GST – Key activities to be carried out at the Year End

It is difficult to track the increasing number of amendments in the GST law and their implementation within statutory mandate timeframe.

The yearly compliances are more prone to the risk of non-compliance as these are not regular routine compliances as compared to the compliances having periodicity – monthly, quarterly and half yearly.

Certain important activities to be carried out in the end of Financial Year 2021-22 are as follows:

1. E-invoicing is mandatory for Businesses with aggregate turnover more than 20 Crores:

The CBIC has notified that starting 01 April 2022, e-Invoicing will be applicable for businesses with a turnover of more than Rs.20 crores (in any financial year from FY 2017-18 onwards).

In case of Non-compliance of E-invoicing, the input tax credit may not be available to the recipient without having e-invoice issued by the supplier.

Entities need to consider following compliances in this regard:

• Implement e-invoicing facility in the accounting system or using various third-party software’s for integration of e-invoicing module.
• Generate E-invoice on a real time basis for all B2B & export transactions.
• Communicating the invoice requirement liable for this compliance.
• Verifying the vendor’s compliance to the e-invoicing requirements.

2. Letter of undertaking:

Letter of Undertaking filed during the FY 2021-22 is applicable only till 31 March 2022. In case the taxpayer wants to make any zero-rated supplies (i.e., supply goods or services to any person located outside India or in SEZ) without payment of GST, then the tax payer shall submit a fresh LUT for FY 2022-23 till 31 March 2022.

3. Reconciliations to be maintained:

• Outward supplies as per books and GST returns (Books vs. GSTR-1 vs. GSTR-3B)
• ITC appearing in GSTR-2A and 2B with ITC recorded in books of accounts and take necessary steps to reconcile the same.
• Reconciliation of balance of credit and cash as per GST portal with balance appearing in books.
• Accounting of Credit where details are not reflecting in GSTR-2B –Deferred Input account-revaluate before September-2022 of coming year & consider charge to vendor & passing of as Expenses.

4. Requirement for any ITC reversal or ITC to be reclaimed, to be checked:

• Rule 37 – Any ITC reversal required on account of non-payment within 180 days or
• Reclaim of any ITC in respect of supplies for which payment has been made.
• Rule 42 or 43 – Impact of annualized ITC reversal in case of exempted as well as taxable Supplies to be considered.
• Check if any reversal required against purchased goods rejected and returned. (ensure) the impact of the same has been considered in GST returns.

5. Cross charge to distinct person and related parties for supply of common services:

• As Provided in Schedule I of CGST Act ,2017, supply of goods & services or both between related persons or between distinct persons as specified in section 25, when made in the course or furtherance of business even without consideration to be treated as supply under GST. There can be many support services availed by the taxpayer which should be identified on periodical basis. Before finalization of annual accounts, it is important to identify the common support services and more important is to allocate this cost to the other units. By adopting appropriate valuation mechanism as provided in the act and rules, the tax invoice needs to be raised in this regard and GST needs to be discharged .Base on the cross charge, invoice raised by one unit, the recipient until can avail the ITC in their books & GST returns.

6. Validation of RCM liability:

• Ensure if the liability is being paid in respect of all input supplies covered under section 9(3) notified for reverse Charge and all the amendments have been taken care of. Analyze GST on Section 9(3) expenses:
• Freight & transportation Payments,
• Ocean Freight on CIF imports,
• Advocate Payments -Legal Expenses,
• Security services,
• Renting of motor vehicle from non-body corporates,
• Import of services, (with or without consideration)
• Sponsorship/Advertisement & marketing,
• Fees & licenses to various Governments.
• Procurement less than 80% from unregistered person in case of builders
• Check if the tax paid under RCM matches with ITC under RCM. RCM liability should be more than or equal to ITC under RCM.
• Ensure timely payment of RCM liability, interest liability need to be discharged in respect of any delay in tax payment.

7. Issuance of GST Debit note/ Credit note:

Any credit/debit note for the financial year 2020-21 can be issued latest by the date on which return for September 2022 (30 November 2022 as per Budget 2022) or annual return is filed, whichever is earlier. Therefore, it is advisable to evaluate such transactions (any return of goods or price variance of earlier supply/procurement) against which there is any requirement to issue such document.

8. GST on advances received for future Supplies

Ensure tax liability against receipt of advances and adjustment thereof to derive at unadjusted advances at year end.

9. E-way Bill & E-invoices Reconciliation

Reconciliation of E-way Bill and E-invoices issued during the year viz a viz tax invoices/delivery challans generated.

10. Writing off Inventories, Assets etc.:

End of March is quite famous for stock take. Inventories at hand at the closing date are usually physically verified by the assessee. It is highly probable that physical inventory count & figures in books are at variance. If the variance is causes due to loss of inventory for any reason like theft, destruction, obsolete etc. and is accounted accordingly then ITC on same is required to be reversed as per provisions of Section 17(5). In the same way, small units issued on sample basis, may together form a big number at the end of year. Requisite provision of ITC reversal should be made at the end of the year

11. New series of Invoice for a Financial Year:

Basis the GST law, new /unique invoice series not exceeding 16 characters is to be maintained for every financial year. Hence a new series is to be tossed for F.Y 2022-2023 while issuing tax invoice , credit/debit note, delivery challan, receipt voucher refund voucher etc. to avoid duplication of invoices issued in preceding Financials years.