residential apartment?

Affordable residential apartment is a residential apartment in a project which commences on or after 01-04-2019, or in an ongoing project in respect of which the promoter has opted for new rate of 1% (effective from 01-04-2019) having carpet area upto 60 square meter in metropolitan cities and 90 square meter in cities or towns other than metropolitan cities and the gross amount charged for which, by the builder is not more than forty five lakhs rupees. [Cities or towns in the notification shall include all areas other than metropolitan city as defined, such as villages.]

In an ongoing project in respect of which the promoter has opted for new rates, the term also includes apartments being constructed under the specified housing schemes of Central or State Governments.

[Metropolitan cities are Bengaluru, Chennai, Delhi NCR (limited to Delhi, Noida, Greater Noida, Ghaziabad, Gurgaon, Faridabad), Hyderabad, Kolkata and Mumbai (whole of MMR) with their geographical limits prescribed by Government.]

3.

 

What is an on-going project?

A project which meets the following conditions shall be considered as an ongoing project.

(a) Commencement certificate for the project, where required, has been issued by the competent authority on or before 31st March, 2019, and it is certified by a registered architect, chartered engineer or a licensed surveyor that construction of the project has started (i.e. earthwork for site preparation for the project has been completed and excavation for foundation has started) on or before 31st March, 2019.

(b) Where commencement certificate in respect of the project, is not required to be issued by the competent authority, it is to be certified by any of the authorities specified in (a) above that construction of the project has started on or before the 31st March, 2019.

(c) Completion certificate has not been issued or first occupation of the project has not taken place on or before the 31st March, 2019.

(d) Apartments of the project have been, partly or wholly, booked on or before 31st March, 2019.

4.

 

Does a promoter or a builder has option to pay tax at old rates of 8% & 12% with ITC?

Yes, but such an option is available in the case of an ongoing project. In case of such a project, the promoter or builder has option to pay GST at old effective rate of 8% and 12% with ITC.

To continue with the old rates, the promoter/ builder has to exercise one time option in the prescribed form and submit the same manually to the jurisdictional Commissioner by the 10th of May, 2019.

However, in case where a promoter or builder does not exercise option in the prescribed form, it shall be deemed that he has opted for new rates in respect of ongoing projects and accordingly new rate of GST i.e. 5% / 1% shall be applicable and all the provisions of new scheme including transitional provisions shall be applied.

There is no such option available in case of projects which commence on or after 01.04.2019. Construction of residential apartments in projects commencing on or after 01.04.2019 shall compulsorily attract new rate of GST @ 1% or 5% without ITC.

5.

What is the rate of GST applicable on construction of commercial apartments [shops, godowns, offices etc.] in a real estate project?

With effect from 01-04-2019, effective rate of GST, after deduction of value of land or undivided share of land, on construction of commercial apartments [shops, godowns, offices etc.] by promoter in real estate project are as under:

Description

Effective rate of GST (after deduction of value of land)

Construction of commercial apartments in a Residential Real Estate Project (RREP), as explained in question no. 6 below, which commences on or after 01-04-2019 or in an ongoing project in respect of which the promoter has opted for new rates effective from 01-04-2019

5% without ITC on total consideration.

Construction of commercial apartments in a Real Estate Project (REP) other than Residential Real Estate Project (RREP) or in an ongoing project in respect of which the promoter has opted for old rates

12% with ITC on total consideration.

 

6.

 

What is a Residential Real Estate Project?

A “Residential Real Estate Project” means a 'Real Estate Project' in which the carpet area of the commercial apartments is not more than 15 per cent. of the total carpet area of all the apartments in the project.

7.

 

What is the criteria to be used by an architect, a chartered engineer or a licensed surveyor for certifying that construction of the project has started by 31st March, 2019

Construction of a project shall be considered to have been started on or before 31st March, 2019, if the earthwork for site preparation for the project has been completed, and excavation for foundation has started on or before the 31st March, 2019.

8.

 

Does a promoter/ builder have to purchase all goods and services from registered suppliers only?

A promoter shall purchase at least eighty percent. of the value of input and input services, from registered suppliers. For calculating this threshold, the value of services by way of grant of development rights, long term lease of land, floor space index, or the value of electricity, high speed diesel, motor spirit and natural gas used in construction of residential apartments in a project shall be excluded.

9.

 

If value of purchases as prescribed above from registered supplier is less than 80%, what would be the applicable GST rate on such purchases?

Promoter has to pay GST @ 18% on reverse charge basis on all such inward supplies (to the extent short of 80% of inward supplies from registered supplier) except cement on which tax has to be paid (by the promoter on reverse charge basis) at the applicable rate, which at present is 28% (CGST 14% + SGST 14%)

10.

