last return under indirect taxes & their reconciliation to ...estv.in/icai/idtc/pdf/last return...

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LAST RETURN UNDER INDIRECT TAXES & THEIR RECONCILIATION TO BOOKS

By CA Shubham Khaitan, B.COM (Honours), ACA, ACS, CFA(USA), DISA (ICAI)

CENVAT Credit C/F in a Return allowed as ITC

25-06-2017 Shubham Khaitan [B.Com(Hons),ACA,ACS,CFA(USA),DISA(ICAI)] 2

➢Applicable for a person filing return under Central Excise / Service Tax / VAT who is registered as a normal taxpayer in GST

➢CENVAT credit carried forward in the last return to be carried forward as CGST ➢VAT/Entry tax credit carried forward in the last return to be carried forward as SGST ➢Credit to be allowed only if admissible under the GST law ➢Return for the period of 6 months before the appointed date has been filed

➢All invoices should be in place for the credit being carried forward as per last return

➢Advisable to prepare a statement of purchase/inward supplies and reconcile it with

books

Multiple registrations of the same entity under

Excise/VAT having 1 registration in GST


➢Applicable for a person having multiple registrations under Central Excise / multiple registrations under VAT

➢Such a person opts for a single registration in GST ➢CENVAT credit of each individual Excise registration to be consolidated and carried

forward as CGST as per their last returns respectively ➢VAT credit of each individual VAT registration to be consolidated and carried forward as

SGST as per their last returns respectively ➢Credit to be allowed only if admissible under the GST law ➢Return for the period of 6 months before the appointed date has been filed

Credit on payments under Reverse charge


➢No transitional provision for availment of such credits ➢Credit to be carried forward in the last return to be only allowed ➢Credit available to service recipient upon payment of service tax under reverse charge ➢To avoid any disputes, it is recommended that tax be paid under reverse charge by 30th

June. Prepare statement of such payment and reconcile with books. ➢After payment of such tax, credit should be availed in the last return of 30th June

➢Reverse charge also applicable for purchase tax on purchase from unregistered dealers.

Prepare such statement of purchases for reconciliation ➢Better to pay such purchase tax before 01/07/2017, then claim and carry forward credit

Input Goods / Services in Transit


➢Segregate stock in hand and in transit ➢Applicable when duty or tax in respect of the inputs/input services has been paid before the

appointed date but inputs or input services received after appointed date ➢Credit allowed only if the invoice is recorded in the books of the recipient within 30 days of

the appointed date i.e. 30th July, 2017 (extendable by further 30 days) ➢Certificate should be taken from supplier showing the payment of duty before 01/07/2017

➢Reconcile stock in transit in Purchase A/c (may be debited in purchase but received later)

➢Reconcile Cenvat Credit Receivable A/c and the credit shown as per return ➢Ensure that the credit should be availed only once and not twice

List of Eligible Duties and Taxes

I. The duty of excise specified in the First Schedule to the Central Excise Tariff Act, 1985(5 of 1986);

II. The duty of excise specified in the Second Schedule to the Central Excise Tariff Act, 1985(5 of 1986);

III. The additional duty of excise leviable under section 3 of the Additional Duties of Excise (Textile and

Textile Articles) Act, 1978 (40 of 1978);

IV. The additional duty of excise leviable under section 3 of the Additional Duties of Excise (Goods of Special

Importance) Act, 1957(58 of 1957);

V. The National Calamity Contingent Duty leviable under section 136 of the Finance Act, 2001(14 of 2001);

VI. The additional duty leviable under sub-section (1) of section 3 of the Customs Tariff Act, 1975 (51 of

1975);

VII. The additional duty leviable under sub-section (5) of section 3 of the Customs Tariff Act, 1975 (51 of

1975); and

VIII. The service tax leviable under section 66B of the Finance Act, 1994 (32 of 1994).


ITC on Capital Goods

➢Applicable for a person filing return under Central Excise / Service Tax / VAT who is registered as a normal taxpayer in GST

