Nov 172018
 

Detailed analysis of credit notes and debit notes under GST

Meaning of terms Financial credit notes:

A taxable person may issue a credit note reducing the value of original supply without tax attributable to the reduction claimed. Such credit notes are referred as ‘financial credit notes’.

When financial credit note is issued by a supplier, it would adjust turnover of the original supply and hence the revenue recorded in the books of accounts. However, such credit note would not be declared in the returns under the GST law.

Introduction to Credit Note and debit notes under GST:

In terms of Section 34 of the CGST / SGST Act, 2017 the supplier of goods and / or services is permitted to issue credit notes and debit notes in very specific situations which is summarized in the following manner:

Credit notes Debit notes
taxable value or tax charged in the tax invoice is found to exceed the taxable value or tax payable.  taxable value or tax charged in the tax invoice is found to be less than the taxable value or tax payable.

 

 

Goods supplied are returned by the recipient.
Goods and / or services or both supplied are found to be deficient.
Pre-agreed discount given after issue of invoice subject to conditions.

Situations where credit note can be issued:

  1. Reducing taxable value or tax payable on an earlier supply.
  2. Reducing the taxable value without affecting the tax involved in the amount of such reduction, i.e., financial credit notes
  3. Verify the fact that whether credit notes issued are correctly reported in GSTR 1, it would leave a trail for verification and compliance in due course.

Impact of financial credit notes in annual returns:

There would be difference in revenue as per the audited annual financial statements and the turnover reckoned for purpose of GST returns.

The value of such credit notes should be declared against Pt. II Sl. No. 5J as ‘credit notes accounted for in the audited Annual Financial Statement but are not permissible under GST’.

This Pt.5J goes to increase the revenues as appearing in the audited financial statements (minus of a negative value would be a plus).

It is concluded from the above that credits notes not admissible under GST will attract incidence of GST. And for this reason, it is not advisable to issue such credit notes that omit to adjust the tax involved in the reduction sought to be made to the  value of original supply.

Impact of GST credit notes on Annual return:

The credit notes issued under the provisions of Section 34 viz., mentioning the value of taxable value and the tax payable thereon as well is not required to be declared in the reconciliation statement in Form GSTR – GSTR 9C  for the reason that such credit note would have already been declared in the monthly returns / annual returns.

Situations under which the financial credit notes are issued:

  • Discounts offered post supply: The discount issued by the supplier after effecting supply of goods and / or services if not in terms of the provisions as specified under Section 15(3) of the CGST / SGST Act, 2017, the supplier cannot claim the reduction in the output tax
  • Credit notes issued in relation to exempt supplies, zero-rated supplies and non-GST outward supplies Credit notes issued for claiming reduction in the taxable value shall be declared against Pt. II No. 5J of Form– GSTR 9C.
  • Credit notes issued after expiry of the time limit specified under the GST law: In terms of Section 34 of the CGST / SGST Act, 2017, a supplier cannot issue a credit note any time after either of the following 2 events:
    • Annual return has been filed for the FY in which the original tax invoice was issued; or
    • September of the FY immediately succeeding the FY in which the original tax invoice was issued (i.e., for a tax invoice issued in April 2018 as well as a tax invoice issued in March 2019, the relevant credit notes cannot be issued after September 2019;

Compliances and treatment of financial credit notes: The financial credit notes issued by a taxable person should not be declared either in the monthly returns filed in Form GSTR 3B or outward supply statement filed in Form GSTR – 1 since, it does not involve adjustment of output tax payable. This infers that the financial credit notes would also not be declared in the annual return filed in Form GSTR – 9.  In as much as the reconciliation statement in Form GSTR 9C is concerned such financial credit notes may be required to be declared for the reason that the value of credit notes are given effect in the revenue of the audited annual financial statements. Therefore, such credit notes whether issued in terms of Section 34 or otherwise, should be declared against  Pt. II of Sl. No. 5J of the Form GSTR 9C.