 

In case of new rate of 5% / 1%, whether the conditions of payment of tax through Cash Ledger, payment of tax under RCM subject to 80% limit, non-availing of Input Tax Credit, reversal of credit, maintenance of project wise account, reporting of ITC not availed in corresponding GSTR-3B etc. are required to be complied mandatorily by the Developer ?

Yes. All the specified conditions against clause (i) to (id) of Sl. No 3 of Notification No. 11/2017-CTR are mandatory.

11.

 

What is the rate of GST applicable on transfer of development rights, FSI and long term lease of land?

Supply of TDR or FSI or long term lease of land used for the construction of residential apartments in a project that are booked before issue of completion certificate or first occupation is exempt.

Supply of TDR or FSI or long term lease of land, on such value which is proportionate to construction of residential apartments that remain un-booked on the date of issue of completion certificate or first occupation, would attract GST at the rate of 18%, but the amount of tax shall be limited to1% or 5%of value of apartment depending upon whether the residential apartments for which such TDR or FSI is used, in the affordable residential apartment category or in other than affordable residential apartment.

TDR or FSI or long term lease of landused for construction of commercial apartments shall attract GST of 18%.

The above shall be applicable to supply of TDR or  FSI or long term lease of land used in the new projects where new rate of 1% or 5% is applicable.

12.

 

Who is liable to pay GST on TDR and floor space index?

The promoter is liable to pay GST on TDR or floor space index supplied on or after 01-04-2019 on reverse charge basis.

13.

 

At what point of time, the promoter should discharge its tax liability on TDR.

The liability to pay GST on development rights shall arise on the date of completion or firstoccupation of the project, whichever is earlier. Therefore, promoter shall be liable to pay tax on reverse charge basis, onsupply of TDR on or after 01-04-2019, which is attributable tothe residential apartments that remain un-booked onthe date of issuance of completion certificate, or first occupation of the project.

14.

 

At what point of time, the promoter should discharge its tax liability on FSI (including additional FSI).

On FSI received on or after 1.4.2019, the promoter should discharge his tax liability on FSI as under:

(i) In case of supply of FSI wherein consideration is in form of construction of commercial or residential apartments, liability to pay tax shall arise on date of issuance of Completion Certificate.

(ii) In case of supply of FSI wherein monetary consideration is paid by promoter, liability to pay tax shall arise on date of issuance of Completion Certificate only if such FSI is relatable to construction of residential apartments. However, liability to pay tax shall arise immediately if such FSI is relatable to construction of commercial apartments.

15.

 

At what point of time, the promoter should discharge its tax liability on supply of long term lease.

On long term lease received on or after 1.4.2019, the promoter should discharge his tax liability on long term lease as under:

In case of supply of long term lease of land for construction of commercial apartments, tax shall be paid by the promoter immediately. However, for construction of residential apartment, liability to pay tax on the upfront amount payable for long term lease shall arise on the date of issuance of Completion Certificate.

16.

 

Land development corporation of Orissa has provided land on long term lease for 99 years, for construction of a real estate project. As per the lease agreement, promoter has to pay an upfront amount of ₹ 10 Crore and annual/ monthly licence fee of 5 lakhs. Does the promoter has to pay GST on these amounts?

 

The liability to pay tax on Long term lease of land (30 years or more) received against consideration in the form of upfront amount and periodic licence fee is on the promoter. The promoter has to discharge tax liability on the same on RCM basis. However, the upfront amount payable for the long term lease (known as premium, salami, cost, price, development charges etc.) is exempt to the extent it is used for construction of residential apartments that are booked before issuance of completion certificate or first occupation.

Annual/ monthly rent or licence fee payable for long term lease is taxable under GST.

17.

 

Someone booked a flat from XYZ Developers in June, 2018. As of 31-03-2019, he had paid 40 % of the value of the flat. What shall be the GST rate applicable on the remaining portion of value of the flat?

GST on the remaining portion of the value of flat payable to the promoter on or after 01-04-2019 as per the contract between the promoter and buyer shall be payable at effective rate of 1% or 5%, subject to the condition that the builder has not exercised the option to pay tax on construction of apartments at the old rates of 12% or 18%. If the XYZ developer exercises option to continue to pay tax at old effective rate of 8% or 12% by 10th May, 2019, then GST has to be paid @ 8% or 12% on remaining portion of the value of the flat; in such cases, the promoter would be entitled to permissible credit of input taxes and, as such, the price that he charges from the buyer should appropriately reflect this credit.

18.

 

I am a beneficiary of PMAY- CLSS and carpet area of my house being constructed in an ongoing project is 150 sqm. Am I eligible for new rate of 1% on same?

