HANDBOOK TO

BY :- CA ATUL KUMAR GUPTAASSISTED BY :- CA SMELLY KINRA CA MOHIT GUPTA

G S T AUDIT(with GSTR-9 and 9C)

HANDBOOK TO GST AUDIT (With GSTR 9 & GSTR 9C)

By-

CA Atul Kumar Gupta

Assisted by-

CA Smelly Kinra CA Mohit Gupta

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HANDBOOK TO GST AUDIT (With GSTR 9 & GSTR 9C)

By-

CA Atul Kumar Gupta

Assisted by-

CA Smelly Kinra CA Mohit Gupta

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Contents Introduction: .......................................................................................................................... 5

A. To whom GST Audit is applicable? ............................................................................... 6

B. How to conduct Audit? ................................................................................................. 7

B.1 Levy & Collection of Tax:........................................................................................... 7

B.2 Non-taxable supplies................................................................................................. 12

B.3 Transactions covered under Schedule III or Not Covered by definition of Supply. ....... 12

B.4 Composite and Mixed Supply.................................................................................... 13

B.5 Payment of tax under reverse charge mechanism........................................................ 15

B.6 Payment of tax in case of inward supply of taxable goods/services effected from unregistered dealers......................................................................................................... 17

B.7 Compliance with the provisions of Time of Supply .................................................... 18

B.8 Change in rate of tax on the goods or services ............................................................ 23

B.9 Supply ceased prior to completion of supply .............................................................. 24

B.10 Goods sent on approval basis................................................................................... 25

B.11 Place of Supply ....................................................................................................... 25

B.12 Value of taxable supply liable to tax ........................................................................ 32

B.13 Value of Supply – Rule 27-31 of CGST rules ........................................................... 35

B.14 Value of supply- specified cases under rule 31A and 32 of CGST rules..................... 38

B.15 Concept of Pure Agent ............................................................................................ 41

B.16 Tax liability on account of bad debts........................................................................ 42

B.17 Input Tax Credit ...................................................................................................... 42

B.18 Ineligible Input Tax Credit....................................................................................... 44

Case Study 1:.............................................................................................................. 46

Case Study 2. .............................................................................................................. 47

B.19 ITC in case of banking/financial/NBFC ................................................................... 48

B.20 Transitional credits .................................................................................................. 48

B.21 Exports ................................................................................................................... 51

B.22 Any exemption notifications or special orders applicable to the registered person ...... 52

B.23 Compliance of section 18 of CGST Act ................................................................... 54

B.24 Job Work ................................................................................................................ 55

B.25 Returns and other forms .......................................................................................... 57

B.26 Payments - Electronic cash ledger and Electronic credit ledger [Section 49 (1&2)] .... 57

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Contents Introduction: .......................................................................................................................... 5

A. To whom GST Audit is applicable? ............................................................................... 6

B. How to conduct Audit? ................................................................................................. 7

B.1 Levy & Collection of Tax:........................................................................................... 7

B.2 Non-taxable supplies................................................................................................. 12

B.3 Transactions covered under Schedule III or Not Covered by definition of Supply. ....... 12

B.4 Composite and Mixed Supply.................................................................................... 13

B.5 Payment of tax under reverse charge mechanism........................................................ 15

B.6 Payment of tax in case of inward supply of taxable goods/services effected from unregistered dealers......................................................................................................... 17

B.7 Compliance with the provisions of Time of Supply .................................................... 18

B.8 Change in rate of tax on the goods or services ............................................................ 23

B.9 Supply ceased prior to completion of supply .............................................................. 24

B.10 Goods sent on approval basis................................................................................... 25

B.11 Place of Supply ....................................................................................................... 25

B.12 Value of taxable supply liable to tax ........................................................................ 32

B.13 Value of Supply – Rule 27-31 of CGST rules ........................................................... 35

B.14 Value of supply- specified cases under rule 31A and 32 of CGST rules..................... 38

B.15 Concept of Pure Agent ............................................................................................ 41

B.16 Tax liability on account of bad debts........................................................................ 42

B.17 Input Tax Credit ...................................................................................................... 42

B.18 Ineligible Input Tax Credit....................................................................................... 44

Case Study 1:.............................................................................................................. 46

Case Study 2. .............................................................................................................. 47

B.19 ITC in case of banking/financial/NBFC ................................................................... 48

B.20 Transitional credits .................................................................................................. 48

B.21 Exports ................................................................................................................... 51

B.22 Any exemption notifications or special orders applicable to the registered person ...... 52

B.23 Compliance of section 18 of CGST Act ................................................................... 54

B.24 Job Work ................................................................................................................ 55

B.25 Returns and other forms .......................................................................................... 57

B.26 Payments - Electronic cash ledger and Electronic credit ledger [Section 49 (1&2)] .... 57

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B.27 Liability of Interest on Delayed Payment of Taxes and in case of undue or excess claim of Input Tax Credit.......................................................................................................... 57

B.28 Miscellaneous ......................................................................................................... 58

B.29 GSTR-9 and GSTR-9C............................................................................................ 59

FORM GSTR-9............................................................................................................... 60

FORM GSTR-9C ............................................................................................................ 75

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Introduction:

GST is one of India’s largest tax reforms and it has been one year of implementation of GST. Various technical glitches along with other procedural issues have been faced by registered persons all over the country during this period. To ensure compliance of GST law various measures have been adopted by the government and audit is one of them.

To cover up with the inaccuracies, it is time to adopt the final corrective measure for the year. Audit under GST is the process of examination of records, returns and other documents maintained by a registered person. The purpose is to verify the correctness of turnover declared, taxes paid, refund claimed and input tax credit availed, and to assess the compliance with the provisions of GST. It is a way to analyse the compliance of taxpayer with the provisions of the GST Act.

In order to ensure effective compliance with the various GST provisions and to ensure performance of audits systematically and to bring transparency, audit provisions have been incorporated under the GST Acts/Rules.

Definition of the term “Audit” – Section 2(13) of the CGST Act

“Audit” means the examination of records, returns and other documents maintained or furnished by the registered person under the GST Acts or the rules made there under 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 the GST Acts or the rules made thereunder.

The following 3 types of audits are prescribed under the GST laws:

1. 1st type of audit is to be done by a chartered accountant or a cost accountant under section 35(5), section 44(2) of the CGST Act read with rule 80(3) of CGST rules;

2. 2nd type of audit is to be done by tax authorities under section 65 of the CGST Act;and

3. 3rd type of audit is called the Special Audit and is to be conducted under the mandate of Section 66 of CGST Act, 2017.

We are going to discuss only about first type of audit viz. annual GST audit in terms of section 35(5), section 44(2) of the CGST Act read with rule 80(3) of CGST rules to be performed by chartered accountant or a cost accountant.

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B.27 Liability of Interest on Delayed Payment of Taxes and in case of undue or excess claim of Input Tax Credit.......................................................................................................... 57

B.28 Miscellaneous ......................................................................................................... 58

B.29 GSTR-9 and GSTR-9C............................................................................................ 59

FORM GSTR-9............................................................................................................... 60

FORM GSTR-9C ............................................................................................................ 75

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Introduction:

GST is one of India’s largest tax reforms and it has been one year of implementation of GST. Various technical glitches along with other procedural issues have been faced by registered persons all over the country during this period. To ensure compliance of GST law various measures have been adopted by the government and audit is one of them.

To cover up with the inaccuracies, it is time to adopt the final corrective measure for the year. Audit under GST is the process of examination of records, returns and other documents maintained by a registered person. The purpose is to verify the correctness of turnover declared, taxes paid, refund claimed and input tax credit availed, and to assess the compliance with the provisions of GST. It is a way to analyse the compliance of taxpayer with the provisions of the GST Act.

In order to ensure effective compliance with the various GST provisions and to ensure performance of audits systematically and to bring transparency, audit provisions have been incorporated under the GST Acts/Rules.

Definition of the term “Audit” – Section 2(13) of the CGST Act

“Audit” means the examination of records, returns and other documents maintained or furnished by the registered person under the GST Acts or the rules made there under 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 the GST Acts or the rules made thereunder.