➢Credit availed on capital goods carried forward as per the last return (max 50% in 1st year in Excise / staggered in some states in VAT)

➢Unavailed credit = Aggregate amount of Credit entitlement – Credit already availed

➢Unavailed credit on capital goods not carried forward as per the last return for the period immediately preceding the appointed date also to be allowed

➢Unavailed CENVAT credit to be allowed as CGST and VAT credit to be allowed as SGST

➢Credit to be allowed only if admissible under both the earlier and the GST law

➢Proper quantification and recon of credit availed and yet to be availed should be made

➢Applicable for capital goods stock in transit as well

Returns for persons having Centralized Registration


Credit shall be carried forward as per the last return

Ensure that the last return is filed within 3 months from 01/07/2017

Claim all the credits in the original return

In the revised return, higher credit than the original return will not be allowed

Credit can then be transferred to any of the registered person having the same PAN

Reversed CENVAT credit under existing law


CENVAT credit claimed under existing law

Reversed due to non-payment of consideration for input services within 3 months before the appointed day

Reclaiming of such credit allowed upon payment

Such payment should be made within 3 months from the appointed day

Such credit to be allowed even though not carried forward as per the last return

Make payment before 01/07/2017 to reclaim credit reversed before 01/04/2017. Such credit should be claimed in the last return

Reversal of credit under Rule 6 of CENVAT Credit Rules

Rule 6 prescribes reversal of Cenvat Credit wherein both exempted and taxable goods/services are supplied. Proportionate credit w.r.t taxable supplies allowed.

Close the books as on 30th June and finalise the value of reversal based on the actual value of exempted and taxable goods / services

Incorrect / Excess reversal of credits under Rule 6 of Cenvat Credit Rules to be reclaimed

Ensure credit for inputs w.r.t. exempt supplies is not being claimed in final return. If claimed by mistake, it should be reversed

Take credit of eligible duties and taxes for inputs held in stock on 01/07/2017 in the form of inputs, semi-finished goods and finished goods relatable to exempted goods/services

Prepare stock statement summary on 30th June to find stocks attributable to exempted and taxable goods / services

Cenvat Credit A/c should contain reversal of the amount attributable to exempted goods. First return in GST can contain the claim of this amount

Missed credits


➢Any missed credits of the past should be taken immediately in the last return ➢Reconcile books with the return to find if any credit has been missed out ➢Missed credits on capital goods can be availed without any time limit

➢Companies availing credit upon payment of taxes may miss out on credit on unpaid

invoices as on 30th June ➢Job-worker’s Credit missed out ➢Eligible credits to be taken within 1 year of the date of issue of invoice

➢Proper Cenvat Credit audit to identify if any credits are missed out/taken wrongly

Disputed credits


➢Advisable to take credits which are doubtful in nature. May not be available later even if it turns out to be eligible later ➢Ineligible credits under existing law should however not be taken

➢Cenvat Credit claimed before the period of registration / centralized registration ➢Credit reversed under protest can be taken for unlimited period

➢Credit reversed at the time of audit to buy peace

➢Credit reversed based on oral instructions by the Department

➢Credit availment on rejection of Cenvat credit refund claim

➢Examine eligibility of disputable credits and claim them with intimation to the Department

Certain Doubtful credits


Freight Outwards in case of FOR delivery (where customer location is place of removal)

Credit on outdoor catering though Factory compulsorily required to have canteen under Factories Act

Input tax credit of Rent a cab may be taken as per the judgement of Madras High Court (Commissioner of Central Excise, Chennai v. M/s Visteon Automatic India (P) Ltd.)

Expenses [other than construction expenses] incurred for setting up new factory/premises by manufacturer/service provider such as on architect, project management consultant, consulting engineer service, soil testing, loan processing, financial charges, erection, commission & installation of machine works.