You are eligible for new GST rate of 1%, subject to the condition that the developer-promoter with whom you have booked the house has not exercised option to pay tax on construction of apartments at the old rate of 8%.

19.

 

I am planning to purchase an apartment in a newly launched project. The project has been launched after 31.03.2019 by XYZ Developers at Noida. Price of the apartment having carpet area of 80 sqm is 48 lakhs. What is the rate of GST applicable on construction of this apartment?

The tax rate applicable on construction of the apartments in a project that commences on or after 01.04.2019 would be 5%.

20.

 

I have already paid tax of 12% (effective) on instalments paid before 01.04.2019. I wish to get  the benefit of new rate of 1% or 5%. Whether it is the builder or the buyer who has the option to pay tax at the new or old rates?

 

The buyer cannot exercise option to pay tax at the new or old rates. It is the builder,who has to exercise the option to pay tax on construction of apartments at the old rate of 12% latest by 10th May, 2019. If the builder doesn't exercises his option to continue to pay tax at the old rate by the said date, then the effective GST rate applicable on all your instalments payable to the builder on or after 01.04.2019 as per the contract shall be either 1% or 5%, depending on whether the apartment is an affordable or other than affordable residential apartment. 

21.

 

In respect of supply made in an ongoing Project covered by clauses (ie) and (if) of Entry 3 of Notification No. 3/2019, CT (R), an option is required to be exercised by the Promoter in Annexure IV by 10th May 2019. At the same time, it is permissible for him to issue invoices between 1st April 2019 to 9th May 2019 which shall, however, be in conformity with the option to be exercised. Whether it is permissible for the Promoter to revise the invoice as provided in Section 34 of CGST Act, 2017, including by way of issuance of Credit/Debit Notes so as to bring the transaction in conformity with the option exercised by the Promoter ultimately by 10th May 2019?

Where the GST rate at which tax has been charged in the invoices issued by the promoter prior to 10th May, 2019 are not in accordance with the option required to be exercised by him on or before 10th May, 2019 to pay GST on construction of apartments in an ongoing project at either the new or old rates, the promoter may issue debit or credit notes in accordance with Section 34 of CGST Act, 2017.

22.

 

How to compute adjustment of tax in a Credit Note to be issued u/s 34 by Real Estate Developer in case unit was booked prior to 1st April, 2019 on which GST was paid on part consideration received at the time of booking, but cancelled after 1st April, 2019.

Developer shall be able to issue a Credit Note to the buyer as per provisions of section 34 in case of change in price or cancellation of booking provided that the amount received in excess if any, consequent to issuance of Credit Note, is refunded to the Buyer by the Developer before September following the end of the financial year. Developer shall be able to take adjustment of tax paid in respect of the amount of such Credit Note. For example, a Developer who paid GST of ₹ 1,20,000 at the rate of 12% (effectively) in respect of a gross amount of booking of ₹ 10,00,000  before 1st April, 2019 shall be entitled to take adjustment of tax of ₹ 1,20,000 upon cancellation of the said booking on or after 1st April, 2019 against other liability of GST including liability arising at the rate of 5% / 1% provided that the entire amount received from the buyer is refunded by the Developer.

Further, in case apartments booked prior to 1.04.2019 on which GST has been paid till 31.03.2019 at the old rates of 8%/ 12% with ITC, are cancelled and rebooked at the new rates of 1% / 5% without ITC or sold after issuance of completion certificate, the credit taken in respect of such apartments for supply of service till 31.03.2019 on which tax was paid @ 8%/ 12% with ITC shall be required to be reversed.  

23.

 

Whether the option to pay tax at the applicable effective rate of 12% or 8% (with ITC) is available to the Promoter in respect of the New Project, which has been commenced on or after 1st April 2019?

No, there is no option to pay tax at the effective rate of 12% or 8% with ITC on construction of residential apartments in projects which commences on or after 01-04-2019.

24.

 

From the plain reading of the provisions and the definitions of the various terms as defined in the Notification No. 3/2019- CT(R), it appears that the one-time option is required to be exercised for the entire REP or RREP. Does this mean that a Promoter can opt for old rates or new rates, as the case may be, for different projects being undertaken by him under the same entity?

Yes.The option to pay tax on construction of apartments in the ongoing projects at the effective old rates of 8% and 12% with ITC has to be exercised for each ongoingproject separately. As per RERA, 2016, project wise registration is allowed. So, the promoter may exercise different options for different ongoing projects being undertaken by him.

25.