The following 3 types of audits are prescribed under the GST laws:

1. 1st type of audit is to be done by a chartered accountant or a cost accountant under section 35(5), section 44(2) of the CGST Act read with rule 80(3) of CGST rules;

2. 2nd type of audit is to be done by tax authorities under section 65 of the CGST Act;and

3. 3rd type of audit is called the Special Audit and is to be conducted under the mandate of Section 66 of CGST Act, 2017.

We are going to discuss only about first type of audit viz. annual GST audit in terms of section 35(5), section 44(2) of the CGST Act read with rule 80(3) of CGST rules to be performed by chartered accountant or a cost accountant.

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A. To whom GST Audit is applicable?

Sub-section 5 of section 35 of the CGST Act, sub-section (2) of the CGST Act and sub-rule (3) of rule 80 are the applicable section is respect of GST annual audit, which prescribes the basic criteria such as:

turnover limit to identify the person whose accounts are liable to get audited under GST; period for which audit is to be conducted; time limit by when audit report is to be furnished; documents or other information like reconciliation statement to be furnished along with

audit report in desired format as will be notified soon etc.

The relevant provisions in respect of GST Audit have been provided below:

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.

Section 44(1): Every registered person, other than an Input Service Distributor, a person paying tax under section 51 or section 52, a casual taxable person and a non-resident taxable person, shall furnish an annual return for every financial year electronically in such form and manner as may be prescribed on or before the thirty-first day of December following the end of such financial year.

Section 44(2): Every registered person who is required to get his accounts audited in accordance with the provisions of sub-section (5) of section 35 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.

Rule 80(3): 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 audited annual accounts and a reconciliation statement, duly certified, in FORM GSTR-9C, electronically through the common portal either directly or through a Facilitation Centre notified by the Commissioner.

Sec. 2(6) of the CGST Act: Aggregate Turnover“Aggregate Turnover” means the aggregate value of all taxable supplies (excluding the value of inward supplies on which tax is payable by a person on reverse charge basis), exempt supplies, exports of goods or services or both and inter-State supplies of persons having the same Permanent Account Number, to be computed on all India basis but excludes central tax, State tax, Union territory tax, integrated tax and cess.

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In author’s view aggregate turnover means the aggregate value of all taxable supplies (excluding the value of inward supplies on which tax is payable by a person on reverse charge basis), exempt supplies, exports of goods or services or both and inter-State supplies of persons having the same Permanent Account Number, to be computed on all India basis but excludes central tax, State tax, Union territory tax, integrated tax and cess.

Let’s assume, a Company is registered in three different states with same PAN, engaged in making taxable supplies, exempt supply, export and interstate supply. Total turnover ofdifferent registration is Rs.2 cr., 50 lakhs and 10 lakhs respectively. Here, aggregate turnover will be computed on all India basis and it shall be computed as Rs.2 cr. 60 Lakhs (viz. 2 cr. + 50 lakhs + 10 lakhs). Thus, in accordance with above mentioned provisions, the company is required to comply with GST Audit in all three states.

It is also to be noted here that registered person majorly affecting exempt supply and having turnover Rs.2.5 cr. (comprising exempt supply of Rs.2.4 cr. and taxable supply Rs.10 lakhs), is also required to comply with GST Audit, eg: school, hospitals etc.

The matter of discussion here is whether first GST audit is to be conducted for FY April 2017 to March 2018 or July 2017 to March 2018. We are of the view that GST has been implemented from 1st day of July, hence, audit under GST should be conducted for period covered under GST regime and aggregate turnover should also be computed for July 2017 to March 2018.

In accordance with the above mentioned provisions, due date of furnishing of annual return and audit for a financial year is 31st of December of succeeding financial year. Also, the maximum period for rectification of invoices and other relevant documents for the benefit of ITC is due date of furnishing of return of the month of September of succeeding financial year. Further, it is pertinent to mention here that in Income Tax Laws, due date of furnishing of tax audit and income tax return is 30th September respectively and hence, period beyond this date has of no relevance after finalization of accounts. Therefore, GST audit should also be completed by that date only.

Further, in respect of Annual Return under section 44(1), it is to be noted here that every registered person other than ISD, person taxable under section 51 (viz. TDS) or section 52 (viz. TCS) and a non-resident taxable person is required to file Annual Return under this section irrespective of the amount of turnover

B. How to conduct Audit?

B.1 Levy & Collection of Tax: Whether the supplies effected by the registered person have been considered in returns?

Section 7: Scope of Supply (1) For the purposes of this Act, the expression “supply” includes––

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A. To whom GST Audit is applicable?

Sub-section 5 of section 35 of the CGST Act, sub-section (2) of the CGST Act and sub-rule (3) of rule 80 are the applicable section is respect of GST annual audit, which prescribes the basic criteria such as:

turnover limit to identify the person whose accounts are liable to get audited under GST; period for which audit is to be conducted; time limit by when audit report is to be furnished; documents or other information like reconciliation statement to be furnished along with

audit report in desired format as will be notified soon etc.

The relevant provisions in respect of GST Audit have been provided below:

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.

Section 44(1): Every registered person, other than an Input Service Distributor, a person paying tax under section 51 or section 52, a casual taxable person and a non-resident taxable person, shall furnish an annual return for every financial year electronically in such form and manner as may be prescribed on or before the thirty-first day of December following the end of such financial year.

Section 44(2): Every registered person who is required to get his accounts audited in accordance with the provisions of sub-section (5) of section 35 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.

Rule 80(3): 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 audited annual accounts and a reconciliation statement, duly certified, in FORM GSTR-9C, electronically through the common portal either directly or through a Facilitation Centre notified by the Commissioner.

Sec. 2(6) of the CGST Act: Aggregate Turnover“Aggregate Turnover” means the aggregate value of all taxable supplies (excluding the value of inward supplies on which tax is payable by a person on reverse charge basis), exempt supplies, exports of goods or services or both and inter-State supplies of persons having the same Permanent Account Number, to be computed on all India basis but excludes central tax, State tax, Union territory tax, integrated tax and cess.

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In author’s view aggregate turnover means the aggregate value of all taxable supplies (excluding the value of inward supplies on which tax is payable by a person on reverse charge basis), exempt supplies, exports of goods or services or both and inter-State supplies of persons having the same Permanent Account Number, to be computed on all India basis but excludes central tax, State tax, Union territory tax, integrated tax and cess.

Let’s assume, a Company is registered in three different states with same PAN, engaged in making taxable supplies, exempt supply, export and interstate supply. Total turnover ofdifferent registration is Rs.2 cr., 50 lakhs and 10 lakhs respectively. Here, aggregate turnover will be computed on all India basis and it shall be computed as Rs.2 cr. 60 Lakhs (viz. 2 cr. + 50 lakhs + 10 lakhs). Thus, in accordance with above mentioned provisions, the company is required to comply with GST Audit in all three states.

It is also to be noted here that registered person majorly affecting exempt supply and having turnover Rs.2.5 cr. (comprising exempt supply of Rs.2.4 cr. and taxable supply Rs.10 lakhs), is also required to comply with GST Audit, eg: school, hospitals etc.

The matter of discussion here is whether first GST audit is to be conducted for FY April 2017 to March 2018 or July 2017 to March 2018. We are of the view that GST has been implemented from 1st day of July, hence, audit under GST should be conducted for period covered under GST regime and aggregate turnover should also be computed for July 2017 to March 2018.

In accordance with the above mentioned provisions, due date of furnishing of annual return and audit for a financial year is 31st of December of succeeding financial year. Also, the maximum period for rectification of invoices and other relevant documents for the benefit of ITC is due date of furnishing of return of the month of September of succeeding financial year. Further, it is pertinent to mention here that in Income Tax Laws, due date of furnishing of tax audit and income tax return is 30th September respectively and hence, period beyond this date has of no relevance after finalization of accounts. Therefore, GST audit should also be completed by that date only.

Further, in respect of Annual Return under section 44(1), it is to be noted here that every registered person other than ISD, person taxable under section 51 (viz. TDS) or section 52 (viz. TCS) and a non-resident taxable person is required to file Annual Return under this section irrespective of the amount of turnover

B. How to conduct Audit?

B.1 Levy & Collection of Tax: Whether the supplies effected by the registered person have been considered in returns?