Nov 112018
 

International Tourist under GST

Tourist meaning under IGST act –

As per section 8 of IGST act –

Subject to the provisions of section 10, supply of goods where the location of the supplier and the place of supply of goods are in the same State or same Union territory shall be treated as intra-State supply:

Provided that the following supply of goods shall not be treated as intra-State supply –

(i)       Supply of goods to or by a Special Economic Zone developer or a Special Economic Zone unit;

(ii)     Goods imported into the territory of India till they cross the customs frontiers of India; or

(iii)    Supplies made to a tourist referred to in section 15

As per section 15 of the IGST act the term “tourist” means a person not normally resident in India, who enters into India for a stay of not more than six months for legitimate non-immigrant purposes.

Thus, tourist is a person to come to India for non immigrant purpose.

Scope of taxation under GST:

All the supplies made to tourists are inter-State supplies in accordance with Section 8 of the IGST Act, 2017 and accordingly are levied to integrated tax.

Benefit to tourist under GST:

The integrated tax paid by tourist leaving India on any supply of goods taken out of India by him shall be refunded in such manner and subject to such conditions and safeguards as may be prescribed.

Thus, anything sold to tourist on which IGST is paid by him refundable to tourist in case the goods are not consumed by him within India and same is taken by him out of India.

On what supplies refund is claimable:

The tourist can claim refund of integrated tax only on the supply of goods taken out of India. The tourist cannot claim the refund of tax paid on the supply of goods consumed in India or on supply of services.

Composite supplies to tourist:

If the principal supply is of the goods, then same will be eligible for refund, though the element of service could be involved.

Mixed supplies to tourist:

In case of Mixed Supplies comprising of goods, or goods & services, if  the supply of goods attracts highest rate of tax, then same will be eligible for  refund.  However, if the mixed supply consists of only services, then the same will not be eligible for refund.

Oct 112018
 

Whether Intermediary Services can be exported under GST

Meaning of intermediary services Section – [Section 2(13) of IGST act]:

Intermediary means a broker, an agent or any other person, by whatever name called,

  • who arranges or facilitates the supply of goods or services or both, or
  • securities, between two or more persons, but
    • does not include a person who supplies such goods or services or both or securities on his own account

Thus, the definition of intermediary is wide enough to include broker as well as agent. The only requirement is that its scope is limited to facilitation of trade.

Case:

Now the question arises that the services provided by an intermediary located in India to a non resident outside India is export of services or intra-state supply or inter-state supply?

Analysis:

  • Point of supply in case intermediary services [section 13]:

Section 13(8) – The place of supply of the following services shall be the location of the supplier of services, namely:––

(a) …….

(b) intermediary services;

(c) …….

Thus, in respect of intermediary services place of supply is the location of supplier. Since the place of supply and location of supplier both are in India and hence services by intermediary services are not export of services within the meaning of section 2(6) of IGST act.

Advance ruling [Global Reach Education Services Pvt. Ltd]:

In the given case the applicant was promoting the foreign university and was helping them in enrolling Indian students. In providing the promotional services, the promotional company was charging commission/fee from the foreign university. Citing the above section in this case AAR decided that in the given case intermediary services are not export of services.

  • Whether intermediary services are inter-state supply:

In the given case location of supplier and place of supply both are in the same state and hence it becomes an intra-state supply.

Whether the intermediary services provided by a banking company to its offshore account holders be treated as an intra-State supply or an inter-State supply for payment of GST?

With the same logic such services are also not export of services.

Impact:

  • Benefit of section 16 (export being zero rated) is not available to such intermediary and all services are taxable at full rate.
  • However, with the same logic import of this services is outside the preview of GST and not GST is payable on it. Means all exports are taxable and all imports are tax free.
  • This, essence is encouraging import and discouraging export.