 

In respect of the construction and supply of premises under specific schemes like PMAY, Housing for All (Urban), RAY etc. as mentioned in sub items (b), (c), (d), (da), (db) of item (iv) and sub items (c), (d), (da) of item (v) of Entry 3 of Notification 11/2017 – CT (R), whether the pre-existing effective rate of 8%, with ITC benefit continues to be available in case of any New Project that has commenced under any such scheme after 1/4/2019?

No.The rate of 8% and 12% with ITC is not available for construction of apartments in a project that commences on or after 01-04-2019. It makes no difference whether or not the apartments are being constructed under PMAY or any other housing schemes of the Central or State Government.

26.

 

In respect of any ongoing project undertaken under the specific schemes like PMAY, Housing for All(Urban), RAY etc. as mentioned in items(iv) and (v) of Entry 3 of Notification 11/2017- CT (R), prior to 31/3/2019, whether an option is available to the Promoter to pay the tax at the new rates of 1% or 5% (without ITC) or at the existing rates of 8% (with ITC)?

Yes. The promoter has the option to pay tax either at the old rate of 8% (with ITC) or at 1% (without ITC) on construction of residential apartments in ongoing projects being constructed under PMAY and other specified housing schemes of the Central or State Governments in items (iv) and (v) of Entry 3 of Notification 11/2017- Central Tax (Rate) dated 28-06-2017. The option to pay tax on construction of apartments in the ongoing projects at the old rates of 8% with ITC has to be exercised by the promoter for ongoing project.

27.

 

In case where the Development rights are supplied by the Landowner to the Promoter, under an area sharing arrangement between 1st July 2017 and 31/3/19, but the allotment of constructed area in an ongoing project is made by the Promoter to the Landowner on or after 1/4/2019, whether the tax liability, if any, is required to be discharged in terms of the Notification No. 4/2018 – CT (R)?

Yes. Tax liability on service by way of transfer of development rights prior to 01-04-2019 is required to be discharged in terms of Notification No. 4/2018-CentralTax (Rate) dated 25.01.2018.

28.

 

Whether the GST is leviable on the output supply of Transferrable Development rights by a developer (usually evidenced by TDR Certificate issued by the authorities). If yes, under which entry and at what rate?

Yes, GST is payable on transfer of development rights by a developer to another developer or promoter or to any other person under reverse charge mechanism @ 18% with ITC under Sl. No. 16, item (iii) of Notification No. 11/2017 - Central Tax (Rate) dated 28-06-2017 (heading 9972).

29.

 

What is the meaning of the term “first occupation” referred to in clauses (i) to (id) of Entry 3 of Notification No. 3/2019? Whether, in case of an ongoing project, where part occupation certificate has been received in respect of some of the premises comprised in the on going project, the Promoter is entitled to exercise the option of 1% / 5% (without ITC)or @ 8%/12% (with ITC)available in terms of Notification No. 3/2019 CT (R), in respect of the balance ongoing project?

 

The term “first occupation” appearing in Schedule II para 5 (b) and in notification No. 11/2017 – Central Tax (Rate) dated 29-03-2019 means the first occupation of the project in accordance with the laws, rules and regulations laid down by the Central Government, State Government or any other authority in this regard. Where occupation certificate has been issued for part (s) of the project but not for the entire project by 31-03-2019, the first occupation of the project shall not be considered to have taken place on or before 31-03-2019 and the project shall be considered on going project provided it satisfies the other requirements of the definition of the term ongoing project. Promoter shall be entitled to exercise option to pay tax @ 1%/5% (without ITC)or @ 8%/12% (with ITC) on construction of apartments in such project.

30.

 

(a) In case of a single building registered as 2 (two) separate projects under the provisions of RERA viz. 1st to 10th floor as one Project and 11thto 20th floor as another project, whether the Developer can consider the entire building as single ongoing project, since all the three conditions to be complied with for classifying a project as an ongoing project can be satisfied only if the entire building is considered as a single project?

(b) Furthermore, if different towers in a single layout are registered as separate projects under the provisions of RERA but where the approvals are common for all the towers, whether the Developer can consider entire layout as a single Ongoing project ?

(a) Both the projects registered as separate projects under RERA, 2016 shall be treated as distinct projects for the purpose of Notification No. 11/2017-Central Tax (Rate) dated 28-06-2017 as amended by Notification No. 3/2019-Central Tax (Rate) dated 29-03-2019. Both the projects will have to independently satisfy the requirements of the definition of ongoing projects.

(b) No. All the towers registered as different projects under RERA shall be treated as distinct projects. Only such towers registered as distinct projects for which commencement certificate has been issued on or before 31-03-2019, construction has started on or before 31-03-2019 and for which apartments have been booked on or before 31-03-2019 but completion certificate has not been issued or first occupation has not taken place by the said date shall be treated as ongoing projects.

