Nov 222018

Consequences of non filing to regular return in GST

Who are non fillers for the purpose of section 62 of GST act?

A non-filer is a taxpayer who has not met his tax filing obligation by the due date of the return / statement or approved extended due date.

Non-filers and unregistered non-compliant person are normally misunderstood as one and the same but, these two persons are different. The difference is as under:

  1. An unregistered non-compliant person under GST is the person liable to apply and obtain registration but failed to do so, i.e., unregistered non – compliant person.
  2. Non-filer is a person who is already registered and is therefore liable to file the return/ statement but has failed to do so, i.e., registered non – compliant.

Thus, A Non-filer is a Registered Person liable to file the return or statement periodically but one who has failed to do so.

Assessment of non – filers under section 62 of CGST act:

Under Section 62 of the CGST Act, where a registered taxable person fails to furnish the return (non-filer), the proper officer may,

  • After allowing a period of 15 days from the date of service of the notice under 46 of the CGST Act 2017,

proceed to assess the tax liability of the person to his best judgment, taking into account all the relevant material which is either available on records or which he has gathered.

Assessment of unregistered non compliant person:

Under Section 63 of the CGST Act, where a taxable person (i.e. a person liable to take registration) fails to obtain registration, the proper officer may:

  • Decide to assess the tax liability of the said taxable person to his best judgment for the relevant tax periods, .i.e., 15 days notice period need not to be given in such cases, and
  • Issue an assessment order within a period of five years from the due date for filing of the annual return for the year to which the tax not paid relates to.

What material department would consider for making best judgment assessment?

Best Judgment Assessment are made either

  1. ex-parte or
  2. by rejecting the accounts or
  3. plea of the Registered person.

In such cases no records or documents are furnished, or claims are not substantiated. Records and evidence produced before proper officer are rejected, whether wholly or partly, due to unreliability, incorrectness or incompleteness.

In making best judgment assessment the officer does not possess arbitrary powers to assess any figure as he like. Though quasi judicial in nature these assessments are to be based on the principles of justice, equity and good conscience. In common parlance the words ‘best judgment’ carry the connotation that what is being done is in order to make an estimate.

The best judgment is made in a non-arbitrary way and the nexus seems apparent the decision is final and there is no scope for interfering with the best judgment. Thus, in a way there remains no scope for challenging a best judgment assessment. This is because an assessee cannot be allowed to take advantage of his own illegal act.

Nov 202018

Who is auditor under GST?

Requirements as to audit under GST:

By provisions of Section 35(5) read with Section 44(2) and other related provision, it indicates that appointments of auditors are subject to conditions and limitations that are specified / prescribed. On an understanding and analysis of these provisions the following facts emerge:

  • Every registered person whose turnover during a financial year exceeds the prescribed limit shall get his accounts audited:
    • by a Chartered Accountant; or
    • by a Cost Accountant.
  • The registered person is required to submit electronically a copy of the:
    • Audited annual accounts;
    • Annual return in the prescribed GSTR 9 (refer Appendix 2 for GSTR 9);
    • Reconciliation statement, duly certified, reconciling the value of supplies declared in the return furnished for the financial year along with the audited financial statement in GSTR 9C (refer Appendix 3 for GSTR 9C); and
    • Such other particulars as prescribed; on or before the 31st day of December following the end of the financial year.
  • Such documents are to be submitted electronically through the common portal either directly or through a Facilitation Centre notified by the Commissioner

Restrictions on appointment of auditor:

Relative or employee of the registered person:

The GST Laws do not prohibit a relative or an employee of the registered person being appointed as an auditor under Section 35(5) read with Section 44(2) of the CGST Act and the corresponding Rule 80(3) of the CGST Rules.

It may, however, be noted that as per Code of Conduct under clause (4) of Part I of Second Schedule, a chartered accountant who is in the employment of a concern or in any other concern under the same management cannot be appointed as auditor of that concern.

Further, as per the decision of the Council, a member who is not in full time practice cannot carry out attest function on and after the 1st of April 2005.

Therefore, an employee of the registered person or an employee of a concern under the same management cannot audit the accounts of the registered person under Section 35(5) read with Section 44(2) of the CGST Act and the corresponding Rule 80(3) of the CGST Rules.

Disclosure of interest of CAs with entity:

It may also be noted that under the Second Schedule to the Chartered Accountants Act, if a member furnishes / gives an audit report in the case of a concern in which he and / or his relatives have substantial interest, it will be necessary for him to disclose his interest in the audit report. This is equally applicable to audit under section 35(5) read with Section 44(2) of the CGST Act and the corresponding Rule 80(3) of the CGST Rules.

Internal auditor can not be a GST auditor:

An announcement is made on 28th September 2018 clarifying that the council of the Institute of Chartered Accountants of India, in its 378th meeting clarified that “an Internal Auditor of an entity cannot undertake GST Audit of the same entity.

Audit fees:

The turnover (aggregate turnover) of a registered person, quantum of tax paid, refunds envisaged etc., cannot be a basis for fee to be charged. Fees cannot be fixed, based on the percentage of trading profits or any such method.