 

Oct 052018
 

Due dates for the Month of October 2018
7th
Income Tax
– TDS Payment for September
10th
GST
– Details of outward supplies of taxable goods and/or services effected – GSTR 1 for September
– Return for authorities deducting tax at source – GSTR 7 for September
– Details of supplies effected through e-commerce operator and the amount of tax collected –
GSTR 8 for September
13th
GST
– Return for Input Service Distributor – GSTR 6 for September
15th
Providend Fund
– PF Payment for September
ESIC
– ESIC Payment for September
15th
GST
– Details of inward supplies of taxable goods and/or services effected claiming input tax credit – GSTR 2 for September
18th
GST
– Return for compounding taxable person – GSTR 4 for April to September
20th
GST
– Monthly return on the basis of finalisation of details of outward supplies and inward supplies along with the payment of amount of tax – GSTR 3 for September
– Return for Non-Resident foreign taxable person – GSTR 5 for September
28th
GST
– Details of Inward Supplies to be furnished by a person having UIN and claiming refund – GSR 11 for September.
31st
Profession Tax
– Monthly Return (covering salary paid for the preceding month) (Tax Rs. 50,000 or more)
31st
Income Tax
– TDS / TCS Quarterly Statements (Other than Government deductor) for July to September
Sensys Technologies Pvt. Ltd.
904, 905 & 906, Corporate Annexe, Sonawala Road, Goregaon East, Mumbai – 400 063.
Tel.: 022-66278600 | Call: 09769468105 / 09867307971
Email: enquiry@sensysindia.com | Website: http://www.sensysindia.com
Branches: Delhi & NCR | Pune | Bangalore | Hyderabad | Ahmedabad | Chennai | Kolkata
Visit our BLOG for latest news and updates related to XBRL, Income Tax, HR & Payroll, PF / ESIC / TDS / PT etc.. Click here to visit Sensys BLOG
Sep 252018
 

Tax implication of forfeiture of advance

Meaning of forfeiture:

According to the dictionary meaning of the word ‘forfeiture’, the loss or the deprivation of goods has got to be in consequence of a crime, offence or breach of engagement or has to be by way of penalty of the transgression or a punishment for an offence.

Unless the loss or deprivation of the goods is by way of a penalty or punishment for a crime, offence or breach of engagement, it would not come within the definition of forfeiture.”

Section 56: Income from other sources.

(1) Income of every kind which is not to be excluded from the total income under this Act shall be chargeable to income-tax under the head “Income from other sources”, if it is not chargeable to income-tax under any of the heads specified in section 14, items A to E.

(2) In particular, and without prejudice to the generality of the provisions of sub-section (1), the following incomes, shall be chargeable to income-tax under the head “Income from other sources”, namely :—

 (ix) any sum of money received as an advance or otherwise in the course of negotiations for transfer of a capital asset, if,—

(a)  such sum is forfeited; and

(b)  the negotiations do not result in transfer of such capital asset;

Section 56(2)(ix) was inserted by the Finance (No 2) Act 2014, with effect from assessment year 2015-16. It provides for taxability as Income from Other Sources of any sum of money received as an advance or otherwise in the course of negotiations for transfer of a capital asset, if such sum is forfeited and the negotiations do not result in transfer of such capital asset. Section 51 has now been amended to provide that any amount taxed under section 56(2)(ix) shall not be deducted from the cost or written down value.

A forfeiture has to be either in terms of the right to forfeit such advance under the contractual terms of the agreement, or as agreed upon with the prospective purchaser.

It must be a positive action on the part of the assessee. However, once the assessee has forfeited the amount, then the matter will be taxed under this clause.

A mere notice of forfeiture by the assessee, which is contested by the other party, may not amount to forfeiture. In such a case following one situation may arise:

  1. if the amount is not written back by the assessee, taxing of such amount is not required merely on the grounds of issue of notice of forfeiture.
  2. In case such amount is written back by the assessee, such amount should be reported under this clause, giving the stand of the assessee.