31.

 

Whether TDR purchased on or after 1.4.2019 to be consumed by a developer-promoter in an ongoing project, in respect of which the promoter has opted for the new rate of tax, shall be liable to be taxed at the applicable rate, but limited to 1% or 5%, as the case may be, of the unsold area at the time of issuance of completion certificate?

 

Yes. Portion of such TDR transferred on or after 01-04-2019 which is used in an ongoing project in respect of which the promoter has opted for new rate of tax on construction of apartment @ 1% or 5% without ITC which remained un-booked on the date of issuance of completion certificate or first occupation of the project shall be liable to tax at the applicable rate not exceeding 1% of the value in case of affordable residential apartments and 5% of the value in case of other than affordable residential apartments.

32.

 

What shall be the classification of and rate of tax applicable to works contract service provided by a contractor to a developer or promoter under the new dispensation effective from 01-04-2019 for

(a) New project after 1.4.2019 and ongoing projects where option has been exercised for new rate and

(b) Ongoing projects where option has not been exercised for new rate?

 

The rate of tax applicable on the work contract service provided by a contractor to a promoter for construction of a real estate project shall be 12% or 18% depending upon whether such work contract service is provided for construction of affordable residential apartments or residential apartments other than affordable residential apartments. Rate of tax applicable on such work contract service provided by a contractor to a promoter on construction of commercial apartments shall be 18%(irrespective of option exercised by developer-promoter).The relevant entries of the notification are at items (iv), (v), (va) and (vi) against sl. no. 3 of the table in Notification No. 11/2017-Cenral Tax (rate) dated 28-06-2017 prescribing rate of 12% for works contract services of construction of affordable apartments/ apartments being constructed under schemes specified therein. In case of works contract services for construction of other apartments, rate of 18% as prescribed in item (xii) against sl. no. 3 of the table in Notification No. 11/2017-Cenral Tax (rate) dated 28-06-2017 shall be applicable.

33.

 

A registered project has three blocks and Completion Certificate has been received for one block prior to 1st April, 2019 and for two blocks will be received after that date.

Will such a project for which multiple completion certificates are received partly before 1st April, 2019 and partly after that date, constitute an ongoing project?

 

Where more than one completion certificate is issued for one project, for the purpose of definition of ongoing project as defined in the clause (xx) in the paragraph 4 of the notification No. 11/ 2017- CTR, dated 28.06.2017, completion certificate issued for part of the project shall not be considered to have been issued for the project on or before 31-03-2019 unless completion certificate(s) have been issued for the entire project. Therefore, if completion certificate has not been issued for part of the project on or before 31-03-2019, the project shall still be considered as ongoing project provided other conditions of the definition of 'ongoing project' are met.

34.

 

It is a prevalent practice that more than one commencement certificate is issued by competent authority for single project. For example, in case of a single tower comprising of 50 floors and registered as single project, separate commencement certificates may be issued by the competent authority for (i) basement and parking which is common to entire building (ii) first twenty floors (iii) next thirty floors. If one or two commencement certificates are received by the Developer prior to 1st April, 2019 and remaining on or after that date, will such a project be considered as an ongoing project?

Where commencement certificate has been issued even for part of the project on or before 31-03-2019, it shall be treated as an ongoing project provided other requirements of the definition of ongoing project are met.

35.

 

There are many projects of redevelopment/slum rehabilitation in pipeline as on 1st April, 2019. It is possible that in such projects the development rights have been conferred upon the developer and pursuant to which the development process has been initiated such as receipt of commencement certificate, excavation for foundation etc., but booking against units for sale has not been received prior to 1st April, 2019.

However, allotment of units to the existing dwellers (in respect of free supply units) which will yield no monetary consideration has been done. Clause (xiii) of Para 4 of Notification No.11/2017-CTR as amended by Notification No. 3/2019-CTR requires credit of at least one instalment in the bank account prior to 1st April, 2019 for a project to be considered as ongoing project. It may please be clarified whether in such cases, apartments being constructed in the project shall be deemed to have been booked prior to 1st April, 2019 in case development agreement is executed prior to that date and whether accordingly such projects shall be considered as an ongoing project?

