Rectification of mistakes made in 2017-18 in September 2018 The return ( GSTR-3B & GSTR-1) for the month of September 2018 is the last return which provides the last opportunity to the tax payers to rectify mistakes/make good the omissions in the returns filed during 2017-18. The rectification of errors which lead to liability for the taxpayer, can be made good while filing annual return (with audited financial statements and reconciliation statement in prescribed forms where applicable). The errors which result in reduction of tax liability or increase in ITC, cannot be rectified. Therefore all the tax payers have to conduct a review of all GST related accounts and the ledgers. An attempt is made to highlight the important aspects that will have to be looked into by the taxpayers in this article. Supply related errors ●
Non availment of exemption benefit available for a supply because of lack of awareness or incorrect classification.
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Incorrect rate adopted leading to excess payment of taxes.
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Wrong application of concept of composite, non-composite or mixed supply.
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Determination of wrong place of supply by the vendor resulting in wrong credit availment.
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Non-availment of reduction of tax paid on discounts passed on at the yearend as per the understanding between the recipient and the supplier.
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Reconciliation of turnover has to be done for all types of supplies i.e. taxable supplies, exempt supplies, non GST supplies, RCM, zero rated supplies etc. so that turnover limit is not increased wrongly. 1
Rectification of mistakes made in 2017-18 in September 2018
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Credit note issuable pertaining to the last year transaction should be issued and included in the GSTR 1.
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It is necessary to check whether any supply which is export or deemed export, has been shown as domestic supply.
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Verify correctness of the treatment accorded to sale/purchase of securities and investments.
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Check the correctness of treatment accorded to sale/purchase of MEIS/SEIS scraps.
Input Tax Credit missed or not availed fully (i)
Review all the invoices to check whether any admissible ITC has not been taken. Attention may have to be paid for tax paid on advances, receipts on which RCM is applicable, ITC in respect of Insurance, AMC etc.
(ii)
Ensure that all eligible credit of tax paid on inputs, capital goods and input services are availed in accordance with law and fulfilment of procedures for receipt, documentation, vendor compliance etc.
(iii)
Review terms of purchase orders vis-a-vis purchase invoices: Defective invoices can lead to disputes at a later date. They can however be rectified once identified. Ensure that defects are cured and credits are taken. Pending rectification credit can be taken and reversed later if not rectified.
(iv)
Review method of capitalising the work in progress. This is to examine whether eligible credits are not availed. This should be as per Accounting Standards and GST law.
(v)
Review import documents, job work inward invoices, stock transfer inward invoices, etc. Some of these may not be accounted in the system as they are not financial entries but have an impact on ITC.
(vi)
Review credit apportionment in case of supply of taxable and exempted supplies to check whether any excess credit has been reversed.
(vii)
Review various returns filed under GST such as GSTR 1 and GSTR 3B and identify of differences in ITC if any, between GSTR 3B and
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Rectification of mistakes made in 2017-18 in September 2018
GSTR 2A and if any credit has been missed out, ensure necessary correction entries. Common errors in ITC availment I.
II.
Legally eligible credits that may be missed (i)
ITC is only restricted for provider of GTA service who pays at 5%. The customer who pays taxes under RCM could avail ITC if eligible. Check whether it has been missed to be availed.
(ii)
Credit of taxes paid on the goods or services could be availed by the person making the exports/deemed exports even when output GST is not paid on exported goods/exported services or paid at 0.1% (Exports through merchant exports).
(iii)
ITC can be availed on bank charges as there is no specific restriction U/S 17(5).
(iv)
Review and take ITC on purchase of capital assets if missed.
(v)
A review of inputs/capital goods with the job worker or with the taxpayer if he himself is doing job work have to be verified for compliance.
Tax payable on reverse charge basis (i)
Check whether tax has been paid on legal services provided by individual advocate (including senior advocate) or firm of advocates, if not, pay and take credit. (applicable to any business entity in taxable territory).
(ii)
Check whether tax has been paid on services provided by Arbitral Tribunal, if not, pay and take credit. (applicable to any business entity in taxable territory).
(iii)
If immovable property has been rented from the government department or local authority, check whether tax is liable to be paid and if so, pay and take credit. (applicable to any registered person).
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Rectification of mistakes made in 2017-18 in September 2018
III
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(iv)
Check whether tax has been paid on directorship services by director of body corporate or Company to that company/ body corporate. If not, pay and take credit.
(v)
Check whether tax has been paid on sponsorship services, if not, pay the tax and take credit (applicable to corporate or partnership firm).
(vi)
In case of publisher, music company, producer or the like located in the taxable territory, ensure that the tax is paid and credit is taken in respect of Services by Author, music composer, photographer, and artist by way of transfer or enjoyment of copyright relating to original literary work.
(vii)
Check whether tax has been paid on services supplied by a person located in non- taxable territory by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India to an importer. If not paid, pay and take credit.
Returns data comparison (i)
Check whether auto populated GSTR – 2A has any supplies on which tax has been paid but credit not availed.
(ii)
Reconcile the differences in turnover disclosed between GSTR-1 and GSTR-3B to ascertain if there is any excess payment of CGST/SGST/IGST. In case of excess payment, the same may be adjusted towards subsequent period liability or refund needs to be claimed by the taxpayer.
(iii)
Export sales as shown under zero rated supplies should match with the amount of export sales shown in table 6A of GSTR-1. As per table 3.1(b) of the GSTR 3B tax payer needs to show the zero rated supplies which includes the supplies made to the SEZ also. However, tax payer would show only exports in the table 6A of GSTR 1 provided that supplies which are shown in the GSTR 1 should not exceed the supplies which are shown in the GSTR 3B. Hence it required to reconcile and match exports as per GSTR 3B is matching with the table 6A of GSTR 1.
Rectification of mistakes made in 2017-18 in September 2018
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Comparison with the books of accounts (i)
Verify the exports as per books with the shipping bills.
(ii)
When the vendor charged wrong tax but correct credit has been availed, Intimate the vendor to amend the GSTR-1 and GSTR-3B to charge correct tax. Also ask the vendor to issue credit note for wrong invoice and issue revised invoice.
(iii)
When physical invoice is correct but disclosure is wrongly in the GSTR-1 by vendor, ask the vendor to amend the disclosure of the same in GSTR-1.
There could be many such other instances where corrections may be required in GSTR-1 and GSTR-3B. It should be ensured that all such corrections are made in the return for the month of September so that the Annual Return GSTR-9 would be flawless and there are no qualifications reporting in the GSTR-9C. The last date of filing of GSTR-1 has been extended to 31st October, 2018. It is suggested to avail the facility of extension and thoroughly examine all the records to ensure that the corrections have been made in the last return. It is also suggested to start preparation for audit and reconciliation statement so that last minute rush can be avoided. Special effort would be required where the information required for annual return cannot be taken out from monthly returns filed but will have to be taken out from the books of accounts. One example is credits taken specific service wise which is required in the annual return which was not there in the monthly returns. For more details the GST Audit Book ‌. From which this article has been adapted maybe referred. Readers may revert to madhukar@hiregange.com or murthy1953in@gmail.com for feedback.
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