10 Things we miss while Filing Returns

10 Things we miss while Filing Returns

Return filing is neither an easy process nor a difficult one too. The consultants will be surrounded in a hustle and bustle in the beginning of every month. The busy schedule from first of every month till twentieth, could lead us miss some small points while filing returns, which ends up with big penalties. Conduct the return filing process like an Audit. It is not like you are getting the tally backup from the client, extracting the ledgers, preparing the workings and filing returns. One should focus on the other key aspects of GST law and check whether the same is complied by the client or not.

I’m not telling you to perform additional work while doing returns. I too know that it is not possible to check each and every aspect of GST law and compliance of same, especially during return period. In this article, we are going to look into those points which can be checked while filing returns without putting additional efforts.

1.   Displaying GSTIN and GST Certificate

If you are visiting the client place while filing the returns, check whether the client has displayed his GSTIN and GST certificate in the predominant place of business. Rule 18 of CGST Act, 2017 states that “every registered person shall display his GST registration certificate at predominant place and GSTIN on the name board, in the principal place of business and additional places”. Contravention of this provision could lead to a general penalty of Rs. 50,000. Many companies have got notices from department imposing penalty for not displaying the same. Better to avoid such situation.

Even if you’re not visiting the client place, just confirm from the client whether he has displayed such certificate and GSTIN or not. If not, suggest doing the same.

2.   Invoicing Contents

Rule 46 prescribes the specific set of particulars; every invoice should contain. But when we file the returns, we don’t give much concern to the invoicing. Invoice not containing all the particulars mentioned in Rule 46 would attract general penalty. So, while filing returns, test check a copy of invoice and examine whether it contains all the particulars required or not.

3.   Verify Creditors Aging Report

We are all aware that input tax credit availed has to be reversed if the payment has not been made to the supplier within 180 days. So, how many of you are checking creditors aging report every month? Very less.  Most of the businesses maintain the track of such creditor’s payment report. Even the tally can generate the Creditors Aging Report, if the client has maintained the data properly. Verify such reports and if the client has not made payments for more than 180 days, reverse the credit along with interest.

4.   Taxable Value vs Total Value of Sales

When we refer the profit and loss account, the client would have maintained incomes under relevant heads. Take the total of those heads which are taxable under GST. Then compare the same with the taxable value calculated as per your workings. It should match. If there is any difference, it means there are some taxable transactions which you have not considered in your workings. Consider the same. This could help you not missing any transaction on which GST is applicable.

5.   Taxable value of purchases vs Total Purchases

While preparing workings, you could have prepared a list of purchases on which tax has been charged. Take the taxable value from such workings. Compare that taxable value with the total of purchases in the profit and loss account. If the percentage is more, it means the client has less purchases from unregistered dealer which is good. But if the same is low, it means the client has more purchases from unregistered dealer which increases the cost.

Let us see how purchases from unregistered dealer increases cost. Considered Mr. A is a registered dealer and Mr. B is unregistered dealer. Both are charging a margin of 10% on their cost.

1. Mr. A has purchased goods at Rs. 118 (Price – 100 and GST – 18). He can claim Rs. 18 ITC as he is registered. Therefore, his net cost is Rs. 100 itself. He will add his margin of Rs. 10 (10% of 100) and sell the said goods to you at Rs. 129.80 (Cost – 110 and GST – 19.8). You can claim the credit of Rs. 19.8 and your net cost will be Rs. 110.
2. Now we will see the second scenario. Mr. B has purchased goods at Rs. 118 (Price – 100 and GST – 18). As he cannot claim ITC, his net cost would be Rs. 118 itself. He will add his margin of Rs. 11.8 (10% of 118) and sell the goods to you at Rs. 129.80 (Price – 129.8 and GST – 0). As you have not paid any tax to claim credit, your net cost will be Rs. 129.8.

In this way, the procurement from unregistered dealers increases the cost to the company. If your clients have more procurement from unregistered dealers, you can explain the disadvantages of it and suggest them to purchase goods or services from registered dealers.

6.   Place of Supply

I have come across a case recently. A client (say Mr. C) is selling goods to both registered and unregistered persons. He will not transport any goods; his customers will come to his place and buy the goods. He is charging CGST and SGST for those customers who come from within state and IGST for the customers who is coming from outside state. Now, you tell me whether this treatment is correct or not?

In terms of section 10(1)(a), in case of supply which involves movement of goods, the place of supply shall be location of goods at the time at which movement of goods terminates. Therefore, in the case stated above, the place of supply for all the customers shall be the Mr. C’s location, as the movement of goods terminates at his place. Therefore, he shall charge all of his customers CGST/SGST and not IGST. Thus, the tax charged by him to customers from outside state is not proper. To avoid such kind of issues, test check how the client is charging tax to his customers and determine place of supply accordingly. Give special attention to place of supply in case services related to immovable property, as it is the area where lot of mistakes happen.

7.   Self-Invoices for Reverse Charge

Most of the times we check for reverse charge transactions in tally and end up not checking whether the client has raised self-invoices and payment vouchers or not. Section 31(3)(f) and 31(3)(g) mandates the recipient to issue a payment voucher to supplier and raise self-invoices in case of transactions made under reverse charge. Further section 16(2) states that to claim ITC, the recipient should possess tax invoice or any other tax paying documents. In case of reverse charge, self-invoice acts as a document to claim ITC. Therefore, if the client is not raising self-invoices and payment vouchers, he is vulnerable to a general penalty and cannot claim credit of reverse charge transactions at the same time.

8.   Advances received

In case of supply of services, GST has to be discharged on the advances received. You will not find this in sales account. You have to refer the current liabilities head of balance sheet where you will see advances received. Check whether the client has discharged GST on such advances. There could be some cases where the client would not know this and not collected GST portion from his customer. In such cases, discharge the tax on inclusive basis and adjust the same in final invoice.

Further the client has to issue a receipt voucher at the time of receiving advance specifying the contents mentioned in Rule 50. Test check whether the practice of the same is there or not and verify the particulars of receipt voucher. GST on advances on sale of goods has been made exempted vide Notification 66/2017 – CT.

9.   Refund of accumulated credit

Lot of times we don’t give much attention to the input tax credit that is getting accumulated. If the client has any such credits accumulating either on account of inverted duty structure or zero-rated supplies, suggest to go for refund instead of keeping the amount idle in the credit ledger.

10.  Client Discussion

Last but not least i.e. client discussion. Almost 90% of the returns, now-a-days, gets filed without the client discussion and without the intervention of the client. As I have already mentioned, return filing is time taking and you might not have time for such discussions. But what if I say that 10-15 minutes of discussions will save your hours of work?

Enquire the client what are the new changes made in the business, any new supplies made during the month, unusual transactions and at the same time explain the new changes in GST law which are related to the industry in which client is operating. These things could hardly take 10-15 minutes. But if you skip this part and start directly with tally, you have to go and ask client each time you find a new transaction and analyze its nature, which of course grabs your hours of time.

Conclusion

This is not an exhaustive list. There will be many other points too that we may miss while filing the returns. As I’ve said, the primary intention of this article is to discuss those points which can be checked without additional efforts. But if you have time, analyze all the relevant GST provisions applicable to the client. All these things will be helpful during the times of GST Audits and also avoids the penalties to the client.