Claim of Credit for CST transactions in respect of

which forms are pending


➢Applicable for a person filing return under CST/VAT who is registered as a normal taxpayer in GST

➢VAT/Entry tax credit carried forward in the last return before the appointed date to be

carried forward as SGST ➢Credit attributable to claims in respect of Form C / F / H / I which could not be received

within 90 days after the appointed day to be ineligible ➢If the forms are received after 90 days, amount denied earlier is to be refunded

CENVAT Credit Claim to be Disposed Under Earlier Law


Applicable when proceedings of CENVAT claim under earlier law initiated before/on/after the appointed date

Disposal of proceedings as per earlier law

If carried forward, no refund claim will be allowed and amount is found to be: Admissible – Continue to be carried forward Inadmissible – Recovered with interest

If balance not carried forward in last return and amount is found to be: Admissible – Refunded in cash subject to unjust enrichment Inadmissible – No refund will be allowed

Call to be taken on claim of such CENVAT credit in the last return

Safeguards – Taxation and Credits


All sale invoices recorded in books and tallied with the last return.

For questions of taxability, taxes may be paid for the customer to avail the input tax credit

Even after filing of original return, reverify the output tax liability as per the last return and file revised return if necessary

Review credit of eligible duties as per the last return and verify if any credits missed in the last return can be claimed in the revised return

Mistake can due to calculation/taxability/eligibility/any other reason

Time period for revised return will be as per the current law. So, complete review of tax liability and credits should be completed by then

Prepare relevant sales/credit statement and reconcile with returns and ledger account

Difference of Point of Taxation – Last return - Excise


Levy of Excise is manufacture and POT is removal of goods

Tax payable in GST for goods removed after the advent of GST

For goods removed before 1st July, 2017, Excise duty is applicable

Even if payment is received later, no tax is to be paid

Ensure all removals are shown in the last return i.e. removals made till 30.06.2017

Difference of Point of Taxation – Last return - VAT


Levy of VAT is on sale of goods

States wherein VAT is leviable on advances, no tax to be paid at the time of sale even if made under GST regime

Where VAT is not payable on advance and supply made during GST, taxability to occur as per GST

Where sale made before 01/07/2017, date of payment becomes immaterial as VAT will be levied

If any goods are simply delivered to recipient on or after 01.07.2017 against which risk and reward has already been transferred within 30.06.2017, then such sales should be disclosed in the last return

Difference of Point of Taxation – Last return – Service Tax


Point of taxation as per Service tax is the date of invoice (invoice issued within 30 days of provision of service) or payment whichever is earlier

For advances received earlier, Point of taxation will be under Service tax

If invoice issued under earlier law, even then Point of taxation will be in Service tax

Preserve proper document of invoices/advance receipts to avoid its demand in GST

Ensure all invoices for completed services are issued before 1st July, 2017. Such invoices should be disclosed properly in the last return

Ensure payment of service tax on advances before 1st July, 2017 and its proper disclosure in the last return

Difference of Point of Taxation – Both Service tax and VAT


Applicable when tax paid on any supply under both VAT and Service tax for which supplies made on or after 1st July, 2017

Taxable person to claim credit of VAT and Service tax paid

Henceforth, tax will be levied under GST

E.g. Works contract, Outdoor catering etc.

Not regd/ regd in special scheme earlier

• Person not liable to get registered

• Supplier of exempted goods/services

• Person providing works contract service and availing the benefit of Not. 26/2012 dtd 20/06/12

• Persons availing abatement under Service Tax

• First Stage/Second Stage Dealer

• Registered Importer • Depot of

manufacturer

under the earlier law

Becomes a registered taxable person under GST

Continues to be non-registered/ supplies exempt goods/ opts for composition

scheme under GST

Take ITC of eligible duties & taxes on inputs, inputs contained in semi-finished & finished goods held in stock on the appointed

day (subject to certain conditions)

No ITC available


Person not in possession of duty paying document


Service Provider

Persons

Ineligible

Manufacturer

Trader/Any other person

Ineligible

Ad-hoc credit

> = 18% < 18%

CGST IGST CGST IGST

60% of CGST

30% of IGST

40% of CGST

20% of IGST

MRP based valuation in VAT


Persons holding stock without duty paying document

Tax paid at the first point of sale and subsequent sales are

not liable to tax

Ad-hoc credit

> = 18% < 18%

SGST IGST SGST IGST

60% of SGST

30% of IGST

40% of SGST

20% of IGST

Allowed to avail ITC on goods held on appointed date

Certain safeguards to be taken


Prepare a statement calculating the reduction in price to be passed to consumers

Person claiming ITC is in possession of invoice and/or other prescribed documents

