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LAST RETURN UNDER INDIRECT TAXES & THEIR RECONCILIATION TO BOOKS
By CA Shubham Khaitan, B.COM (Honours), ACA, ACS, CFA(USA), DISA (ICAI)
CENVAT Credit C/F in a Return allowed as ITC
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➢Applicable for a person filing return under Central Excise / Service Tax / VAT who is registered as a normal taxpayer in GST
➢CENVAT credit carried forward in the last return to be carried forward as CGST ➢VAT/Entry tax credit carried forward in the last return to be carried forward as SGST ➢Credit to be allowed only if admissible under the GST law ➢Return for the period of 6 months before the appointed date has been filed
➢All invoices should be in place for the credit being carried forward as per last return
➢Advisable to prepare a statement of purchase/inward supplies and reconcile it with
books
Multiple registrations of the same entity under
Excise/VAT having 1 registration in GST
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➢Applicable for a person having multiple registrations under Central Excise / multiple registrations under VAT
➢Such a person opts for a single registration in GST ➢CENVAT credit of each individual Excise registration to be consolidated and carried
forward as CGST as per their last returns respectively ➢VAT credit of each individual VAT registration to be consolidated and carried forward as
SGST as per their last returns respectively ➢Credit to be allowed only if admissible under the GST law ➢Return for the period of 6 months before the appointed date has been filed
Credit on payments under Reverse charge
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➢No transitional provision for availment of such credits ➢Credit to be carried forward in the last return to be only allowed ➢Credit available to service recipient upon payment of service tax under reverse charge ➢To avoid any disputes, it is recommended that tax be paid under reverse charge by 30th
June. Prepare statement of such payment and reconcile with books. ➢After payment of such tax, credit should be availed in the last return of 30th June
➢Reverse charge also applicable for purchase tax on purchase from unregistered dealers.
Prepare such statement of purchases for reconciliation ➢Better to pay such purchase tax before 01/07/2017, then claim and carry forward credit
Input Goods / Services in Transit
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➢Segregate stock in hand and in transit ➢Applicable when duty or tax in respect of the inputs/input services has been paid before the
appointed date but inputs or input services received after appointed date ➢Credit allowed only if the invoice is recorded in the books of the recipient within 30 days of
the appointed date i.e. 30th July, 2017 (extendable by further 30 days) ➢Certificate should be taken from supplier showing the payment of duty before 01/07/2017
➢Reconcile stock in transit in Purchase A/c (may be debited in purchase but received later)
➢Reconcile Cenvat Credit Receivable A/c and the credit shown as per return ➢Ensure that the credit should be availed only once and not twice
List of Eligible Duties and Taxes
I. The duty of excise specified in the First Schedule to the Central Excise Tariff Act, 1985(5 of 1986);
II. The duty of excise specified in the Second Schedule to the Central Excise Tariff Act, 1985(5 of 1986);
III. The additional duty of excise leviable under section 3 of the Additional Duties of Excise (Textile and
Textile Articles) Act, 1978 (40 of 1978);
IV. The additional duty of excise leviable under section 3 of the Additional Duties of Excise (Goods of Special
Importance) Act, 1957(58 of 1957);
V. The National Calamity Contingent Duty leviable under section 136 of the Finance Act, 2001(14 of 2001);
VI. The additional duty leviable under sub-section (1) of section 3 of the Customs Tariff Act, 1975 (51 of
1975);