Mere unilateral writing back of an advance by credit to the profit and loss account, asset account or capital account may not by itself amount to an act of forfeiture by the assessee. Such a write back is however an indication of a possible act of forfeiture

Requirement in Tax Audit form 3CD:

  1. Whether any amount is to be included as income chargeable under the head ‘income from other sources’ as referred to in clause (ix) of sub-section (2) of section 56? (Yes/No)
  2. If yes, please furnish the following details:
    1. Nature of income:
    2. Amount thereof:

A new clause 29A has been inserted, requiring disclosure of whether any amount is chargeable to tax under section 56(2)(ix), and if so, to furnish prescribed details of such income.

Point to consider in taxing forfeiture of advance:

  1. The auditor is not required to report any such forfeited amount if it is in respect of a personal capital asset, where neither the asset, the advance nor the forfeiture is recorded in the books of account relating to the business or profession.
  2. The requirement of reporting arises only on forfeiture of such amount.
  3. If an advance has been received and has been outstanding for a considerable period of time, there is no requirement to report such amount unless and until it is forfeited by an act of the assessee.
  4. Only forfeiture of amounts received as advance towards transfer of a capital asset is required to be reported under this clause.
  5. Any advances received and forfeited towards sale of stock-in-trade would be taxable under section 28(i), and would not be required to be reported since the amount would be credited to profit & loss account.
Sep 202018
 

Who and what is required to be audit in form 3CD (Tax Audit)

Notification no 33/2018:

With the season of tax audit compilation in at your door step the income tax department thrown a major reform in tax audit forms (commonly known as form 3CD) by shifting majority of work of assessing officer to an auditor. Here our endeavor is pre prepare assessee for extra audit requirements with the changes made in tax audit forms.

Effective date of implementation of revised 3CD forms:

Amendments to Form No. 3CD (other than clauses 30C and 44) are effective from 20th August 2018, these amendments would not apply to tax audits which have already been signed and uploaded before the amendments come into effect. In such cases, the revised particulars need not be given.

Thus, all audits concluded and uploaded on portal upto 20th August 2018 need not to be uploaded again on the portal with revised particulars.

Whether incomes other then business and / or professional incomes are to be consider in revised 3CD forms:

The audit is required to be compiled for the books and accounts maintained in respect of the business or profession carried on by the assessee.

So far as the reporting requirements under clauses relating to heads of income other than “Profits and Gains of Business or Profession” are concerned, these can only be only in relation to entries made in such books of account, and does not extend to transactions not recorded in such books of account.

Meaning of business and profession for the purposes of tax audit:

The expression “profession” involves the idea of an occupation requiring purely intellectual skill or manual skill controlled by the intellectual skill of the operator, as distinguished from an operation which is substantially the production or sale or arrangement for the production or sale of commodities.

Whether tax audit is required in case of incomes outside the preview of income tax law and exempt under the income tax law:

Neither the section 44AB nor any other provisions of the Act stipulate exemption from the compulsory tax audit to any person whose income is exempt from tax. This section makes it mandatory for every person carrying on any business or profession to get his accounts audited where conditions laid down in the section are satisfied and to furnish the report of such audit in the prescribed form.

Case 1: A trust/association/institution carrying on business may enjoy exemptions as the case may be under sections 10(21), 10(23A), 10(23B) or section 10(23BB) or section 10(23C) or section 11. Such institutions/associations of persons will have to get their accounts audited and to furnish such audit report for purposes of section 44AB if their turnover in business exceeds the prescribed limit

Case 2: A co-operative society carrying on business may enjoy deduction under section 80P. Such co-operative society will have to get their accounts audited and to furnish such audit report for purposes of section 44AB if their turnover in business exceeds the prescribed limit.

Case 3: An agriculturist, who does not have any income under the head “Profits and gains of business or profession” chargeable to tax under the Act and who is not required to file any return under the said Act, need not get his accounts audited for purposes of section 44AB even though his total sales of agricultural products may exceed the prescribed limit.

Case 4: A non-resident assessee is also required to get his accounts audited and to furnish such report under section 44AB if his turnover/sales/gross receipts exceed the prescribed limits. This audit, however, would be confined only to the Indian operations carried out by the non-resident assessee since he is chargeable to income-tax in India only in respect of income accruing or arising or received in India.