Section 7: Scope of Supply (1) For the purposes of this Act, the expression “supply” includes––

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(a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business;

(b) import of services for a consideration whether or not in the course or furtherance of business;

(c) the activities specified in Schedule I, made or agreed to be made without a consideration; and

(d) the activities to be treated as supply of goods or supply of services as referred to in Schedule II.

(2) Notwithstanding anything contained in sub-section (1),––(a) activities or transactions specified in Schedule III; or (b) such activities or transactions undertaken by the Central Government, a State

Government or any local authority in which they are engaged as public authorities, as may be notified by the Government on the recommendations of the Council, shall be treated neither as a supply of goods nor a supply of services.

(3) Subject to the provisions of sub-sections (1) and (2), the Government may, on the recommendations of the Council, specify, by notification, the transactions that are to be treated as—

(a) a supply of goods and not as a supply of services; or (b) a supply of services and not as a supply of goods.

SCHEDULE I: ACTIVITIES TO BE TREATED AS SUPPLY EVEN IF MADE WITHOUT CONSIDERATION

1. Permanent transfer or disposal of business assets where input tax credit has been availed on such assets.

2. Supply of goods or services or both between related persons or between distinct persons as specified in section 25, when made in the course or furtherance of business:

Provided that gifts not exceeding fifty thousand rupees in value in a financial year by an employer to an employee shall not be treated as supply of goods or services or both.

3. Supply of goods—(a) by a principal to his agent where the agent undertakes to supply such goods on behalf of the principal; or (b) by an agent to his principal where the agent undertakes to receive such goods on behalf of the principal

4. Import of services by a taxable person from a related person or from any of his other establishments outside India, in the course or furtherance of business.

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SCHEDULE II: ACTIVITIES TO BE TREATED AS SUPPLY OF GOODS OR SUPPLY OF SERVICES

1. Transfer(a) Any transfer of the title in goods is a supply of goods; (b) Any transfer of right in goods or of undivided share in goods without the transfer of title thereof, is a supply of services; (c) Any transfer of title in goods under an agreement which stipulates that property in goods shall pass at a future date upon payment of full consideration as agreed, is a supply of goods.

2. Land and Building(a) any lease, tenancy, easement, license to occupy land is a supply of services; (b) any lease or letting out of the building including a commercial, industrial or

residential complex for business or commerce, either wholly or partly, is a supply of services.

3. Treatment or process:Any treatment or process which is applied to another person's goods is a supply of services.

4. Transfer of business assets(a) where goods forming part of the assets of a business are transferred or disposed of by or under the directions of the person carrying on the business so as no longer to form part of those

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(a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business;

(b) import of services for a consideration whether or not in the course or furtherance of business;

(c) the activities specified in Schedule I, made or agreed to be made without a consideration; and

(d) the activities to be treated as supply of goods or supply of services as referred to in Schedule II.

(2) Notwithstanding anything contained in sub-section (1),––(a) activities or transactions specified in Schedule III; or (b) such activities or transactions undertaken by the Central Government, a State

Government or any local authority in which they are engaged as public authorities, as may be notified by the Government on the recommendations of the Council, shall be treated neither as a supply of goods nor a supply of services.

(3) Subject to the provisions of sub-sections (1) and (2), the Government may, on the recommendations of the Council, specify, by notification, the transactions that are to be treated as—

(a) a supply of goods and not as a supply of services; or (b) a supply of services and not as a supply of goods.

SCHEDULE I: ACTIVITIES TO BE TREATED AS SUPPLY EVEN IF MADE WITHOUT CONSIDERATION

1. Permanent transfer or disposal of business assets where input tax credit has been availed on such assets.

2. Supply of goods or services or both between related persons or between distinct persons as specified in section 25, when made in the course or furtherance of business:

Provided that gifts not exceeding fifty thousand rupees in value in a financial year by an employer to an employee shall not be treated as supply of goods or services or both.

3. Supply of goods—(a) by a principal to his agent where the agent undertakes to supply such goods on behalf of the principal; or (b) by an agent to his principal where the agent undertakes to receive such goods on behalf of the principal

4. Import of services by a taxable person from a related person or from any of his other establishments outside India, in the course or furtherance of business.

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SCHEDULE II: ACTIVITIES TO BE TREATED AS SUPPLY OF GOODS OR SUPPLY OF SERVICES

1. Transfer(a) Any transfer of the title in goods is a supply of goods; (b) Any transfer of right in goods or of undivided share in goods without the transfer of title thereof, is a supply of services; (c) Any transfer of title in goods under an agreement which stipulates that property in goods shall pass at a future date upon payment of full consideration as agreed, is a supply of goods.

2. Land and Building(a) any lease, tenancy, easement, license to occupy land is a supply of services; (b) any lease or letting out of the building including a commercial, industrial or

residential complex for business or commerce, either wholly or partly, is a supply of services.

3. Treatment or process:Any treatment or process which is applied to another person's goods is a supply of services.

4. Transfer of business assets(a) where goods forming part of the assets of a business are transferred or disposed of by or under the directions of the person carrying on the business so as no longer to form part of those

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assets, whether or not for a consideration, such transfer or disposal is a supply of goods by the person;

(b) where, by or under the direction of a person carrying on a business, goods held or used for the purposes of the business are put to any private use or are used, or made available to any person for use, for any purpose other than a purpose of the business, whether or not for a consideration, the usage or making available of such goods is a supply of services;

(c) where any person ceases to be a taxable person, any goods forming part of the assets of any business carried on by him shall be deemed to be supplied by him in the course or furtherance of his business immediately before he ceases to be a taxable person, unless—

(i) the business is transferred as a going concern to another person; or (ii) the business is carried on by a personal representative who is deemed to be a taxable

person.

5. Supply of servicesThe following shall be treated as supply of service, namely:—(a) renting of immovable property; (b) construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier.

Explanation.—For the purposes of this clause—(1) the expression "competent authority" means the Government or any authority authorized to issue completion certificate under any law for the time being in force and in case of non-requirement of such certificate from such authority, from any of the following, namely:—

(i) an architect registered with the Council of Architecture constituted under the Architects Act, 1972; or

(ii) a chartered engineer registered with the Institution of Engineers (India); or (iii) a licensed surveyor of the respective local body of the city or town or village or

development or planning authority; (2) the expression "construction" includes additions, alterations, replacements or remodelling of any existing civil structure;

(c) temporary transfer or permitting the use or enjoyment of any intellectual property right; (d) development, design, programming, customization, adaptation, up gradation, enhancement, implementation of information technology software; (e) agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act; and (f) transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration.

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6. Composite supply The following composite supplies shall be treated as a supply of services, namely:— (a) works contract as defined in clause (119) of section 2; and (b) supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (other than alcoholic liquor for human consumption), where such supply or service is for cash, deferred payment or other valuable consideration. 7. Supply of GoodsThe following shall be treated as supply of goods, namely:—Supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration.

The auditor is required to check the nature of supply as provided in section 7 of the CGST Act i.e. sale, barter, transfer, exchange, license, rental, lease or disposal made and comment upon nature of supply under different heads, if not complied in returns. In respect of activities specified in Schedule I we need to examine carefully as such transactions are difficult to track from the books of the registered person. Relevant table number of GSTR-1 and 3B along with explanations has been tabulated below for quick reference,

Details of Outward Supplies

Relevant Table in GSTR-1

Relevant Table in GSTR-3B

Explanation in relation to GSTR-1

Taxable Supplies (Sale, Transfer, Barter, Exchange, License, Rental, Lease, Disposal etc.)

4A, 4B, 4C, 6B, 6C

3.1 B2B Invoices - Details of invoices of Taxable supplies made to other registered taxpayers

Taxable Supplies (Sale, Transfer, Barter, Exchange, License, Rental, Lease, Disposal Etc.)