VII. The additional duty leviable under sub-section (5) of section 3 of the Customs Tariff Act, 1975 (51 of
1975); and
VIII. The service tax leviable under section 66B of the Finance Act, 1994 (32 of 1994).
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ITC on Capital Goods
➢Applicable for a person filing return under Central Excise / Service Tax / VAT who is registered as a normal taxpayer in GST
➢Credit availed on capital goods carried forward as per the last return (max 50% in 1st year in Excise / staggered in some states in VAT)
➢Unavailed credit = Aggregate amount of Credit entitlement – Credit already availed
➢Unavailed credit on capital goods not carried forward as per the last return for the period immediately preceding the appointed date also to be allowed
➢Unavailed CENVAT credit to be allowed as CGST and VAT credit to be allowed as SGST
➢Credit to be allowed only if admissible under both the earlier and the GST law
➢Proper quantification and recon of credit availed and yet to be availed should be made
➢Applicable for capital goods stock in transit as well
Returns for persons having Centralized Registration
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Credit shall be carried forward as per the last return
Ensure that the last return is filed within 3 months from 01/07/2017
Claim all the credits in the original return
In the revised return, higher credit than the original return will not be allowed
Credit can then be transferred to any of the registered person having the same PAN
Reversed CENVAT credit under existing law
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CENVAT credit claimed under existing law
Reversed due to non-payment of consideration for input services within 3 months before the appointed day
Reclaiming of such credit allowed upon payment
Such payment should be made within 3 months from the appointed day
Such credit to be allowed even though not carried forward as per the last return
Make payment before 01/07/2017 to reclaim credit reversed before 01/04/2017. Such credit should be claimed in the last return
Reversal of credit under Rule 6 of CENVAT Credit Rules
Rule 6 prescribes reversal of Cenvat Credit wherein both exempted and taxable goods/services are supplied. Proportionate credit w.r.t taxable supplies allowed.
Close the books as on 30th June and finalise the value of reversal based on the actual value of exempted and taxable goods / services
Incorrect / Excess reversal of credits under Rule 6 of Cenvat Credit Rules to be reclaimed
Ensure credit for inputs w.r.t. exempt supplies is not being claimed in final return. If claimed by mistake, it should be reversed
Take credit of eligible duties and taxes for inputs held in stock on 01/07/2017 in the form of inputs, semi-finished goods and finished goods relatable to exempted goods/services
Prepare stock statement summary on 30th June to find stocks attributable to exempted and taxable goods / services
Cenvat Credit A/c should contain reversal of the amount attributable to exempted goods. First return in GST can contain the claim of this amount
Missed credits
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➢Any missed credits of the past should be taken immediately in the last return ➢Reconcile books with the return to find if any credit has been missed out ➢Missed credits on capital goods can be availed without any time limit
➢Companies availing credit upon payment of taxes may miss out on credit on unpaid
invoices as on 30th June ➢Job-worker’s Credit missed out ➢Eligible credits to be taken within 1 year of the date of issue of invoice
➢Proper Cenvat Credit audit to identify if any credits are missed out/taken wrongly
Disputed credits
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➢Advisable to take credits which are doubtful in nature. May not be available later even if it turns out to be eligible later ➢Ineligible credits under existing law should however not be taken
➢Cenvat Credit claimed before the period of registration / centralized registration ➢Credit reversed under protest can be taken for unlimited period
➢Credit reversed at the time of audit to buy peace
➢Credit reversed based on oral instructions by the Department
➢Credit availment on rejection of Cenvat credit refund claim
➢Examine eligibility of disputable credits and claim them with intimation to the Department
Certain Doubtful credits
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Freight Outwards in case of FOR delivery (where customer location is place of removal)
Credit on outdoor catering though Factory compulsorily required to have canteen under Factories Act
Input tax credit of Rent a cab may be taken as per the judgement of Madras High Court (Commissioner of Central Excise, Chennai v. M/s Visteon Automatic India (P) Ltd.)
Expenses [other than construction expenses] incurred for setting up new factory/premises by manufacturer/service provider such as on architect, project management consultant, consulting engineer service, soil testing, loan processing, financial charges, erection, commission & installation of machine works.
