Simplifying GST

In this fortnightly column, Rajeev Varaiya, partner at Varaiya & Shah LLP (chartered accountants) answers your queries on this knotty subject of Goods and Service Tax

Q: What is the latest amendment in the matter of claiming ITC which has created hue and cry? Please explain with an example.

A. Vide Notification dated October 9, 2019 the Government have amended the relevant rule as per which from October, 2019, claim of ITC will be restricted to 120 per cent of the ITC reflected in GSTR-2A.

Example 1:

Say the recipient receives during October 2019, invoices of inward supply of goods and services involving ITC of Rs 10 lakh. His suppliers have furnished in their respective GSTR-1 invoices covering credit of Rs 6 lakh (which appear in GSTR-2A of the recipient).

So, as per amendment, the recipient can claim ITC in GSTR-3B = Rs 6 lakh plus 2 per cent of Rs 6 lakhs i.e. 1,20,000 i.e. total ITC claim of Rs 7,20,000 credit (which could not be claimed in GSTR-3B of October, 2019) can be claimed in subsequent month/s on reflection thereof in GSTR-2A.

Example 2:

In above example: Say in GSTR-2A of recipient, credit of Rs 9 lakh appear. So the recipient can claim ITC of Rs 9 lakh plus 20 per cent i.e. 1,80,000 i.e. full Rs 10 lakh.

Q: My turnover during April 2017 – June 2017 was Rs 40 lakh and during July 2017 - March 2018 was Rs 1.80 crore. Am I liable for GST audit for F Y 2017-18?

A. GST audit becomes applicable when turnover during financial year exceeds Rs 2 crore. Financial year means April to March. April 2017-June 2017 was non-GST period and hence turnover of these three months may not be considered to calculate limit of Rs 2 crore.

Moreover, vide Press Release dated July 3, 2019, the Board have clarified that aggregate turnover for calculating limit of Rs 2 crore shall be considered for the period July 2017 to March 2018. Thus, you are not liable for GST audit.

Q: We have head office in Maharashtra and branch in Gujarat. The turnover of head office is Rs 1.5 crore and that of Gujarat branch is Rs 1.2 crore. Are we liable for GST audit considering each turnover is below threshold limit of Rs 2 crore?

A. The limit of Rs 2 crore for the purpose of GST audit is to be considered taking aggregate turnover on PAN India basis. Since your aggregate turnover of head office and branch is Rs 2.7 crore (i.e. more than 2 crore), you are liable for GST audit both for head office as well as branch.

Q: We are receiving (foreign) commission from a foreign company for rendering certain services to them in India. What is the position of our GST liability?

A. Based on the definition of ‘Intermediary’ and place of provisions of supply, in our view, you are liable for GST. Now which GST; IGST or SGST and CGST? Again, considering certain provisions, in our view, CGST plus SGST would apply.

Q: Our banker has charged GST on certain charges which is allowable ITC. They have paid such GST in GSTR 3B. But they have not disclosed the same with our GSTIN in B2B column but erroneously shown in B2C column. Hence, it is not reflected in our GSTR2A. Can we claim such ITC and how?

A. You should obtain declaration from your respective bank certifying the payment and punching error in GSTR-1 and undertake to revise GSTR-1, if and when portal allows. Since bank has paid GST in GSTR 3B and filed GSTR-1, you may claim ITC which should be allowed.

Q: We are engaged in providing Information Technology enabled services for several years. We were registered under the service tax laws and now under GST laws. As on June 30, 2017, we had accumulated unutilised credit of Education Cess (EC), Secondary Higher Education Cess (SHEC) and Krishi Kalyan Cess (KKC). We carried forward these three unutilised credits to GST era. Our officer is refusing to allow carry forward.

A. Your case is favorably covered by the decision of Madras High Court (dated September 5, 2019) in the case of ‘Sutherland Global Services P. Ltd’. The High court has allowed such carry forward.

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