In case of redevelopment or slum rehabilitation projects, the original inhabitants or the slum dwellers are not required to pay any monetary consideration to the promoter for the residential apartments allotted to them. Therefore, the residential apartments allotted to the original inhabitants in case of redevelopment project or slum dwellers in case of slum rehabilitation or redevelopment project, the requirement that at least one instalment has been credited to the bank account of the promoter shall not be required to be met for such apartments to be considered as having been booked on or before 31-03-2019 provided other requirements for considering an apartment booked on or before 31.03.2019 have been met. The consideration for such apartments is receipt in the form of transfer of development rights from the original inhabitants in case of redevelopment projects or the government in case of slum rehabilitation projects. Hence, the condition  relating to credit of at least one instalment in the bank account of the promoter for the apartments being constructed in a slum redevelopment project to have been partly or wholly booked shall be deemed to have been satisfied in order to consider the project as an ongoing project, provided all other conditions for considering an apartment as booked are met in case of apartments allotted to slum dwellers; as there is no cash payment to be made by the slum dwellers.

 

36.

 

Can a developer take deduction of actual value of Land involved in sale of unit instead of taking deduction of deemed value of Land as per Paragraph 2 to Notification No. 11/2017-CTR ?

No. Valuation mechanism prescribed in paragraph 2 of the notification No. 11/2017- CTR dated 28.06.2017 clearly prescribes one- third abatement towards value of land.

37.

 

Para 3 of Annexure I and II to Notification No. 3/2019-CTR dated 29.03.02019, stipulate three different conditions. Clause (i) and (ii) of the said Para 3 are relating to percentage of invoicing. It is requested to clarify as to how and where the percentage of invoicing is to be taken into consideration while determining quantum of ITC reversal.

The illustrations given in the said annexure clearly explain how the provisions given in the clause (i) and (ii) of para 3 of the said annexure relating to percentage of invoicing shall operate. The same may be referred to.

38.

 

It may be clarified whether exemption granted on transfer of development right or FSI for residential construction and reverse charge mechanism prescribed for payment of tax on TDR, FSI or long term lease (premium) in the new dispensation is applicable where development rights were transferred by way of an agreement executed prior to 1st April, 2019 but consideration, whether in cash or other form, flowed to the land owner, in full or part, on or after 1st April, 2019.

The new dispensation has been prescribed for real estate sector vide notifications issued on 29.03.2019. The same are effective prospectively from 01.04.2019. They shall apply only to development rights or FSI transferred on or after 01.04.2019. They shall not apply to development rights transferred by way of an agreement prior to 01.04.2019 even if the consideration for the same, in cash or kind, is paid in part or full on or after 01.04.2019.

 

39.

 

Land Owner being an individual is not engaged in the business of land relating activities and thus whether the transfer of development rights by an individual to a promoter is liable for GST and whether the same will fall within the scope of 'Supply' as defined in Section 7 of CGST / SGST Act, 2017? Position of such a transaction may be clarified in light of amendments recently made.

The term business has been assigned a very wide meaning in the CGST Act and it includes any trade, commerce, manufacture, profession, vacation, adventure, or any other similar activity whether or not it is for a pecuniary benefit irrespective of the volume, frequency, continuity or regularity of such activity or transaction. Therefore, the activity of transfer of development rights by a land owner, whether an individual or not, to a promoter is a supply of service subject to GST.

40.

 

In certain projects, developers have started construction on or before 31-03-2019. However, bookings in the project have not started. One of the conditions prescribed for a project to qualify as an ongoing project is that apartments being constructed should have been partly or wholly booked. Whether such project where bookings have not started but construction has started, would be eligible for the new rates of 1% or 5% without ITC?

As per explanation in clause (xxviii) of para 4 of the notification No. 11/2017- CTR dated 28.06.2017, “project which commences on or after 01.04.2019” shall mean a project other than an ongoing project. A project, in which bookings for the apartments have not started, would not be covered under definition of “ongoing project”. The same would accordingly be treated as a project which commences on or after 01.04.2019 subject to the new rates of 1% or 5% without ITC, as the case may be.

41.

 

Whether the Form as per Annexure IV of the Notification No. 3/2019-CTR is to be filed with both the jurisdictional commissioner i.e. Central Tax, State Tax.

Whether modification / amendments in such Form are allowed subsequent to filing of the form, after 10th May, 2019?

No. The Form shall be filed manually with the office of the Commissioner in whose jurisdiction the registration of the promoter is assigned.

No modification / amendment of the option is allowed in the Form once submitted.

F. No. 354/32/2019-TRU

AAR ALLOWS INPUT TAX CREDIT BY DEBT SETTLEMENT IN GST

The bengal wing of AAR has now made rulingwhile hearing acase realting to Senco Gold, asupplier of jewellery. It has been pronounced that the Debt adjustments between distinct person or any other person , whether or not having gst number, could adjust the debts internally through accounting adjustements and the same could be considered as equivalent to payment for the purposes of Sec 16(2), here it has been made manadtaory that the receipent of goods or services should paid the money to the supplier of goods or services within 180 days of Sales transaction. 

