Month: September 2018

ITC on Goods in Transit

Posted on by Tally Academy

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In a business world, it is quite natural to have a situation where the date of supply of goods by the supplier and the date of receipt of goods are in two different months. Let’s say, the supplier has billed and dispatched the goods on March, 2018 but you have received the goods on 3rd April, 2018. In general, this situation is known as goods in transit. In this article, we will understand all about ITC on goods in transit.

How to handle goods in transit in GST

While the reasons are many for good in transit situation but what makes the situation a little difficult is the treatment of GST on goods in transit.
You must be wondering WHY? How it is different compared to the situation of goods billed and received on two dates but belongs to same month?

To answer, we need to understand the conditions prescribed in GST Law to claim ITC.

The following are conditions which the registered businesses need to fulfil to claim ITC.

  • You should have the Tax Invoice/Debit or Credit Note issued by a registered person.
  • The goods/services should have been received.
  • You should have filed GST Returns for the related month
  • The tax charged has been paid to the government by the supplier, either in cash or through utilization of ITC

If you closely look at the first 2 conditions, it clearly states that you should have a tax invoice and more importantly the goods in question should have actually received by you. To be more clear on GST on goods in transit,  let us discuss this considering the example used above.

The supplier has billed and dispatched the goods on March, 2018 but you have received the goods on 3rd April, 2018

In the above case, you will become eligible to claim ITC only in the month of April 2018. This is because, only when the invoice and the goods are received, will you be allowed to claim ITC. This is the current provision to claim ITC on goods in transit under GST.

Proposed changes – ITC on goods in transit under GST

With the proposed simplified GST Returns, the provision to claim ITC on goods in transit is simplified. The new proposal allows ITC claim on the date of invoice even if goods are in transit if the following conditions are met:

  1. Your supplier uploads the tax invoice to GST portal (outward supplies annexure) by 10th of the subsequent month.
  2. You should receive such goods before 20th of the subsequent month.

Let us understand this change of ITC on goods in transit under GST with some examples.

Scenario-1

Date of Invoice Date of Invoice Upload by the Supplier Date of Receipt of Goods by the Recipient
30th April,2019 8th May,2019 15th May,2019

In the above case, you will be eligible to avail the ITC in the Month of April, 2019 to be filed by 20th May, 2019. This is because, the invoice is uploaded by the supplier before 10th May, 2018 and the goods are received before 20th May, 2019 which is before the due date to file returns for the month of April, 2018.

Scenario-2

Date of Invoice Date of Invoice Upload by the Supplier Date of Receipt of Goods by the Recipient
30th April,2019 8th May,2019 25th May,2019

In the above case, you will not be eligible to avail the ITC in the Month of April, 2019 to be filed by 20th May, 2019. This is because, the goods are not received before 20th May, 2019 which is the due date to file returns for the month of April, 2018. You will be eligible to claim the ITC in the month of May, 2019 to be filed by 20th June, 2019.

Scenario-3

Date of Invoice Date of Invoice Upload by the Supplier Date of Receipt of Goods by the Recipient
30th April,2019 15th May,2019 9th May,2019

In the above case, you will not be eligible to avail the ITC in the Month of April, 2019 to be filed by 20th May, 2019. This is because, the invoice is uploaded by the supplier after the 10th of May, 2018. You will be eligible to claim the ITC in the month of May, 2019 to be filed by 20th June, 2019.

Conclusion

The simplification proposed on claiming ITC on goods in transit under GST will help the businesses in having an additional ITC claim on all those goods which are in transit but received before the due date of filing GST returns. It also helps in reducing the number of pending invoice compared to the existing provision of claiming ITC on goods in transit under GST.

New GST Input Tax Credit Rules

Posted on by Tally Academy

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Input Tax Credit is the heart of GST compliance for all taxpayers. It is the provision of input tax credit that ensures that taxpayers only need to pay GST on the value added to the goods or services supplied. In the first phase of GST implementation, taxpayers are required to claim input tax credit on a self-assessed basis, as declared in GSTR-3B. In the second phase of GST implementation, as discussed in our article ‘New GST return filing process’, input tax credit of each taxpayer will be arrived at based on the invoices uploaded by their suppliers and locked by them. Let us understand all about the new GST input tax credit rules.

New GST Input Tax Credit Rules – Mechanism

As per the new GST input tax credit rules, only an invoice uploaded by a supplier and locked by the buyer will be a valid document for claim of ITC by the buyer.

Suppliers must pay the tax liability on supplies made during a month by 20th of the next month. Suppliers will also have the facility to continuously upload invoices for their supplies to the GST portal. These invoices will be instantly shown to the buyers in the GST portal and can be locked by them. Input tax credit for a month will be arrived at based on the invoices uploaded by suppliers until 10th of the following month. Invoices uploaded by suppliers after 10th of the following month will be considered for ITC in the following month, as per the input tax credit rules under new GST returns.