5A, 5B 3.1 B2C (Large) Invoices -Invoices for Taxable outward supplies to consumers where:a) The place of supply is outside the

state where the supplier is registered and

b) The total invoice value is more that Rs 2,50,000

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assets, whether or not for a consideration, such transfer or disposal is a supply of goods by the person;

(b) where, by or under the direction of a person carrying on a business, goods held or used for the purposes of the business are put to any private use or are used, or made available to any person for use, for any purpose other than a purpose of the business, whether or not for a consideration, the usage or making available of such goods is a supply of services;

(c) where any person ceases to be a taxable person, any goods forming part of the assets of any business carried on by him shall be deemed to be supplied by him in the course or furtherance of his business immediately before he ceases to be a taxable person, unless—

(i) the business is transferred as a going concern to another person; or (ii) the business is carried on by a personal representative who is deemed to be a taxable

person.

5. Supply of servicesThe following shall be treated as supply of service, namely:—(a) renting of immovable property; (b) construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier.

Explanation.—For the purposes of this clause—(1) the expression "competent authority" means the Government or any authority authorized to issue completion certificate under any law for the time being in force and in case of non-requirement of such certificate from such authority, from any of the following, namely:—

(i) an architect registered with the Council of Architecture constituted under the Architects Act, 1972; or

(ii) a chartered engineer registered with the Institution of Engineers (India); or (iii) a licensed surveyor of the respective local body of the city or town or village or

development or planning authority; (2) the expression "construction" includes additions, alterations, replacements or remodelling of any existing civil structure;

(c) temporary transfer or permitting the use or enjoyment of any intellectual property right; (d) development, design, programming, customization, adaptation, up gradation, enhancement, implementation of information technology software; (e) agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act; and (f) transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration.

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6. Composite supply The following composite supplies shall be treated as a supply of services, namely:— (a) works contract as defined in clause (119) of section 2; and (b) supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (other than alcoholic liquor for human consumption), where such supply or service is for cash, deferred payment or other valuable consideration. 7. Supply of GoodsThe following shall be treated as supply of goods, namely:—Supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration.

The auditor is required to check the nature of supply as provided in section 7 of the CGST Act i.e. sale, barter, transfer, exchange, license, rental, lease or disposal made and comment upon nature of supply under different heads, if not complied in returns. In respect of activities specified in Schedule I we need to examine carefully as such transactions are difficult to track from the books of the registered person. Relevant table number of GSTR-1 and 3B along with explanations has been tabulated below for quick reference,

Details of Outward Supplies

Relevant Table in GSTR-1

Relevant Table in GSTR-3B

Explanation in relation to GSTR-1

Taxable Supplies (Sale, Transfer, Barter, Exchange, License, Rental, Lease, Disposal etc.)

4A, 4B, 4C, 6B, 6C

3.1 B2B Invoices - Details of invoices of Taxable supplies made to other registered taxpayers

Taxable Supplies (Sale, Transfer, Barter, Exchange, License, Rental, Lease, Disposal Etc.)

5A, 5B 3.1 B2C (Large) Invoices -Invoices for Taxable outward supplies to consumers where:a) The place of supply is outside the

state where the supplier is registered and

b) The total invoice value is more that Rs 2,50,000

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Taxable Supplies (Sale, Transfer, Barter, Exchange, License, Rental, Lease, Disposal Etc.)

7 3.1 B2C (Small) Invoices -Supplies made to consumers and unregistered persons of the following nature:a) Intra-State: any valueb) Inter-State: Invoice value Rs 2.5 lakh or less

Exports 6A 3.1 Exports supplies including supplies to SEZ/SEZ Developer or deemed exports

B.2 Non-taxable supplies Whether generally non-taxable supplies have been reported in the return?

Section 2(78) of the CGST Act: “non-taxable supply” means a supply of goods or services or both which is not leviable to tax under this Act or under the Integrated Goods and Services Tax Act;

Examples of Non-taxable supply: • petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas

and aviation turbine fuel • alcoholic liquor for human consumption

Here, the auditor will be required to check and comment whether value of non-taxable supplies like liquor, petroleum, high speed diesel, natural gas, turbine fuel, motor spirit, (high sea sales) or any other non-taxable supplies have been reported in return.

Details of Exempt/ Nil - Rated Supplies

Relevant Table in GSTR-1

Relevant Table in GSTR-3B

Explanation in relation to GSTR-1

Exempt/ Nil - Rated Supplies

8A, 8B, 8C, 8D

3.1 Details of Nil Rated, Exempted and Non-GST Supplies made during the tax period

B.3 Transactions covered under Schedule III or Not Covered by definition of Supply. Whether it is ensured that transactions of the transactions covered under Schedule III of the Act & not covered by definition of supply have not been reported in the return?

a) Schedule III to Section 7: 1. Services by an employee to the employer in the course of or in relation to his

employment. 2. Services by any court or Tribunal established under any law for the time being in force. 3. (a) the functions performed by the Members of Parliament, Members of State

Legislature, Members of Panchayats, Members of Municipalities and Members of other local authorities;

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(c) the duties performed by any person who holds any post in pursuance of the provisions of the Constitution in that capacity; or

(d) the duties performed by any person as a Chairperson or a Member or a Director in a body established by the Central Government or a State Government or local authority and who is not deemed as an employee before the commencement of this clause.

4. Services of funeral, burial, crematorium or mortuary including transportation of the deceased.

5. Sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building. 6. Actionable claims, other than lottery, betting and gambling.

Explanation.—For the purposes of paragraph 2, the term "court" includes District Court, High Court and Supreme Court.

b) Transactions not covered by definition of supplies• Transactions which are not in the course of business or commerce

Transactions covered under Schedule III (mentioned above) and supply of goods or services not covered under the definition of supply (if any) like dividend, interest of fixed deposits, interest on saving account etc. are not required to be reported in periodical returns. The Auditor is required to review and report the fact, if any reported in respective returns.

B.4 Composite and Mixed Supply Whether the tax liability has been determined in accordance with Section 8 of the CGST Act, 2017?

Section 8: Tax liability on composite and mixed suppliesThe tax liability on a composite or a mixed supply shall be determined in the following manner, namely:-

a) a composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply; and

b) a mixed supply comprising two or more supplies shall be treated as a supply of that particular supply which attracts the highest rate of tax.

‘Composite Supply’ means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply.

‘Mixed Supply’ shall mean the full amount which a recipient of a supply is required to pay in order to obtain the goods or services or both of like kind and quality at or about the same time and at the same commercial level where the recipient and the supplier are not related.

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Taxable Supplies (Sale, Transfer, Barter, Exchange, License, Rental, Lease, Disposal Etc.)

7 3.1 B2C (Small) Invoices -Supplies made to consumers and unregistered persons of the following nature:a) Intra-State: any valueb) Inter-State: Invoice value Rs 2.5 lakh or less

Exports 6A 3.1 Exports supplies including supplies to SEZ/SEZ Developer or deemed exports

B.2 Non-taxable supplies Whether generally non-taxable supplies have been reported in the return?

Section 2(78) of the CGST Act: “non-taxable supply” means a supply of goods or services or both which is not leviable to tax under this Act or under the Integrated Goods and Services Tax Act;

Examples of Non-taxable supply: • petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas

and aviation turbine fuel • alcoholic liquor for human consumption

Here, the auditor will be required to check and comment whether value of non-taxable supplies like liquor, petroleum, high speed diesel, natural gas, turbine fuel, motor spirit, (high sea sales) or any other non-taxable supplies have been reported in return.

Details of Exempt/ Nil - Rated Supplies

Relevant Table in GSTR-1

Relevant Table in GSTR-3B

Explanation in relation to GSTR-1

Exempt/ Nil - Rated Supplies

8A, 8B, 8C, 8D

3.1 Details of Nil Rated, Exempted and Non-GST Supplies made during the tax period

B.3 Transactions covered under Schedule III or Not Covered by definition of Supply. Whether it is ensured that transactions of the transactions covered under Schedule III of the Act & not covered by definition of supply have not been reported in the return?

a) Schedule III to Section 7: 1. Services by an employee to the employer in the course of or in relation to his

employment. 2. Services by any court or Tribunal established under any law for the time being in force. 3. (a) the functions performed by the Members of Parliament, Members of State

Legislature, Members of Panchayats, Members of Municipalities and Members of other local authorities;

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(c) the duties performed by any person who holds any post in pursuance of the provisions of the Constitution in that capacity; or

(d) the duties performed by any person as a Chairperson or a Member or a Director in a body established by the Central Government or a State Government or local authority and who is not deemed as an employee before the commencement of this clause.

