GST Health check activities

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GST Health check Activities

  • Reconciliation of sales/revenue income with outward supply value in GSTR 1

A Registered Person must ensure that the sales recorded in their books of accounts and the outward supply disclosed in GSTR 1 are reconciled. Various crucial points to be kept in mind during this process are mentioned below:

Inter-state stock transfer

Recovery from employees

Charging GST on free samples/FOC transactions

Any penalty recovered from vendor or customer

  • Reconciliation of GSTR-3B & GSTR-1

GSTR 3B is a summary return of sales & purchases that every registered tax payer must file after paying taxes on monthly basis. GSTR 1 shows invoice wise details of outward supply. A tax payer must take utmost care to ensure that the amount disclosed as outward supply in GSTR 3B as well as that in GSTR 1 is the same. Notices have been sent by the department to many taxpayers whose outward supplies do not match in both these returns. Hence reconciliation between GSTR 3B & GSTR 1 is important.

  • Classification of goods/services and respective rate

Appropriate classification of goods and services is another aspect which needs to be kept in mind. In case the classification is incorrect, it would lead to incorrect HSN code as well. HSN codes help in determining the rate of tax applicable for a supply. Short payment of taxes can lead to heavy interest and penalties. Ambiguity in the classification of supply is mainly noticed in Composite supplies. Hence extra precaution must be taken while classifying composite supplies.

  • Admissibility of input tax credit (ITC) & “negative list” u/s 17(5) of CGST Act

There have been discussions on the eligibility of ITC regarding various inward supplies, and no clarification is available for the same. In that case, the opinion will differ from person to person. Examples of such supplies are mentioned below:

Housekeeping services

Mobile service

Repairs & maintenance services related to an office building

Canteen service

  • Verification of “place of supply” to check whether correct GST is charged

Place of supply (POS) provisions help you to decide if CGST/SGST or IGST must be charged for a given supply. In case of incorrect head of GST, the taxpayer will have to bear interest as high as 18%. Taxpayers dealing with “Bill To” and “Ship To” transactions must take utmost care while determining the POS.

  • Precaution regarding availment of Input Tax Credit

There are five conditions that must be fulfilled before availing ITC:

Receipt of Tax Invoice

Receipt of goods/services

Payment of GST by the vendor to the Government

The vendor has filed GST Return with correct details of Tax Invoice

Payment against Tax Invoice made to the vendor within 180 days

  • Reverse charge liability

RCM provisions for supplies u/s 9(3) have been suspended up to 30th September 2019. However, taxpayer must ensure that the tax was paid under reverse charge on all such supplies undertaken up to 13th October 2018.

RCM provisions for supplies u/s 9(4) are still applicable, and the registered taxpayer must pay taxes on all such inward supplies. Few of such supplies are mentioned below:

Import of service – 15CB

GTA – Transport Charges/ Inward Carriage/ Outward Carriage

Legal service – Professional Fees/ Legal Fees

Arbitration service – Legal Fees

Sponsorship service – Selling & Distribution/ Advertisement Expenses

Director’s Service – independent directors/sitting fees

Transport of goods by sea – import freight

  • Adjustment of advance in an earlier month

Advances paid must be adjusted against the final liability in the invoice. There may be instances where a registered taxpayer may forget to adjust these advances thereby leading to the excess payment of taxes.

  • Supply of services free of cost to branches located to other States – Schedule – I

  • All service transactions with group companies

Intergroup transactions always attract the valuation issues. This is mainly since the amount charged may be free of cost or below the market price.

  • Any recovery from employees

Mobile expenses

Canteen expenses

Transport expenses

Any damages

  • Anti-profiteering impact on selling price

  • Any value of goods written off in the books

♠ Reversal of Input Tax Credit in case of :

Reconciliation of Books vs GST Returns

Matching of ITC: GSTR 3B vs GSTR 2A

exempted / non-GST supply

Free samples / FOC

Supply under warranty

♠ Time of Supply

Taxpayers should ensure that tax liability under GST regime has been discharged as per the Time of Supply provision laid down in Sec. 12 & 13 of CGST Act 2017

Payment of interest on account of delay in payment of taxes should be computed in the manner prescribed in Sec. 50 of CGST Act 2017 and the rate notified in notification no. 13/2017-CT dated 06.2017

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