Claim of Credit for CST transactions in respect of
which forms are pending
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➢Applicable for a person filing return under CST/VAT who is registered as a normal taxpayer in GST
➢VAT/Entry tax credit carried forward in the last return before the appointed date to be
carried forward as SGST ➢Credit attributable to claims in respect of Form C / F / H / I which could not be received
within 90 days after the appointed day to be ineligible ➢If the forms are received after 90 days, amount denied earlier is to be refunded
CENVAT Credit Claim to be Disposed Under Earlier Law
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Applicable when proceedings of CENVAT claim under earlier law initiated before/on/after the appointed date
Disposal of proceedings as per earlier law
If carried forward, no refund claim will be allowed and amount is found to be: Admissible – Continue to be carried forward Inadmissible – Recovered with interest
If balance not carried forward in last return and amount is found to be: Admissible – Refunded in cash subject to unjust enrichment Inadmissible – No refund will be allowed
Call to be taken on claim of such CENVAT credit in the last return
Safeguards – Taxation and Credits
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All sale invoices recorded in books and tallied with the last return.
For questions of taxability, taxes may be paid for the customer to avail the input tax credit
Even after filing of original return, reverify the output tax liability as per the last return and file revised return if necessary
Review credit of eligible duties as per the last return and verify if any credits missed in the last return can be claimed in the revised return
Mistake can due to calculation/taxability/eligibility/any other reason
Time period for revised return will be as per the current law. So, complete review of tax liability and credits should be completed by then
Prepare relevant sales/credit statement and reconcile with returns and ledger account
Difference of Point of Taxation – Last return - Excise
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Levy of Excise is manufacture and POT is removal of goods
Tax payable in GST for goods removed after the advent of GST
For goods removed before 1st July, 2017, Excise duty is applicable
Even if payment is received later, no tax is to be paid
Ensure all removals are shown in the last return i.e. removals made till 30.06.2017
Difference of Point of Taxation – Last return - VAT
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Levy of VAT is on sale of goods
States wherein VAT is leviable on advances, no tax to be paid at the time of sale even if made under GST regime
Where VAT is not payable on advance and supply made during GST, taxability to occur as per GST
Where sale made before 01/07/2017, date of payment becomes immaterial as VAT will be levied
If any goods are simply delivered to recipient on or after 01.07.2017 against which risk and reward has already been transferred within 30.06.2017, then such sales should be disclosed in the last return
Difference of Point of Taxation – Last return – Service Tax
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Point of taxation as per Service tax is the date of invoice (invoice issued within 30 days of provision of service) or payment whichever is earlier
For advances received earlier, Point of taxation will be under Service tax
If invoice issued under earlier law, even then Point of taxation will be in Service tax
Preserve proper document of invoices/advance receipts to avoid its demand in GST
Ensure all invoices for completed services are issued before 1st July, 2017. Such invoices should be disclosed properly in the last return
Ensure payment of service tax on advances before 1st July, 2017 and its proper disclosure in the last return
Difference of Point of Taxation – Both Service tax and VAT
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Applicable when tax paid on any supply under both VAT and Service tax for which supplies made on or after 1st July, 2017
Taxable person to claim credit of VAT and Service tax paid
Henceforth, tax will be levied under GST
E.g. Works contract, Outdoor catering etc.
Not regd/ regd in special scheme earlier
• Person not liable to get registered
• Supplier of exempted goods/services
• Person providing works contract service and availing the benefit of Not. 26/2012 dtd 20/06/12
• Persons availing abatement under Service Tax
• First Stage/Second Stage Dealer
• Registered Importer • Depot of
manufacturer
under the earlier law
Becomes a registered taxable person under GST
Continues to be non-registered/ supplies exempt goods/ opts for composition
scheme under GST
Take ITC of eligible duties & taxes on inputs, inputs contained in semi-finished & finished goods held in stock on the appointed
day (subject to certain conditions)
No ITC available
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Person not in possession of duty paying document
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Service Provider
Persons
Ineligible
Manufacturer
Trader/Any other person
Ineligible
Ad-hoc credit
> = 18% < 18%
CGST IGST CGST IGST
60% of CGST
30% of IGST
40% of CGST
20% of IGST
MRP based valuation in VAT
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Persons holding stock without duty paying document
Tax paid at the first point of sale and subsequent sales are
not liable to tax
Ad-hoc credit
> = 18% < 18%
SGST IGST SGST IGST
60% of SGST
30% of IGST
40% of SGST
20% of IGST
Allowed to avail ITC on goods held on appointed date
Certain safeguards to be taken
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Prepare a statement calculating the reduction in price to be passed to consumers
Person claiming ITC is in possession of invoice and/or other prescribed documents
Ensure proper record keeping of such invoices along with the identification of stock. Quantity of goods and Input tax credit should be correlated
Such goods should be intended for use in making taxable supplies
In case of ad-hoc credit, such goods should not have been exempted or NIL rated
Stock must be sold off within 6 months to avail complete ad-hoc credit. Stock levels should accordingly be planned
Ensure that such invoices are not dated earlier than 01/07/2016
Prepare a stock statement summary as on 30th June, 2017 showing the quantum, value, duties and taxes involved to find ITC attributable to the said scheme
ITC to a Person Switching from Composition Levy
• Applies to a composition taxable person in VAT coming under normal registration in GST
• Applicable for persons paying under compounded levy scheme under Central Excise (E.g. Payment of tax upon capacity of machines)
• Take ITC of eligible duties & taxes on inputs, inputs contained in semi-finished & finished goods held in stock on the appointed day
• The person is in possession of invoice and/or other prescribed documents for inputs.