4. Services of funeral, burial, crematorium or mortuary including transportation of the deceased.

5. Sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building. 6. Actionable claims, other than lottery, betting and gambling.

Explanation.—For the purposes of paragraph 2, the term "court" includes District Court, High Court and Supreme Court.

b) Transactions not covered by definition of supplies• Transactions which are not in the course of business or commerce

Transactions covered under Schedule III (mentioned above) and supply of goods or services not covered under the definition of supply (if any) like dividend, interest of fixed deposits, interest on saving account etc. are not required to be reported in periodical returns. The Auditor is required to review and report the fact, if any reported in respective returns.

B.4 Composite and Mixed Supply Whether the tax liability has been determined in accordance with Section 8 of the CGST Act, 2017?

Section 8: Tax liability on composite and mixed suppliesThe tax liability on a composite or a mixed supply shall be determined in the following manner, namely:-

a) a composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply; and

b) a mixed supply comprising two or more supplies shall be treated as a supply of that particular supply which attracts the highest rate of tax.

‘Composite Supply’ means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply.

‘Mixed Supply’ shall mean the full amount which a recipient of a supply is required to pay in order to obtain the goods or services or both of like kind and quality at or about the same time and at the same commercial level where the recipient and the supplier are not related.

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Illustration: A supply of a package consisting of canned foods, sweets, chocolates, cakes, dry fruits, aerated drinks and fruit juices when supplied for a single price is a mixed supply. Each of these items can be supplied separately and is not dependent on any other. It shall not be a mixed supply if these items are supplied separately;

If a contract is entered for (i) supply of certain goods and erection and installation of the same thereto or (ii) supply of certain goods along with installation and warranty thereto, it is important to note that these are naturally bundled and therefore would qualify as ‘composite supply’. Accordingly, it would qualify as supply of the goods therein, which is essentially the principal supply in the contract. Thus, the value attributable to erection and installation or installation and warranty thereto will also be taxable as if they are supply of the goods therein.

The purpose behind review of mixed or composite supply is to evaluate whether correct GST has been charged at correct rate i.e. rate of principal supply or highest rate of tax, as applicable. Where taxability of any supply comprising such supply, has not been determined in accordance with the provisions of section 8 of the CGST Act mentioned above, the auditor is required to give his views and to provide details of such supplies.

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B.5 Payment of tax under reverse charge mechanism

Whether tax under reverse charge has been remitted on inward supply of goods or services liable to tax under reverse charge mechanism under section 9(3) of the CGST Act read with section 5(3) of the IGST Act?

Section 9(3) of the CGST Act: The Government may, on the recommendations of the Council, by notification, specify categories of supply of goods or services or both, the tax on which shall be paid on reverse charge basis by the recipient of such goods or services or both and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both.

Section 5(3) of the IGST Act: The Government may, on the recommendations of the Council, by notification, specify categories of supply of goods or services or both, the tax on which shall be paid on reverse charge basis by the recipient of such goods or services or both and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both..

The relevant sub-sections provided that on specific supply goods or services, recipient of supply is liable to pat tax under reverse charge mechanism. The auditor is required to check such inward supply of goods or services which are covered under reverse charge mechanism, whether tax has been remitted by the registered person in capacity of recipient of supply, where required. If tax under reverse charge mechanism has not been remitted, the same shall be reported in audit report. The auditor is also required to review where supplier has offered the tax instead of recipient in case of reverse charge mechanism.

Relevant Notifications for RCM on services: NN 13/2017-CT(rate) dated 28.06.2017, corrigendum dated 25.09.2017 read with NN 10/2017-IT(rate) dated 28.06.2017, corrigendum dated 25.09.2017, -NN 22/2017-CT(rate) dated 22.08.2017 & NN 22/2017-IT(rate) dated 22.08.2017, NN 33/2017-CT(rate) dated 13.10.2017 & NN 34/2017-CT(rate) dated 13.10.2017 and NN 3/2018-CT(rate) dated 25.01.2018 & NN 3/2018-IT(rate) dated 25.01.2018

Services under RCM:1. Supply of Services by a goods transport agency (GTA) (w.e.f. 22.08.2017 GTA who has not

paid central tax at the rate of 6%) in respect of transportation of goods by road to- a. any factory registered under or governed by the Factories Act, 1948(63 of 1948);or b. any society registered under the Societies Registration Act, 1860 (21 of 1860) or under

any other law for the time being in force in any part of India; or c. any co-operative society established by or under any law; or d. any person registered under the CGST Act or IGST Act or SGST Act or UTGST Act; or e. any body corporate established, by or under any law; or

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Illustration: A supply of a package consisting of canned foods, sweets, chocolates, cakes, dry fruits, aerated drinks and fruit juices when supplied for a single price is a mixed supply. Each of these items can be supplied separately and is not dependent on any other. It shall not be a mixed supply if these items are supplied separately;

If a contract is entered for (i) supply of certain goods and erection and installation of the same thereto or (ii) supply of certain goods along with installation and warranty thereto, it is important to note that these are naturally bundled and therefore would qualify as ‘composite supply’. Accordingly, it would qualify as supply of the goods therein, which is essentially the principal supply in the contract. Thus, the value attributable to erection and installation or installation and warranty thereto will also be taxable as if they are supply of the goods therein.

The purpose behind review of mixed or composite supply is to evaluate whether correct GST has been charged at correct rate i.e. rate of principal supply or highest rate of tax, as applicable. Where taxability of any supply comprising such supply, has not been determined in accordance with the provisions of section 8 of the CGST Act mentioned above, the auditor is required to give his views and to provide details of such supplies.

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B.5 Payment of tax under reverse charge mechanism

Whether tax under reverse charge has been remitted on inward supply of goods or services liable to tax under reverse charge mechanism under section 9(3) of the CGST Act read with section 5(3) of the IGST Act?

Section 9(3) of the CGST Act: The Government may, on the recommendations of the Council, by notification, specify categories of supply of goods or services or both, the tax on which shall be paid on reverse charge basis by the recipient of such goods or services or both and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both.

Section 5(3) of the IGST Act: The Government may, on the recommendations of the Council, by notification, specify categories of supply of goods or services or both, the tax on which shall be paid on reverse charge basis by the recipient of such goods or services or both and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both..

The relevant sub-sections provided that on specific supply goods or services, recipient of supply is liable to pat tax under reverse charge mechanism. The auditor is required to check such inward supply of goods or services which are covered under reverse charge mechanism, whether tax has been remitted by the registered person in capacity of recipient of supply, where required. If tax under reverse charge mechanism has not been remitted, the same shall be reported in audit report. The auditor is also required to review where supplier has offered the tax instead of recipient in case of reverse charge mechanism.

Relevant Notifications for RCM on services: NN 13/2017-CT(rate) dated 28.06.2017, corrigendum dated 25.09.2017 read with NN 10/2017-IT(rate) dated 28.06.2017, corrigendum dated 25.09.2017, -NN 22/2017-CT(rate) dated 22.08.2017 & NN 22/2017-IT(rate) dated 22.08.2017, NN 33/2017-CT(rate) dated 13.10.2017 & NN 34/2017-CT(rate) dated 13.10.2017 and NN 3/2018-CT(rate) dated 25.01.2018 & NN 3/2018-IT(rate) dated 25.01.2018

Services under RCM:1. Supply of Services by a goods transport agency (GTA) (w.e.f. 22.08.2017 GTA who has not

paid central tax at the rate of 6%) in respect of transportation of goods by road to- a. any factory registered under or governed by the Factories Act, 1948(63 of 1948);or b. any society registered under the Societies Registration Act, 1860 (21 of 1860) or under

any other law for the time being in force in any part of India; or c. any co-operative society established by or under any law; or d. any person registered under the CGST Act or IGST Act or SGST Act or UTGST Act; or e. any body corporate established, by or under any law; or

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f. any partnership firm whether registered or not under any law including association of persons; or

g. any casual taxable person.

2. Services provided by an individual advocate including a senior advocate or firm of advocates by way of legal services, directly or indirectly. “legal service” means any service provided in relation to advice, consultancy or assistance in any branch of law, in any manner and includes representational services before any court, tribunal or authority.”