Ensure proper record keeping of such invoices along with the identification of stock. Quantity of goods and Input tax credit should be correlated

Such goods should be intended for use in making taxable supplies

In case of ad-hoc credit, such goods should not have been exempted or NIL rated

Stock must be sold off within 6 months to avail complete ad-hoc credit. Stock levels should accordingly be planned

Ensure that such invoices are not dated earlier than 01/07/2016

Prepare a stock statement summary as on 30th June, 2017 showing the quantum, value, duties and taxes involved to find ITC attributable to the said scheme

ITC to a Person Switching from Composition Levy

• Applies to a composition taxable person in VAT coming under normal registration in GST

• Applicable for persons paying under compounded levy scheme under Central Excise (E.g. Payment of tax upon capacity of machines)

• Take ITC of eligible duties & taxes on inputs, inputs contained in semi-finished & finished goods held in stock on the appointed day

• The person is in possession of invoice and/or other prescribed documents for inputs.

• No claim of credit should be made in the last return by composition dealer

• Ensure proper record keeping of such invoices along with the identification of stock

• Ensure that such invoices are not dated earlier than 01/07/2016

• Prepare a stock statement summary as on 30th June, 2017 showing the quantum, value, duties and taxes involved to find ITC attributable to composition scheme

Duty Paid Goods Returned to Place of Business

Duty / Tax paid goods under Earlier Law

Removal within 6 months before the applicability of GST

Returned to place of business

after 6 months from the date of

applicability of GST

The supplier shall not be eligible

for refund of such duty / tax paid

earlier

The supplier shall be eligible for

refund of such duty / tax paid

earlier

Returned to place of business

within 6 months from the date of


Return from a registered

taxable person

Return from a person other

than registered taxable person

Such return is deemed to be a

supply & tax is payable by the

person returning the goods

Credit to be claimed by the

person returning the goods as

per the last return

Safeguards to be taken – last return – Return of goods

Ensure proper disclosure of removal/sale of goods made as per last return

Track if the supply has been made to registered / unregistered person under GST

No refund if goods were removed before 6 months. So, ensure return of such sales made before 01/07/2017 if return is by an unregistered dealer

Reconcile whether goods returned before 01/07/2017 are captured before the last

return is filed

Itemwise statement to be prepared and reconciled with ledger and returns

Ensure that ITC is taken in the last return by the registered person returning the goods

Credit Distribution by Input Service Distributor


CENVAT Credit on the date of


Invoice received after the date

of applicability of GST

Input Service Distributor under earlier law

Carried forward as CGST in

ISD’s books

Received from the same state

Received from a different state

Taken as CGST in ISD’s books

Taken as IGST in ISD’s books

CENVAT Credit on the date


Safeguards to be taken – last return - ISD


Billwise and Itemwise statement of purchase to be prepared. Complete data of this statement to be reconciled with ledger (Purchase, Expense, CC Receivable etc.)

Ensure no omission of purchase/expense for proper distribution

Make bifurcation of invoices between exempted and taxable service. Only Input tax credit for taxable services should be taken

Tag invoices considered for distribution for services received till 30/06/2017. Should reconcile with the statement of credit being carried forward in last return.