• No claim of credit should be made in the last return by composition dealer
• Ensure proper record keeping of such invoices along with the identification of stock
• Ensure that such invoices are not dated earlier than 01/07/2016
• Prepare a stock statement summary as on 30th June, 2017 showing the quantum, value, duties and taxes involved to find ITC attributable to composition scheme
Duty Paid Goods Returned to Place of Business
Duty / Tax paid goods under Earlier Law
Removal within 6 months before the applicability of GST
Returned to place of business
after 6 months from the date of
applicability of GST
The supplier shall not be eligible
for refund of such duty / tax paid
earlier
The supplier shall be eligible for
refund of such duty / tax paid
earlier
Returned to place of business
within 6 months from the date of
applicability of GST
Return from a registered
taxable person
Return from a person other
than registered taxable person
Such return is deemed to be a
supply & tax is payable by the
person returning the goods
Credit to be claimed by the
person returning the goods as
per the last return
Safeguards to be taken – last return – Return of goods
Ensure proper disclosure of removal/sale of goods made as per last return
Track if the supply has been made to registered / unregistered person under GST
No refund if goods were removed before 6 months. So, ensure return of such sales made before 01/07/2017 if return is by an unregistered dealer
Reconcile whether goods returned before 01/07/2017 are captured before the last
return is filed
Itemwise statement to be prepared and reconciled with ledger and returns
Ensure that ITC is taken in the last return by the registered person returning the goods
Credit Distribution by Input Service Distributor
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CENVAT Credit on the date of
applicability of GST
Invoice received after the date
of applicability of GST
Input Service Distributor under earlier law
Carried forward as CGST in
ISD’s books
Received from the same state
Received from a different state
Taken as CGST in ISD’s books
Taken as IGST in ISD’s books
CENVAT Credit on the date
of applicability of GST
Safeguards to be taken – last return - ISD
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Billwise and Itemwise statement of purchase to be prepared. Complete data of this statement to be reconciled with ledger (Purchase, Expense, CC Receivable etc.)
Ensure no omission of purchase/expense for proper distribution
Make bifurcation of invoices between exempted and taxable service. Only Input tax credit for taxable services should be taken
Tag invoices considered for distribution for services received till 30/06/2017. Should reconcile with the statement of credit being carried forward in last return.
Tag invoices received after 30/06/2017 against services received upto 30/06/2017 Should be reconciled with books for invoices not considered under last return
Inputs Removed for Job Work
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Removal of Inputs as such/
partially processed Inputs
Removed to Job worker for
further processing, testing etc.