3. Services supplied by an arbitral tribunal to a business entity.

4. Services provided by way of sponsorship to any body corporate or partnership firm.

5. Services supplied by the Central Government, State Government, Union territory or local authority to a business entity excluding,- (1) renting of immovable property, and (2) services specified below- (i) services by the Department of Posts by way of speed post, express parcel post, life insurance, and agency services provided to a person other than Central Government, State Government or Union territory or local authority; (ii) services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport; (iii) transport of goods or passengers.

5A. Services supplied by the Central Government, State Government, Union territory or local authority by way of renting of immovable property to a person registered under the Central Goods and Services Tax Act, 2017 (12 of 2017).

6. Services supplied by a director of a company or a body corporate to the said company or the body corporate.

7. Services supplied by an insurance agent to any person carrying on insurance business.

8. Services supplied by a recovery agent to a banking company or a financial institution or a nonbanking financial company

9. Supply of services by an author, music composer, photographer, artist or the like by way of transfer or permitting the use or enjoyment of a copyright covered under clause (a) of sub-section (1) of section 13 of the Copyright Act, 1957 relating to original literary, dramatic, musical or artistic works to a publisher, music company, producer or the like.

10. Any service supplied by any person who is located in a non-taxable territory to any person other than non-taxable online recipient.

11. Services supplied by a person located in non- taxable territory by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India.

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12. Supply of services by the members of Overseeing Committee to Reserve Bank of India. (w.e.f. 13.10.2017)

13. Services supplied by the Central Government, State Government, Union territory or local authority by way of renting of immovable property to a person registered under the CGST Act, 2017. (w.e.f. 25.01.2018)

Relevant Notifications for RCM on Goods: NN 04/2017-CT (rate) & IT (rate) dated 28.06.2017 read with NN 36/2017-CT (rate) & NN 37/2017-IT (rate) dated 22.09.2017, NN43/2017-CT (rate) & NN 45/2017-IT (rate) dated 14.11.2017 and NN 11/2018-CT (rate) & NN 12/2018-IT (rate) dated 28.05.2018

Goods under RCM:i. Cashew nuts, not shelled or peeled

ii. Bidi wrapper leaves (tendu) iii. Tobacco leaves iv. Silk yarn v. Used vehicles, seized and confiscated goods, old and used goods, waste and scrap,

supplied by Central Government, State Government, Union territory or a local authority to any registered person

vi. Raw Cotton (w.e.f. 15th November’ 2017)vii. Priority Sector Lending Certificates

B.6 Payment of tax in case of inward supply of taxable goods/services effected from unregistered dealers Whether tax has been remitted under reverse charge in case of goods or services purchased from unregistered dealers under section 9(4) of the CGST Act read with section 9(5) of the IGST Act?

Section 9(4) of the CGST Act: The central tax in respect of the supply of taxable goods or services or both by a supplier, who is not registered, to a registered person shall be paid by such person on reverse charge basis as the recipient and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both.

Section 5(4) of the IGST Act: The integrated tax in respect of the supply of taxable goods or services or both by a supplier, who is not registered, to a registered person shall be paid by such person on reverse charge basis as the recipient and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both.

GST law has been introduced with a new concept of reverse charge mechanism in case of procure of supply from unregistered dealer. The auditor is required to check the inward supply of goods or services which are procured from unregistered supplier and therefore, covered under

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f. any partnership firm whether registered or not under any law including association of persons; or

g. any casual taxable person.

2. Services provided by an individual advocate including a senior advocate or firm of advocates by way of legal services, directly or indirectly. “legal service” means any service provided in relation to advice, consultancy or assistance in any branch of law, in any manner and includes representational services before any court, tribunal or authority.”

3. Services supplied by an arbitral tribunal to a business entity.

4. Services provided by way of sponsorship to any body corporate or partnership firm.

5. Services supplied by the Central Government, State Government, Union territory or local authority to a business entity excluding,- (1) renting of immovable property, and (2) services specified below- (i) services by the Department of Posts by way of speed post, express parcel post, life insurance, and agency services provided to a person other than Central Government, State Government or Union territory or local authority; (ii) services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport; (iii) transport of goods or passengers.

5A. Services supplied by the Central Government, State Government, Union territory or local authority by way of renting of immovable property to a person registered under the Central Goods and Services Tax Act, 2017 (12 of 2017).

6. Services supplied by a director of a company or a body corporate to the said company or the body corporate.

7. Services supplied by an insurance agent to any person carrying on insurance business.

8. Services supplied by a recovery agent to a banking company or a financial institution or a nonbanking financial company

9. Supply of services by an author, music composer, photographer, artist or the like by way of transfer or permitting the use or enjoyment of a copyright covered under clause (a) of sub-section (1) of section 13 of the Copyright Act, 1957 relating to original literary, dramatic, musical or artistic works to a publisher, music company, producer or the like.

10. Any service supplied by any person who is located in a non-taxable territory to any person other than non-taxable online recipient.

11. Services supplied by a person located in non- taxable territory by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India.

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12. Supply of services by the members of Overseeing Committee to Reserve Bank of India. (w.e.f. 13.10.2017)

13. Services supplied by the Central Government, State Government, Union territory or local authority by way of renting of immovable property to a person registered under the CGST Act, 2017. (w.e.f. 25.01.2018)

Relevant Notifications for RCM on Goods: NN 04/2017-CT (rate) & IT (rate) dated 28.06.2017 read with NN 36/2017-CT (rate) & NN 37/2017-IT (rate) dated 22.09.2017, NN43/2017-CT (rate) & NN 45/2017-IT (rate) dated 14.11.2017 and NN 11/2018-CT (rate) & NN 12/2018-IT (rate) dated 28.05.2018

Goods under RCM:i. Cashew nuts, not shelled or peeled

ii. Bidi wrapper leaves (tendu) iii. Tobacco leaves iv. Silk yarn v. Used vehicles, seized and confiscated goods, old and used goods, waste and scrap,

supplied by Central Government, State Government, Union territory or a local authority to any registered person

vi. Raw Cotton (w.e.f. 15th November’ 2017)vii. Priority Sector Lending Certificates

B.6 Payment of tax in case of inward supply of taxable goods/services effected from unregistered dealers Whether tax has been remitted under reverse charge in case of goods or services purchased from unregistered dealers under section 9(4) of the CGST Act read with section 9(5) of the IGST Act?

Section 9(4) of the CGST Act: The central tax in respect of the supply of taxable goods or services or both by a supplier, who is not registered, to a registered person shall be paid by such person on reverse charge basis as the recipient and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both.

Section 5(4) of the IGST Act: The integrated tax in respect of the supply of taxable goods or services or both by a supplier, who is not registered, to a registered person shall be paid by such person on reverse charge basis as the recipient and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both.

GST law has been introduced with a new concept of reverse charge mechanism in case of procure of supply from unregistered dealer. The auditor is required to check the inward supply of goods or services which are procured from unregistered supplier and therefore, covered under

17

reverse charge mechanism in terms of section 9(4) of the CGST Act & section 5(4) of the IGST Act, and where tax is required to be remitted by the registered person. If tax under reverse charge mechanism has not been remitted, the same shall be reported in audit. However, for Financial Year 2017-18, Section 9(4) of the CGST Act and Section 5(4) of the IGST Act is applicable till 12.10.2017.

B.7 Compliance with the provisions of Time of Supply

Whether tax has been paid in accordance with section 12 and 13 read with section 31 of the CGST Act?

Section 12 – Time of supply of Goods1) The liability to pay tax on goods shall arise at the time of supply, as determined in accordance with the provisions of this section.

2) The time of supply of goods shall be the earlier of the following dates, namely: a) The date of issue of invoice by the supplier or the last date on which he is required, under sub-section (1) of section 31, to issue the invoice with respect to the supply; or

Provided that the Government may, on the recommendations of the Council, by notification, specify the categories of goods or supplies in respect of which a tax invoice shall be issued, within such time and in such manner as may be prescribed.

b) the date on which the supplier receives the payment with respect to the supply:

Provided that where the supplier of taxable goods receives an amount up to one thousand rupees in excess of the amount indicated in the tax invoice, the time of supply to the extent of such excess amount shall, at the option of the said supplier, be the date of issue of invoice in respect of such excess amount.