32nd GST Council meeting

The GST Council in its 32nd Meeting held today under the Chairmanship of the Union Minister of Finance & Corporate Affairs, Shri Arun Jaitley in New Delhi took the following major decisions to give relief to MSME (including Small Traders) among others - 1. Increase in Turnover Limit for the existing Composition Scheme: The limit of Annual Turnover in the preceding Financial Year for availing Composition Scheme for Goods shall be increased to ₹ 1.5 crore. Special category States would decide, within one week, about the Composition Limit in their respective States. 1.1 Compliance Simplification: The compliance under Composition Scheme shall be simplified as now they would need to file one Annual Return but Payment of Taxes would remain Quarterly (along with a simple declaration). 2. Higher Exemption Threshold Limit for Supplier of Goods: There would be two Threshold Limits for exemption from Registration and Payment of GST for the suppliers of Goods i.e. ₹ 40 lakhs and ₹ 20 lakhs. States would have an option to decide about one of the limits within a weeks’ time. The Threshold for Registration for Service Providers would continue to be ₹ 20 lakhs and in case of Special Category States at ₹ 10 lakhs. 3. Composition Scheme for Services: A Composition Scheme shall be made available for Suppliers of Services (or Mixed Suppliers) with a Tax Rate of 6% (3% CGST +3% SGST) having an Annual Turnover in the preceding Financial Year up to ₹ 50 lakhs. 3.1 The said Scheme Shall be applicable to both Service Providers as well as Suppliers of Goods and Services, who are not eligible for the presently available Composition Scheme for Goods. 3.2 They would be liable to file one Annual Return with Quarterly Payment of Taxes (along with a Simple Declaration). 4. Effective date: The decisions at Sl. No. 1 to 3 above shall be made operational from the 1st of April, 2019. 5. Free Accounting and Billing Software shall be provided to Small Taxpayers by GSTN. 6. Matters referred to Group of Ministers: i. A seven Member Group of Ministers shall be constituted to examine the proposal of giving a Composition Scheme to Boost the Residential Segment of the Real Estate Sector. ii. A Group of Ministers shall be constituted to examine the GST Rate Structure on Lotteries. 7. Revenue Mobilization for Natural Calamities: GST Council approved Levy of Cess on Intra-State Supply of Goods and Services within the State of Kerala at a rate not exceeding 1% for a period not exceeding 2 years