within 6 months before the date
of applicability of GST
Returned to the factory / place
of business within 6 months (or
extended period) from the date
of applicability of GST
No Tax will be payable
ITC availed earlier in regard to
such inputs shall be recovered as
per the provisions of the Act
Not Returned to the factory /
place of business within 6
months (or extended period)
from the date of applicability of
GST
Declare inputs in stock with Job
worker on the date of applicability
of GST
Goods Removed for Job Work
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Semi-Finished / Finished goods
Sent to Job worker for further
processing, testing etc. within 6
months before applicability of GST
ITC availed earlier shall
be recovered as per the
provisions of the Act
Not Returned to the
factory/place of business
within 6 months (or
extended period) from the
date of applicability of GST
Declare goods in stock with Job
worker on the date of applicability
of GST
Directly transferred to the
premises of any registered
taxable person within 6
months (or extended
period) from the date of
applicability of GST
For supply with
payment of tax
in India
For Export
with/without
payment of tax
No Tax payable/ITC to be recovered
Returned to the
factory/place of business
within 6 months (or
extended period) from the
date of applicability of GST
Certain safeguards to be taken – Job work
• Ensure that all inputs due to be received within 30/06/2017, are actually received. If not,
then make sure that proportionate credit is reversed and reflected in the last return.
• Proper records required to maintain to establish that such goods are received back within
prescribed period (90 days-WBVAT/180 days - Excise)
• Identify the stock lying with job worker for less than six months. Stock to be declared by both
principal and job worker held on 01/07/2017 by job worker
• Datewise, challanwise and job worker wise, prepare statement of stock lying with job worker
• For consignments received from job worker, check date of dispatch is not before 01/01/2017
• For supply from JW’s place of business, his place should be declared as additional place of
business of principal if JW is unregistered
Pending Refund Claims to be Disposed Under Earlier Law
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Any refund claim filed before / after date of applicability of GST
To be disposed of in accordance with the provisions of earlier law
Refund is allowed or partially
allowed
The portion allowed will be paid
in cash / as per the provisions of
the earlier law, subject to the
doctrine of unjust enrichment
The portion rejected will lapse
Refund is rejected or partially
rejected
For refund of taxes paid before the appointed date
Balance of ITC in respect of such
claim has been carried forward
under this Act
Balance of ITC in respect of such
claim has not been carried
forward under this Act
No refund claim shall be allowed
To claim refund, input tax credit in respect of the claim should not have been carried forward
Refund claim for taxes paid on export of goods/services
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Any refund claim filed after the date of applicability of GST
To be disposed of in accordance with the provisions of earlier law
Refund is allowed or partially
allowed
The portion allowed will be paid
as per provisions of earlier law The portion rejected will lapse
Refund is rejected or partially
rejected
For refund of taxes paid before the appointed date for export of
goods / services before / after the appointed date
Balance of ITC in respect of such
claim has been carried forward
under this Act
Balance of ITC in respect of such
claim has not been carried
forward under this Act
No refund claim shall be allowed
To claim refund, input tax credit in respect of the claim should not have been carried forward
Refund claim for taxes paid on services not provided
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Any refund claim filed after the date of applicability of GST
To be disposed of in accordance with the provisions of earlier law
For payment received & tax deposited before the appointed day
Any refund accruing to him shall be paid in cash, subject to the
doctrine of unjust enrichment
In respect of services which has not been provided ultimately
Proper disclosure of payment received and taxes deposited to be maintained for allowance of refund
Contract before the applicability of GST
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Applicable to any contract entered before the applicability of GST
Goods or services supplied on or after the appointed day
Also refers to ongoing contracts wherein the completion event occurs after GST even though it may have started before GST
Tax will be liable under GST law
For completion event before the advent of GST, proper disclosure and recording should be made in the books. Raise invoice under current regime and show in the final return.
Credit for Taxes on Goods/Capital goods Lying with Agents
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For goods/capital goods belonging to
the principal
Agent shall be entitled to take
credit
Lying at the premises of agent
On the appointed day
Agent must be a registered taxable person. Both principal and agent must declare the details of stock of goods / capital goods lying with the agent
on the date immediately preceding the appointed date in a prescribed form and manner Invoices of goods should not be more than twelve months from date of introduction of GST. Principal has either reversed or not availed ITC in respect of VAT paid on such goods / capital goods
If credit already taken by principal, it should be reversed before filing of last return
CONDITIONS -
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