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 152018

Auidt under GST: person covered and annual return to be furnished

Meaning of Audit in GST:

The definition of Audit given in Section 2(13) of Central Goods and Services Tax Act, 2017(CGST Act) as “audit means the examination of records, returns and other documents maintained or furnished by the registered person under this Act or the rules made thereunder or under any other law for the time being in force to verify the correctness of turnover declared, taxes paid, refund claimed and input tax credit availed, and to assess his compliance with the provisions of this Act or the rules made there under.”

As per Rule 80(3) of the CGST Rules “every registered person whose aggregate turnover during a financial year exceeds two crore rupees shall get his accounts audited as specified under sub-section (5) of section 35 and he shall furnish a copy of the audited annual accounts and a reconciliation statement, duly certified, in GSTR 9C, electronically through the common portal either directly or through a Facilitation Centre notified by the Commissioner”.

Thus, the entire compliance of GST law has to be confirmed in GST audit.

What are the outcomes of GST audit:

According to section 35(5) “every registered person whose turnover during a financial year exceeds the prescribed limit shall get his accounts audited by a chartered accountant or a cost accountant and shall Submit:

  • A copy of the audited annual accounts,
  • The reconciliation statement under sub-section (2) of section 44 and
  • Such other documents in such form and manner as may be prescribed”.

According to section 44(2) “every registered person who is required to get his accounts audited in accordance with section 35(5) shall furnish, electronically:

  • The annual return under sub-section (1) along with
  • A copy of the audited annual accounts and
  • A reconciliation statement, reconciling the value of supplies declared in the return furnished for the financial year with the audited annual financial statement, and
  • Such other particulars as may be prescribed”.

Whether for the first financial year, i.e., 2017-18, aggregate turnover of 9 months shall be taken for considering the application of audit provision to the auditee?

For the financial year 2017-18, the GST period comprises of 9 months whereas the relevant section 35(5) uses the expression financial year.

Therefore, in the absence of clarification from government, also to avoid any cases of default, it is reasonable to understand that to reckon the turnover limits prescribed for audit i.e., Rs. 2 crores one has to reckon the turnovers for the whole of the financial year which would also include the first quarter of the financial year 2017-18.

What are the documents required to be furnished annually after audit being carried out?

  1. Annual Return;
  2. Copy of the audited annual accounts;
  3. Reconciliation statement, reconciling the value of supplies declared in the return furnished for the financial year with the audited annual financial statement in FORM GSTR 9C, duly certified;
  4. Such other particulars, as may be prescribed
Nov 132018

Exemptions for charitable trust : GST

Exemptions available to charitable trust:

Exemption from Section / NN Summary of exemption
Income Tax Section 11 and Section 13 Complete exemption of income from tax net
GST NN 12/2017 Central Tax (Rate)

NN 9/2017 Integrated Tax (Rate)

Specific exemption:

1.     Health services

2.     Educational services

3.     Religious services

General exemption:

services by an entity registered under Section 12AA of the Income-tax Act, 1961 by way of charitable activities

Here an attempt being made to combined study the effect to above exemption:

  1. Since Under GST only registration under income tax enough to avail the benefit of exemption and in income tax act registration under section 12AA clubbed with certain other condition are critical requirement to avail total exemption. Hence there may be situation where income of charitable trust is taxed with no GST is payable by them.
  2. Charitable organization prior to 01/04/1997 is registered under section 12A of income tax act and hence such organization may face problem in availing exemption under GST regime.
  3. Since income tax provide exemption on assessment year basis, i.e., situation that exist at the end of relevant previous year and GST levy based on situation exist at the time of supply of services and hence there may be situation where in the same year exemption is available in GST but no exemption in income tax and vise versa. Such situation will occur on 1st year of registration or year of cancellation of registration under income tax act.
  4. Under GST regime a charitable organization should involved in charitable activity. That means a trust registered under section 12AA of income act must also engaged in charitable activities as specified in GST regime. Thus, coverage of organization under GST regime is restrictive and full of various open ended and undefined terms.

The effect of above it may be concluded that while a trust is availing benefit of income tax exemption may not avail benefit of GST exemption in certain cases. The relevant clauses are reproduce below for the sake of comparison:

Charitable activities under GST:

GST Exemption Notification in para 2 (r) defines “charitable activities” to mean activities relating to –

  • public health by way of ,-
    • care or counselling of
      • terminally ill persons or persons with severe physical or mental disability;
      • persons afflicted with HIV or AIDS; (III)persons addicted to a dependence-forming substance such as narcotics drugs or alcohol; or
    • public awareness of preventive health, family planning or prevention of HIV infection;
  • advancement of religion , spirituality or yoga
  • advancement of educational programmes or skill development relating to,-
  • abandoned, orphaned or homeless children;
  • physically or mentally abused and traumatized persons;
  • prisoners; or
  • persons over the age of 65 years residing in a rural area;
  • preservation of environment including watershed, forests and wildlife.

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.