Tag invoices received after 30/06/2017 against services received upto 30/06/2017 Should be reconciled with books for invoices not considered under last return

Inputs Removed for Job Work


Removal of Inputs as such/

partially processed Inputs

Removed to Job worker for

further processing, testing etc.

within 6 months before the date


Returned to the factory / place

of business within 6 months (or

extended period) from the date


No Tax will be payable

ITC availed earlier in regard to

such inputs shall be recovered as

per the provisions of the Act

Not Returned to the factory /

place of business within 6

months (or extended period)

from the date of applicability of

GST

Declare inputs in stock with Job

worker on the date of applicability

of GST

Goods Removed for Job Work


Semi-Finished / Finished goods

Sent to Job worker for further

processing, testing etc. within 6

months before applicability of GST

ITC availed earlier shall

be recovered as per the

provisions of the Act

Not Returned to the

factory/place of business

within 6 months (or

extended period) from the

date of applicability of GST

Declare goods in stock with Job

worker on the date of applicability

of GST

Directly transferred to the

premises of any registered

taxable person within 6

months (or extended

period) from the date of


For supply with

payment of tax

in India

For Export

with/without

payment of tax

No Tax payable/ITC to be recovered

Returned to the

factory/place of business

within 6 months (or

extended period) from the

date of applicability of GST

Certain safeguards to be taken – Job work

• Ensure that all inputs due to be received within 30/06/2017, are actually received. If not,

then make sure that proportionate credit is reversed and reflected in the last return.

• Proper records required to maintain to establish that such goods are received back within

prescribed period (90 days-WBVAT/180 days - Excise)

• Identify the stock lying with job worker for less than six months. Stock to be declared by both

principal and job worker held on 01/07/2017 by job worker

• Datewise, challanwise and job worker wise, prepare statement of stock lying with job worker

• For consignments received from job worker, check date of dispatch is not before 01/01/2017

• For supply from JW’s place of business, his place should be declared as additional place of

business of principal if JW is unregistered

Pending Refund Claims to be Disposed Under Earlier Law


Any refund claim filed before / after date of applicability of GST

To be disposed of in accordance with the provisions of earlier law

Refund is allowed or partially

allowed

The portion allowed will be paid

in cash / as per the provisions of

the earlier law, subject to the

doctrine of unjust enrichment

The portion rejected will lapse

Refund is rejected or partially

rejected

For refund of taxes paid before the appointed date

Balance of ITC in respect of such

claim has been carried forward

under this Act


claim has not been carried

forward under this Act

No refund claim shall be allowed

To claim refund, input tax credit in respect of the claim should not have been carried forward

Refund claim for taxes paid on export of goods/services


Any refund claim filed after the date of applicability of GST


Refund is allowed or partially

allowed

The portion allowed will be paid

as per provisions of earlier law The portion rejected will lapse

Refund is rejected or partially

rejected

For refund of taxes paid before the appointed date for export of

goods / services before / after the appointed date


claim has been carried forward

under this Act


claim has not been carried

forward under this Act

No refund claim shall be allowed

To claim refund, input tax credit in respect of the claim should not have been carried forward

Refund claim for taxes paid on services not provided


Any refund claim filed after the date of applicability of GST


For payment received & tax deposited before the appointed day

Any refund accruing to him shall be paid in cash, subject to the

doctrine of unjust enrichment

In respect of services which has not been provided ultimately

Proper disclosure of payment received and taxes deposited to be maintained for allowance of refund

Contract before the applicability of GST


Applicable to any contract entered before the applicability of GST

Goods or services supplied on or after the appointed day

Also refers to ongoing contracts wherein the completion event occurs after GST even though it may have started before GST

Tax will be liable under GST law

For completion event before the advent of GST, proper disclosure and recording should be made in the books. Raise invoice under current regime and show in the final return.

Credit for Taxes on Goods/Capital goods Lying with Agents


For goods/capital goods belonging to

the principal

Agent shall be entitled to take

credit

Lying at the premises of agent

On the appointed day

Agent must be a registered taxable person. Both principal and agent must declare the details of stock of goods / capital goods lying with the agent

on the date immediately preceding the appointed date in a prescribed form and manner Invoices of goods should not be more than twelve months from date of introduction of GST. Principal has either reversed or not availed ITC in respect of VAT paid on such goods / capital goods

If credit already taken by principal, it should be reversed before filing of last return

CONDITIONS -

last return under indirect taxes & their reconciliation to ...estv.in/icai/idtc/pdf/last return...

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