Let us take an example to understand the input tax credit rules under new GST return:

Example: Super Cars Pvt Ltd supplies cars to Rakesh Automobiles. In April ’19, Super Cars Pvt Ltd makes the following supplies to Rakesh Automobiles:

Date of invoice Date of invoice upload by Super Cars Pvt Ltd Return in which Super Cars Pvt Ltd has to pay the liability Return in which Rakesh Automobiles can avail input tax credit
5th April ‘19 25th April ‘19 April ‘19 April ‘19
15th April ‘19 9th May ‘19 April ‘19 April ‘19
30th April ‘19 12th May ‘19 April ‘19 May ‘19

In the above table,

For the invoice dated 5th April ’19, Super Cars uploads the invoice on 25th April ’19. Super Cars has to pay the liability on the supply in the return for April ’19, as the supply has occurred in April ’19.  Rakesh Automobiles can also avail input tax credit on the supply in the return for April ’19, as Super Cars has uploaded the invoice by 10th May ‘19.

For the invoice dated 15th April ’19, Super Cars uploads the invoice on 9th May ’19. Super Cars has to pay the liability on the supply in the return for April ’19 as the supply has occurred in April ‘19. Rakesh Automobiles can also avail input tax credit on the supply in the return for April ’19, as Super Cars has uploaded the invoice by 10th May ’19.

For the invoice dated 30th April ’19, Super Cars uploads the invoice on 12th May ’19. Super Cars has to pay the liability on the supply in the return for April ’19 as the supply has occurred in April ‘19. Rakesh Automobiles can avail input tax credit on the supply in the return for May ’19, as Super Cars has uploaded the invoice after 10th May ’19.

Hence, taxpayers can expect a systematic and simplified process for claiming input tax credit in the next phase of GST implementation. However, the focus on the buyer’s input tax credit being based on the supplier’s invoice remains a key feature in the entire system. Hence, it is important for taxpayers to become aware of the input tax credit rules under new GST returns and choose their suppliers carefully.

New GST Return Filing Process – A Quick Guide

Posted on by Tally Academy

new-gst-return-filing-processAfter the introduction of GST on 1st July, ’17, the GST Council has repeatedly taken measures to simplify the GST return filing process for taxpayers. As part of this exercise, the GST Council is working to bring in the second phase of GST, with greater simplification in multiple areas of compliance. In our article ‘Highlights of new GST returns’, we learnt that the new GST return filing process can be summarised as ‘Upload-Lock-Pay’. Let us understand this process in detail.

New GST return filing process – Upload

Upload refers to the upload of invoices by suppliers. In the new GST return filing process, suppliers will have the facility to continuously upload invoices anytime during the month and the invoices uploaded will be instantly visible to the buyers.

New GST return filing process – Lock

Once a supplier uploads an invoice, the next step is for the buyer to lock the invoice. In this respect, the buyer has the following options:

Lock

Locking of an invoice by a buyer indicates that the buyer is accepting the transaction reported by the supplier. Only an invoice uploaded by the supplier and locked by the buyer will be eligible for claim of input tax credit by the buyer. Once a supplier uploads an invoice, buyers can lock the invoice any time before filing of the GST return for the period. Buyers who have a huge number of invoices to lock can make use of the facility of deemed locking. Under deemed locking, all invoices which are not marked as rejected or pending will be automatically locked when the buyer files the GST return for the period.

Here, an important point to note is that once an invoice is locked by a buyer, the supplier cannot make any amendments to the invoice. The supplier will need to issue a credit note or debit note to amend such invoices. However, in case a buyer has wrongly locked an invoice, the invoice can be unlocked by the recipient, provided input tax credit claimed on the invoice is reversed.

Reject

In case the supplier has entered the GSTIN of the buyer wrongly, the invoice would appear for a taxpayer who is not the actual recipient of the supply. In such a case, the taxpayer can reject the invoice.

Pending

A buyer can mark an invoice uploaded by the supplier as pending in the following scenarios:
a. The supply has not been received by the buyer
b. The buyer believes that the invoice needs to be amended
c. The buyer is not able to decide whether to take input tax credit on the invoice for the time being

A buyer cannot avail input tax credit on invoices marked as pending. An important point to note is that the facility to mark an invoice as pending is only available to persons filing monthly returns, and not for persons filing quarterly returns. We will discuss more about this in our blog on key features of the new GST quarterly returns.

New GST return filing process – Pay

The new GST return filing process is complete with the filing of return and payment of GST liability by both suppliers and buyers, after considering their respective input tax credit. As discussed earlier, every taxpayer’s eligible input tax credit will be automatically arrived at based on the invoices uploaded by their suppliers and locked by them. Similarly, their GST liability will be arrived at based on the invoices uploaded by them. Hence, majority of their new GST return will be auto-populated, thus ensuring that manual effort required to file the GST return is reduced significantly.

Hence, the new GST return filing process seeks to simplify compliance for taxpayers with the new feature of continuous locking of invoices by buyers. Buyers will not need to wait for the supplier to file their return to know whether the supplier has uploaded their invoice. Also, the facility of deemed locking will make buyers’ life easier by reducing the time required to lock invoices.