Clause 1 and 4 of Section 31 (Tax Invoice)1) A registered person supplying taxable goods shall, before or at the time of,—

a) Removal of goods for supply to the recipient, where the supply involves movement of goods; or

b) delivery of goods or making available thereof to the recipient, in any other case, issue a tax invoice showing the description, quantity and value of goods, the tax charged thereon and such other particulars as may be prescribed:

Section 31(4) Says that in case of continuous supply of goods, where successive statements of accounts or successive payments are involved, the invoice shall be issued before or at the time each such statement is issued or, as the case may be, each such payment is received.

However, vide Notification no. 40/2017 – Central Tax dated 13 October 2017 read with Notification no. 66/2017 – Central Tax dated 15 November 2017, the supplier of goods has to make payment of tax upon issuance of invoice only under Section 12(2)(a).

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Explanation 1.––For the purposes of clauses (a) and (b), “supply” shall be deemed to have been made to the extent it is covered by the invoice or, as the case may be, the payment.

Explanation 2.––For the purposes of clause (b), “the date on which the supplier receives the payment” shall be the date on which the payment is entered in his books of account or the date on which the payment is credited to his bank account, whichever is earlier.

3) In case of supplies in respect of which tax is paid or liable to be paid on reverse charge basis, the time of supply shall be the earliest of the following dates, namely:—

a) the date of the receipt of goods; or b) the date of payment as entered in the books of account of the recipient or the date on which the payment is debited in his bank account, whichever is earlier; or c) the date immediately following thirty days from the date of issue of invoice or any other document, by whatever name called, in lieu thereof by the supplier:

Provided that where it is not possible to determine the time of supply under clause (a) or clause (b) or clause (c), the time of supply shall be the date of entry in the books of account of the recipient of supply.

4) In case of supply of vouchers by a supplier, the time of supply shall be—a) the date of issue of voucher, if the supply is identifiable at that point; or b) the date of redemption of voucher, in all other cases.

5) Where it is not possible to determine the time of supply under the provisions of sub-section (2) or sub-section (3) or sub-section (4), the time of supply shall––

a) in a case where a periodical return has to be filed, be the date on which such return is to be filed; orb) in any other case, be the date on which the tax is paid.

6) The time of supply to the extent it relates to an addition in the value of supply by way of interest, late fee or penalty for delayed payment of any consideration shall be the date on which the supplier receives such addition in value.

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reverse charge mechanism in terms of section 9(4) of the CGST Act & section 5(4) of the IGST Act, and where tax is required to be remitted by the registered person. If tax under reverse charge mechanism has not been remitted, the same shall be reported in audit. However, for Financial Year 2017-18, Section 9(4) of the CGST Act and Section 5(4) of the IGST Act is applicable till 12.10.2017.

B.7 Compliance with the provisions of Time of Supply

Whether tax has been paid in accordance with section 12 and 13 read with section 31 of the CGST Act?

Section 12 – Time of supply of Goods1) The liability to pay tax on goods shall arise at the time of supply, as determined in accordance with the provisions of this section.

2) The time of supply of goods shall be the earlier of the following dates, namely: a) The date of issue of invoice by the supplier or the last date on which he is required, under sub-section (1) of section 31, to issue the invoice with respect to the supply; or

Provided that the Government may, on the recommendations of the Council, by notification, specify the categories of goods or supplies in respect of which a tax invoice shall be issued, within such time and in such manner as may be prescribed.

b) the date on which the supplier receives the payment with respect to the supply:

Provided that where the supplier of taxable goods receives an amount up to one thousand rupees in excess of the amount indicated in the tax invoice, the time of supply to the extent of such excess amount shall, at the option of the said supplier, be the date of issue of invoice in respect of such excess amount.

Clause 1 and 4 of Section 31 (Tax Invoice)1) A registered person supplying taxable goods shall, before or at the time of,—

a) Removal of goods for supply to the recipient, where the supply involves movement of goods; or

b) delivery of goods or making available thereof to the recipient, in any other case, issue a tax invoice showing the description, quantity and value of goods, the tax charged thereon and such other particulars as may be prescribed:

Section 31(4) Says that in case of continuous supply of goods, where successive statements of accounts or successive payments are involved, the invoice shall be issued before or at the time each such statement is issued or, as the case may be, each such payment is received.

However, vide Notification no. 40/2017 – Central Tax dated 13 October 2017 read with Notification no. 66/2017 – Central Tax dated 15 November 2017, the supplier of goods has to make payment of tax upon issuance of invoice only under Section 12(2)(a).

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Explanation 1.––For the purposes of clauses (a) and (b), “supply” shall be deemed to have been made to the extent it is covered by the invoice or, as the case may be, the payment.

Explanation 2.––For the purposes of clause (b), “the date on which the supplier receives the payment” shall be the date on which the payment is entered in his books of account or the date on which the payment is credited to his bank account, whichever is earlier.

3) In case of supplies in respect of which tax is paid or liable to be paid on reverse charge basis, the time of supply shall be the earliest of the following dates, namely:—

a) the date of the receipt of goods; or b) the date of payment as entered in the books of account of the recipient or the date on which the payment is debited in his bank account, whichever is earlier; or c) the date immediately following thirty days from the date of issue of invoice or any other document, by whatever name called, in lieu thereof by the supplier:

Provided that where it is not possible to determine the time of supply under clause (a) or clause (b) or clause (c), the time of supply shall be the date of entry in the books of account of the recipient of supply.

4) In case of supply of vouchers by a supplier, the time of supply shall be—a) the date of issue of voucher, if the supply is identifiable at that point; or b) the date of redemption of voucher, in all other cases.

5) Where it is not possible to determine the time of supply under the provisions of sub-section (2) or sub-section (3) or sub-section (4), the time of supply shall––

a) in a case where a periodical return has to be filed, be the date on which such return is to be filed; orb) in any other case, be the date on which the tax is paid.

6) The time of supply to the extent it relates to an addition in the value of supply by way of interest, late fee or penalty for delayed payment of any consideration shall be the date on which the supplier receives such addition in value.

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Section 13 – Time of supply of Services

1) The liability to pay tax on services shall arise at the time of supply, as determined in accordance with the provisions of this section:

2) The time of supply of services shall be the earliest of the following dates, namely:—a) the date of issue of invoice by the supplier, if the invoice is issued within the period prescribed under sub-section (2) of section 31 or the date of receipt of payment, whichever is earlier; orb) the date of provision of service, if the invoice is not issued within the period prescribed under sub-section (2) of section 31 or the date of receipt of payment, whichever is earlier; or

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c) the date on which the recipient shows the receipt of services in his books of account, in a case where the provisions of clause (a) or clause (b) do not apply:

Provided that where the supplier of taxable service receives an amount up to one thousand rupees in excess of the amount indicated in the tax invoice, the time of supply to the extent of such excess amount shall, at the option of the said supplier, be the date of issue of invoice relating to such excess amount.

Explanation.––For the purposes of clauses (a) and (b)––i. the supply shall be deemed to have been made to the extent it is covered by the invoice or, as the case may be, the payment;ii. The date of receipt of payment” shall be the date on which the payment is entered in the books of account of the supplier or the date on which the payment is credited to his bank account, whichever is earlier.

3) In case of supplies in respect of which tax is paid or liable to be paid on reverse charge basis, the time of supply shall be the earlier of the following dates, namely:––

a) the date of payment as entered in the books of account of the recipient or the date on which the payment is debited in his bank account, whichever is earlier; or

Clause 2 and 5 of Section 31 (Tax Invoice)(2) A registered person supplying taxable services shall, before or after the provision of service but within a prescribed period, issue a tax invoice, showing the description, value, tax charged thereon and such other particulars as may be prescribed:

Provided that the Government may, on the recommendations of the Council, by notification and subject to such conditions as may be mentioned therein, specify the categories of services in respect of which––

a) any other document issued in relation to the supply shall be deemed to be a tax invoice; or

b) Tax invoice may not be issued.

(5) Subject to the provisions of clause (d) of sub-section (3), in case of continuous supply of services,––

a) where the due date of payment is ascertainable from the contract, the invoice shall be issued on or before the due date of payment;

b) where the due date of payment is not ascertainable from the contract, the invoice shall be issued before or at the time when the supplier of service receives the payment;

c) Where the payment is linked to the completion of an event, the invoice shall be issued on or before the date of completion of that event.