It may be appreciated that the object of audit under section 44AB is only to assist the Assessing Officer in computing the total income of an assessee in accordance with different provisions of the Act.

Therefore, even if the income of a person is below the taxable limit laid down in the relevant Finance Act of a particular year, he will have to get his accounts audited and to furnish such report under section 44AB, if his turnover in business exceed the prescribed limit.

Sep 052018
 

Due dates for the Month of September 2018
7th
Income Tax
– TDS Payment for August
10th
GST
– Details of outward supplies of taxable goods and/or services effected – GST1 for August
– Return for authorities deducting tax at source – GSTR 7 for August
– Details of supplies effected through e-commerce operator and the amount of tax collected –
GSTR 8 for August
13th
GST
– Return for Input Service Distributor – GSTR 6 for August
15th
Income Tax
– Advance Income Tax for all Assessees
15th
Providend Fund
– PF Payment for August
ESIC
– ESIC Payment for August
15th
GST
– Details of inward supplies of taxable goods and/or services effected claiming input tax credit – GSTR 2 for August
20th
GST
– Monthly return on the basis of finalisation of details of outward supplies and inward supplies along with the payment of amount of tax – GSTR 3 for August
– Return for Non-Resident foreign taxable person – GSTR 5 for August
28th
GST
– Details of Inward Supplies to be furnished by a person having UIN and claiming refund – GSR 11 for August.
30th
Profession Tax
– Monthly Return (covering salary paid for the preceding month) (Tax Rs. 50,000 or more)
30th
Income Tax
– Return of Income for others covered under Audit and Companies but other than covered under Transfer Pricing Regulations.
Sensys Technologies Pvt. Ltd.
HO: 524, Master Mind1, Royal Palms, Goregaon East, Mumbai – 400 065.
Tel.: 022-6820 6100 Call: 09769468105 / 09867307971
Email: sales@sensysindia.com | Website: http://www.sensysindia.com
Branches: Delhi & NCR | Pune | Bangalore | Hyderabad | Ahmedabad | Chennai | Kolkata
Visit our BLOG for latest news and updates related to XBRL, Income Tax, HR & Payroll, PF / ESIC / TDS / PT etc.. Click here to visit Sensys BLOG
Aug 282018
 

Tax audit limit under income tax act

Meaning of Tax Audit:

44AB. Every person,—

  1. Carrying on business shall, if his total sales, turnover or gross receipts, as the case may be, in business exceed or exceeds one crore rupees in any previous year; or
  2. carrying on profession shall, if his gross receipts in profession exceed fifty lakh rupees in any previous year; or
  3. carrying on the business shall, if the profits and gains from the business are deemed to be the profits and gains of such person under section 44AEor section 44BB or section 44BBB, as the case may be, and he has claimed his income to be lower than the profits or gains so deemed to be the profits and gains of his business, as the case may be, in any previous year; or
  4. carrying on the profession shall, if the profits and gains from the profession are deemed to be the profits and gains of such person under section 44ADAand he has claimed such income to be lower than the profits and gains so deemed to be the profits and gains of his profession and his income exceeds the maximum amount which is not chargeable to income-tax in any previous year; or
  5. carrying on the business shall, if the provisions of sub-section (4) of section 44AD are applicable in his case and his income exceeds the maximum amount which is not chargeable to income-tax in any previous year,

get his accounts of such previous year audited by an accountant before the specified date and furnish by that date the report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed :

The audit conducted as above is commonly known as TAX AUDIT.

Since requirement as to audit is depend upon total sales, turnover or gorss receipt and hence here an attempt is being made to understand these term.

Meaning to terms turnover as commonly understood:

The aggregate amount for which sales are effected or services rendered by an enterprise. The term `gross turnover’ and `net turnover’ (or `gross sales’ and `net sales’) are sometimes used to distinguish the sales aggregate before and after deduction of returns and trade discounts.