DRAFT AUDIT PROGRAMME FOR GST AUDIT

AUDIT PROGRAM FOR GST AUDIT 1 Preliminary Check GST registration certificate Cross check the name of the entity with PAN or Company incorporation certificate Check for single registration or multiple registration - ask for documentation Name board to contain GST registration Ask client to log on to GST portal and verify whether it is active still 2 Transition Verify the June 2017 returns of Service tax, Excise and VAT Take stock of the closing balances as per those returns Verify whether it is reflecting in the Trans 1 statement Verify the documentation for Trans 1 filing with the department Correspondence with department on Trans 1 credit disallowance if any (specifically ask for it and record) Capital goods credit balance 50% under Excise and 1/3rd or 2/3 rd under VAT should be verified How Cess is handled in the transition. As per department Cess cannot be carried forward in GST. If company carries document it and ask for their stand on the same 3 GSTR 3B Whether GSTR 3B has been filed for all the months - July 2017 to date Verify all the returns individually and no test check of the same Verify the correctness of the physical copy with the portal numbers and match the same GST Liability to be classified separately as IGST, CGST and SGST Verify how this is derived - books of accounts Whether the liability shown in GSTR 3B matches with the books of account If not is there any reconciliation and if available please take a copy of the same as our document GSTR3B liability should match with liability shown in GSTR 1 Discuss how the discrepancy comes on the same GL balances should be captured and take a screen shot of the same for our records GL balance should always show credit balance and if any debit balance is there record it and ask for explanation Check the 3B return status in the portal, submitted or filed status Check the GST portal for any queries raised by the department on line and what action taken by the client 4 GSTR1 Whether GSTR1 has been filed for all months - July 2017 to date Verify the physical copy with the portal numbers for correct upload of data Check all the returns for correct filling of all the columns, IGST not updated as local and vice versa Verify how the purchases from unregistered dealers handled Verify how the SEZ or Export transactions are reported Cross verify the rate of tax applied with the tariff headings State code - whether correctly filled up On a random basis check the GST registration of customers in the portal for correctness of the same Check the status of the return - Submitted or filed Open the dash board and verify whether all the returns are appearing in the portal How the data is extracted from the company’s books - manually or downloaded automatically. If Excel download is used verify the no. of document control of the Excel and company’s records Counter check the documents updated in GSTR 1 form with the Excel download or company’s record - Missing documents to be captured clearly Match the sales reported in GSTR 1 and the company records In case of difference whether any reconciliation is prepared and why Check how the difference is handled by the company How debit or credit notes handled in the GSTR 1 system Price revisions before GST how handled - no tax charged or erstwhile excise and service tax charged Price revisions post GST how handled - whether correct rate of GST charged. Compare the rate with the original rate charged in the invoice Documents for issuing credit note or debit note - approval process and how the same is accounted by the company Compare the company’s books and GST records for debit note or credit note JsOne tool how handled - whether Govt site or private software used - if private software used then carefully check whether all transactions are uploaded properly in the portal The liability quantified in GSTR 1 - local and IGST must match with the liability quantified in GSTR 3B Cut off procedure - last document no. for each month as per books accounts and first document no. for the next month - take for Aug 2017, Nov 2017, Jan 2018 and March 2018. Check whether Tally is closed each month and verify the same for three months during the period of audit In case of SAP please verifiy whether period closing is done and ask the concern to open the system and show that the period closure is done. Take a screen shot for our records 5 Input credits Verify the input credit disclosed in GSTR 3B under CGST, SGST and IGST Verify whether the same reflects in company’s books of account and matches If there is difference record the same and ask for explanations If rectified subsequently document the same - today there is no concept of interest but may come at a later date Capture the % of input credit to the GST liability and record it Whether the GL of the company has separate codes for input credit separately for CGST, SGST and IGST - if not it should be opened separately Again for more than one state separate IGST GL codes to be opened IGST should be used for SGST and CGST and not vice versa - check this aspect Ineligible credits as per the GST act should be strictly followed - verify this In case of deviations please record the same and bring to the notice of the concerned in GST Credit should not be availed for purchases from vendors on composition scheme Capital goods credit should be availed fully and not at 50% or 1/3rd as per prior provisions Inter plant movement and depot movement should be with GST document and GST payments only. Check whether the same is followed and credit availed in the other plant or depot Sub-contract movement will not entail credit availment unless he provides GST invoice Import IGST will be eligible for credit and verify the same with Bill of entries Take a listing of vendors of the client with GST nos and check whether client has such a list and updation frequency to be verified How does the client verify whether the vendors have filed their GSTR 1 returns - Process to verify and document For those not filing the returns what steps the company takes to ensure that they file and the credit availed is legal and correct Is there any check for ensuring the vendors making GST payments on monthly basis - If so record the same Rejection of materials - How handled in GST - Whether the client raises the rejection debit note with GST and reverses the credit or not In the alternative for full rejection of invoice client need not avail credit and also raise debit note for rejection. In this case the transportation of materials could be a problem and how handled - verify this Manufacturing rejection how handled - Debit note raised with GST or not If so on what basis the invoice no. of the vendor is captured and debit note raised Credit for capital goods should be reduced from the cost of assets and depreciation to be provided only on the net - check this aspect both from Company Law and Income tax aspects Disposal of capital goods would not entail reversal of credit but only charging GST under the GST regime. Let not client reverse any input credit for the same 6 Documents Invoice to be as per the format given in GST rules Input invoice should satisfy the same - otherwise credit can be denied E Way bill to be raised as per rules - documentation for tracking the same Sub-contract movement - what document is raised and how tracked Whether the company stores the returns in a separate folder or print outs kept in files - recommend storage in soft form in a separate folder Trans 1 credit document to be preserved Get in writing from the company the places where the client’s materials are kept - input materials and output materials, inventory and sub-contract locations. - verify whether these are captured in the RC Any change in director or partner or owner should be intimated and changes to be incorporated in the RC Clear back up work sheets for GST liability including IGST, input credits and net liability to be maintained for each month

GST exemption limit doubled to give relief to small businesses

New Delhi, Jan 10 (PTI) In a bid to give relief to small businesses, the GST Council Thursday doubled the exemption limit and raised the threshold for availing the composition scheme. The GST Council doubled the GST exemption limit to ₹ 20 lakh for north eastern states and ₹ 40 lakh for the rest of the country, Finance Minister Arun Jaitley told reporters here. The scope of the GST Composition Scheme, under which small traders and businesses pay a small tax based on turnover rather than value addition, was raised to ₹ 1.5 crore from ₹ 1 crore. The twin move would give relief to micro, small and medium enterprises (MSMEs), he said. The council also allowed Kerala to levy 1 per cent calamity cess on intra-state sales for a period of up to two years. On including real estate and lottery under the Goods and Services Tax, the council decided for form a seven-member group of ministers after differences of opinion emerged at the meeting, he said