Inclusion and exclusion in sales value / Gross receipts:

Value of Turnover
Inclusion in turnover value Exclusion from turnover value
(a)   Scrap sales

(b)   Sale of By products

(c)   Sale of securities held as stock in trade

(d)   Cash discounts not included in invoices

(e)   Commission on sale

(f)    Indirect taxes included in sales price

(g)   Packing, freight and forwarding etc. included in sales price

(h)   Brokerage income in case of share broker

(i)    In case speculation – Aggregate of both positive and negative differences arising from the difference between purchase and sale transactions

(j)    In case of agency business – commission earned by agent

(a)    Indirect taxes – Like GST

(b)    In case of composition suppliers sales attributable to GST shall be excluded.

(c)    Sale of fixed assets

(d)    Sale of investment property

(k)   Sale of securities held as investment

(e)    Discount allowed in invoice

(f)     Turnover discount

(g)    Packing, freight and forwarding etc. mentioned separately in the invoice

(h)    Sales return

(i)     Price adjustment

(j)     Special rebate

Value of Gross receipts
Inclusion in Gross receipts Exclusion from Gross Receipts
Gross receipts in case of profession would include all receipts arising from carrying on of the profession Re-imbursement of expenses if collected separately either in advance or otherwise, should not form part of the “gross receipts”.

Aug 202018
 

GST :Key features of Monthly Returns

Introduction:

GST Council in its 27th meeting held on 4th May, 2018 had approved the basic principles of GST return design. Now in its 28th meeting held on 21st July, 2018, GST Council approved the key features and new format of the GST returns. Here is an attempt to explain the basic features of new GST return forms:

All taxpayers excluding a few exceptions like

  1. small taxpayers,
  2. composition dealer,
  3. Input Service Distributor (ISD),
  4. Non resident registered person,
  5. persons liable to deduct tax at source under section 51 of CGST Act, 2017,
  6. persons liable to collect tax at source under section 52 of CGST Act, 2017,

shall file one monthly return instead of 2 returns being filed before.

  1. Monthly Return and due-date:

Return filing dates shall be spread over based on the turnover of the taxpayer which shall be calculated based on the reported turnover in the last year i.e. 2017-18, annualized for the full year.

It shall be possible for the taxpayer to check on the common portal whether he falls in the category of a small taxpayer.

A newly registered taxpayer shall be classified on the basis of self-declaration of the estimated turnover. The due date for filing of return by a large taxpayer shall be 20th of the next month.

  1. Small taxpayers:

Taxpayers who have a turnover up to Rs. 5 Cr. in the last financial year shall be considered small calculated in the manner explained in para 1 above.

These small taxpayers shall have facility to file quarterly return with monthly payment of taxes on self-declaration basis.

However, the facility would be optional and small taxpayer can also file monthly return like a large taxpayer.

  1. Continuous uploading and viewing:

There would be facility for continuous uploading of invoices by the supplier anytime during the month.

The uploaded invoice shall be continuously visible to the recipient.

Only uploaded invoice would be a valid document for availing input tax credit.

Invoices uploaded by the supplier by 10th of succeeding month shall be auto-populated in the liability table of the main return of the supplier.

The screen where it shall be visible to the recipient is hereafter called “viewing facility” (shown as “inward annexure” in the return document).

After the due date for the filing of return is over, the recipient shall also be able to see the return filing status of the supplier and thus be aware whether the tax liability on purchases made by him has been discharged by the supplier or not.

Viewing facility shall also show the trade name of the supplier.

  1. Due date for uploading invoices and action to be taken by the recipient:

Invoices uploaded by the supplier by 10th of the next month shall be posted continuously in the viewing facility of the recipient.

Taxes payable on the above invoices which can be availed as input tax credit shall be posted in the relevant field of the ITC table of the return of the recipient by 11th of the next month.

These invoices shall be available for availing input tax credit in the return filed by the recipient.

Invoices uploaded after 10th of next month by the supplier shall get posted in the relevant field of the return of the subsequent month of the recipient though viewing shall be continuous.

But both the invoices would be accounted towards the liability payable by the supplier in his return of the tax period of April.

Therefore, after the 11th of the next month the recipient shall be able to accept, reject or keep pending a particular invoice but the maximum limit of eligible input tax credit will be based on the invoices uploaded by the supplier upto 10th of the subsequent month.

In the transition phase of six months after the new system of return is implemented, the recipient would be able to avail input tax credit on self-declaration basis even on the invoices not uploaded by the supplier by 10th of the next month or thereafter using the facility of availing input tax credit on missing invoices.

  1. Invoice uploaded but return not filed:

It shall be treated as self-admitted liability by the supplier and recovery proceedings shall be initiated against him after allowing for a reasonable time for filing of the return and payment of tax.

  1. Unidirectional Flow of document:

Only the invoices or debit notes uploaded by the supplier on the common portal shall be the valid document for availing input tax credit by the recipient.

Invoices or debit notes which have not been uploaded by the supplier and on which recipient has availed input tax credit shall be hereafter called “missing invoices”.

Recovery from recipient: Where credit is availed on missing invoices by the recipient and such missing invoices are not uploaded by the supplier within the prescribed time period, input tax credit availed in relation to such invoices or debit notes shall be recovered from the recipient.

  1. Missing invoice reporting:

Missing invoices shall be reported by the supplier in the main return for any tax period with interest or penalty as applicable.

Reporting of missing invoices by recipient can be delayed up to two tax periods to allow recipient to follow up and get the missing invoice uploaded from the supplier.

  1. Payment of tax:

Liability declared in the return shall be discharged in full at the time of filing of the return by the supplier as is being done at present in the present return FORM GSTR 3B.

  1. Default in payment of tax by supplier:

There shall not be any automatic reversal of input tax credit at the recipient’s end where tax has not been paid by the supplier.

In case of default in payment of tax by the supplier, recovery shall be first made from the supplier and in some exceptional circumstances recovery of input tax credit from the recipient shall be made through a due process of service of notice and issue of order.

  1. Locking of invoices:

Locking of invoices means acceptance of entering into the transaction in the invoice.

Facility for locking of invoice by the recipient before filing of the return by him shall be available.

Deemed locking of invoices shall be presumed on the uploaded invoices which are either not rejected or kept pending by the recipient.

On filing of the return by recipient, all invoices shall deemed to be accepted except invoices kept pending or rejected.

  1. Pending invoices:

Pending invoices means such invoices which have been uploaded by the supplier but for which one of the three situations exist –

  • first, the supply has not been received by the recipient,
  • second, where the recipient is of the view that the invoice needs amendment,
  • third, where recipient is not able to decide whether to take input tax credit for the time being.

Pending invoices shall be reported by the recipient and no input tax credit shall be availed by the recipient on such pending invoices.

To reduce the number of pending invoices which needs to be reported, a simplification in the procedure for availing input tax credit shall be carried.

Where the goods or services have been received by the recipient before filing of a return and invoice for the same has been uploaded by the supplier upto the due date i.e 10th of the next month, input tax credit for the same can be availed by the recipient in the return.

A pending invoice can be rejected by the recipient at a later date when he is able to decide on either of the three situations mentioned above.

  1. Unlocking of invoices: A wrongly locked invoice shall be unlocked online by the recipient himself.
  2. Amendment of invoices: Amendment of an invoice may be carried out by the supplier. Amendment is invoices are allowed when:
    • where input tax credit has not been availed and
    • the invoice has not been reported as locked by the recipient.

Once an invoice is locked by the recipient, no amendment of the same shall be allowed.

  • Credit note or debit note for the same can still be issued by the supplier to change value, rate of tax, quantity or the tax payable. IT facility would ensure that:
    • where a credit note is issued on an invoice which is kept pending, then both the credit note and the original invoice shall be linked in the system for availing credit so that excess credit is not taken by the recipient;
    • where a credit note is issued on an invoice on which credit has already been availed e. the invoice is locked, the reduction in liability of supplier shall be subject to reduction in input tax credit of the recipient.
  1. Return format: The main return shall have two main tables, one for reporting supplies on which tax liability arises and one for availing input tax credit.
  2. Payment of multiple liability: Liability in the return arising out of invoices of different dates shall be summarized period However, one payment for the total tax liability on all tax invoices shall be allowed to be made. Interest shall be calculated on invoices reported late.
  3. Amendment return: To address the problem of human error e. wrong entries being made in the return, there would be a facility for filing of amendment return. Two amendment returns for each tax period within the time period specified in section 39(9) will be allowed to fill. Amendment of entries which flow from the annexure of the main return shall be allowed only with the amendment of the details filed in the annexure.
  4. Amendment of missing invoices: Amendment of missing invoices reported later by the supplier shall be carried out through the amendment return of the relevant tax period to which the invoice pertains.

It would be advisable to report all the invoices and then avail the facility for amending return so that invoices reported late can also be amended through the amendment return.

  1. Amendment of details other than that of invoice: All user entries of input tax credit table in the main return would be allowed to be amended. Change in the closing balance of the input tax credit shall be affected based on the declaration in the amendment return of the taxpayer. Thus, the opening and closing balances of intervening month(s) shall not get
  2. Payment due to amended liability: Payment would be allowed to be made through the amendment return as it will help save interest liability for the taxpayer. Input tax credit, if available in the electronic credit ledger can also be used for payment of the liability in the amendment
  3. Negative Liability: Negative liability arising from the amendment return shall be carried forward as negative liability in the regular return of the next tax
  4. Higher late fee for amendment return: For change in liability of more than 10% through an amendment return, a higher late fee may be prescribed to ensure that reporting is appropriate in the regular
Aug 162018
 

Significance of business codes in ITR forms

CBDT has changed nature of business codes for income tax return forms from A.Y. 18-19. Before filing of Income tax return, correct business sector along with correct business code has to be selected.

Most of us select business codes recklessly without considering our actual nature and do’s of business. Here is an article mentioning the significance of business codes in self assessment process:

  1. For considering eligibility for presumptive computation: The benefit of presumptive computation of income is available only in case of specified nature of business. In case the selected business codes does not fall in the specified business codes an intimation u/s 143 will sent to wrong computation of income. The only remedy available to you is to file revised return or apply to rectification of return,
  2. The facility of special computation of income is eligible for following class of business:
    1. Special provision for deduction in the case of trade, professional or similar association
    2. Special provision for computing profits or gains of business on presumptive basis
    3. Special provision for computing profits or gains of profession on presumptive basis
    4. Special provision for computing profits and gains of business of plying, hiring or leasing goods carriages
    5. Special provisions for computing profits and gains of retail business (Not applicable from 01.04.2011)
    6. Special provision for computing profits and gains of shipping business in the case of non-residents
    7. Special provision for computing profits and gains in connection with the business of exploration, etc., of mineral oils
    8. Special provision for computing profits and gains of the business of operation of aircraft in the case of non-residents
    9. Special provision for computing profits and gains of foreign companies engaged in the business of civil construction, etc., in certain turnkey power projects… and so on
  3. Few deductions are available only in case of assessee if he is engaged in specified nature of business. The eligibility for these deduction shall be considered based on business coders entered by assessee. For example: Section 35ABA and 35ABB: Expenditure for obtaining right to use spectrum for telecommunication service and Expenditure for obtaining licence to operate telecommunication services. Relevant business code 12006
  4. Allowance for tea development account, coffee development account and rubber development account etc are available if along with other conditions correct relevant business codes are mentioned in ITR forms. 01001 etc

This is worth to mention here that one assessee might be engaged in two or more nature of business with single PAN, business registration and GST registration. Thus, allowance / benefit of more than one business codes under income might be available to single PAN holder and single premises registration.

Further, simply change in business code does not imply a change in nature of business or profession. However, it may be an indication of change in nature of business. Change in nature of business is a wide term and would imply a change in nature, timing and extent of doing business. Change in nature of business would have a direct impact on profitability of business but change in business code have impact on eligibility of an allowance.