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Section 13 – Time of supply of Services

1) The liability to pay tax on services shall arise at the time of supply, as determined in accordance with the provisions of this section:

2) The time of supply of services shall be the earliest of the following dates, namely:—a) the date of issue of invoice by the supplier, if the invoice is issued within the period prescribed under sub-section (2) of section 31 or the date of receipt of payment, whichever is earlier; orb) the date of provision of service, if the invoice is not issued within the period prescribed under sub-section (2) of section 31 or the date of receipt of payment, whichever is earlier; or

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c) the date on which the recipient shows the receipt of services in his books of account, in a case where the provisions of clause (a) or clause (b) do not apply:

Provided that where the supplier of taxable service receives an amount up to one thousand rupees in excess of the amount indicated in the tax invoice, the time of supply to the extent of such excess amount shall, at the option of the said supplier, be the date of issue of invoice relating to such excess amount.

Explanation.––For the purposes of clauses (a) and (b)––i. the supply shall be deemed to have been made to the extent it is covered by the invoice or, as the case may be, the payment;ii. The date of receipt of payment” shall be the date on which the payment is entered in the books of account of the supplier or the date on which the payment is credited to his bank account, whichever is earlier.

3) In case of supplies in respect of which tax is paid or liable to be paid on reverse charge basis, the time of supply shall be the earlier of the following dates, namely:––

a) the date of payment as entered in the books of account of the recipient or the date on which the payment is debited in his bank account, whichever is earlier; or

Clause 2 and 5 of Section 31 (Tax Invoice)(2) A registered person supplying taxable services shall, before or after the provision of service but within a prescribed period, issue a tax invoice, showing the description, value, tax charged thereon and such other particulars as may be prescribed:

Provided that the Government may, on the recommendations of the Council, by notification and subject to such conditions as may be mentioned therein, specify the categories of services in respect of which––

a) any other document issued in relation to the supply shall be deemed to be a tax invoice; or

b) Tax invoice may not be issued.

(5) Subject to the provisions of clause (d) of sub-section (3), in case of continuous supply of services,––

a) where the due date of payment is ascertainable from the contract, the invoice shall be issued on or before the due date of payment;

b) where the due date of payment is not ascertainable from the contract, the invoice shall be issued before or at the time when the supplier of service receives the payment;

c) Where the payment is linked to the completion of an event, the invoice shall be issued on or before the date of completion of that event.

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b) the date immediately following sixty days from the date of issue of invoice or any other document, by whatever name called, in lieu thereof by the supplier:

Provided that where it is not possible to determine the time of supply under clause (a) or clause (b), the time of supply shall be the date of entry in the books of account of the recipient of supply:

Provided further that in case of supply by associated enterprises, where the supplier of service is located outside India, the time of supply shall be the date of entry in the books of account of the recipient of supply or the date of payment, whichever is earlier.

4) In case of supply of vouchers by a supplier, the time of supply shall be–a) The date of issue of voucher, if the supply is identifiable at that point; orb) The date of redemption of voucher, in all other cases.

5) Where it is not possible to determine the time of supply under the provisions of sub-section (2) or sub-section (3) or sub-section (4), the time of supply shall––

a) in a case where a periodical return has to be filed, be the date on which such return is to be filed; orb) in any other case, be the date on which the tax is paid.

6) The time of supply to the extent it relates to an addition in the value of supply by way of interest, late fee or penalty for delayed payment of any consideration shall be the date on which the supplier receives such addition in value.

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Section 12 and 13 of the CGST Act prescribe the provisions in respect of time of supply of goods and services to govern the time of arising taxability based on the issuance of invoice, date of payment or date of completion of service and due of issuance of invoice, if invoice not raised. Here, the auditor needs to check the time of supply whether correctly determined with respect to prescribed provisions, specifically in case where invoice has not been raised and also payment has not been made. If not determined in accordance with said provisions then registered person is liable to pay interest.

B.8 Change in rate of tax on the goods or services Whether there was a change in rate of tax on the goods or services or both supplied during the year and whether effect of the change has been provided in all cases?

Section 14 – Change in rate of tax in respect of supply of goods or servicesNotwithstanding anything contained in section 12 or section 13, the time of supply, where there is a change in the rate of tax in respect of goods or services or both, shall be determined in the following manner, namely:––

a) in case the goods or services or both have been supplied before the change in rate of tax, (i) where the invoice for the same has been issued and the payment is also received after the change in rate of tax, the time of supply shall be the date of receipt of payment or the date of issue of invoice, whichever is earlier; or (ii) where the invoice has been issued prior to the change in rate of tax but payment is received after the change in rate of tax, the time of supply shall be the date of issue of invoice; or (iii) where the payment has been received before the change in rate of tax, but the invoice for the same is issued after the change in rate of tax, the time of supply shall be the date of receipt of payment;

b) in case the goods or services or both have been supplied after the change in rate of tax. (i) where the payment is received after the change in rate of tax but the invoice has been issued prior to the change in rate of tax, the time of supply shall be the date of receipt of payment; or (ii) where the invoice has been issued and payment is received before the change in rate of tax, the time of supply shall be the date of receipt of payment or date of issue of invoice, whichever is earlier; or (iii) where the invoice has been issued after the change in rate of tax but the payment is received before the change in rate of tax, the time of supply shall be the date of issue of invoice:

Provided that the date of receipt of payment shall be the date of credit in the bank account if such credit in the bank account is after four working days from the date of change in the rate of tax. Explanation.––For the purposes of this section, “the date of receipt of payment” shall be the date on which the payment is entered in the books of account of the supplier or the date on which the payment is credited to his bank account, whichever is earlier. After implementation of GST, certain changes have been made for rate of GST vide various notifications. A list of notifications has been provided hereunder. Here, the auditor will be

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b) the date immediately following sixty days from the date of issue of invoice or any other document, by whatever name called, in lieu thereof by the supplier:

Provided that where it is not possible to determine the time of supply under clause (a) or clause (b), the time of supply shall be the date of entry in the books of account of the recipient of supply:

Provided further that in case of supply by associated enterprises, where the supplier of service is located outside India, the time of supply shall be the date of entry in the books of account of the recipient of supply or the date of payment, whichever is earlier.

4) In case of supply of vouchers by a supplier, the time of supply shall be–a) The date of issue of voucher, if the supply is identifiable at that point; orb) The date of redemption of voucher, in all other cases.

5) Where it is not possible to determine the time of supply under the provisions of sub-section (2) or sub-section (3) or sub-section (4), the time of supply shall––

a) in a case where a periodical return has to be filed, be the date on which such return is to be filed; orb) in any other case, be the date on which the tax is paid.

6) The time of supply to the extent it relates to an addition in the value of supply by way of interest, late fee or penalty for delayed payment of any consideration shall be the date on which the supplier receives such addition in value.

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Section 12 and 13 of the CGST Act prescribe the provisions in respect of time of supply of goods and services to govern the time of arising taxability based on the issuance of invoice, date of payment or date of completion of service and due of issuance of invoice, if invoice not raised. Here, the auditor needs to check the time of supply whether correctly determined with respect to prescribed provisions, specifically in case where invoice has not been raised and also payment has not been made. If not determined in accordance with said provisions then registered person is liable to pay interest.

B.8 Change in rate of tax on the goods or services Whether there was a change in rate of tax on the goods or services or both supplied during the year and whether effect of the change has been provided in all cases?

Section 14 – Change in rate of tax in respect of supply of goods or servicesNotwithstanding anything contained in section 12 or section 13, the time of supply, where there is a change in the rate of tax in respect of goods or services or both, shall be determined in the following manner, namely:––

a) in case the goods or services or both have been supplied before the change in rate of tax, (i) where the invoice for the same has been issued and the payment is also received after the change in rate of tax, the time of supply shall be the date of receipt of payment or the date of issue of invoice, whichever is earlier; or (ii) where the invoice has been issued prior to the change in rate of tax but payment is received after the change in rate of tax, the time of supply shall be the date of issue of invoice; or (iii) where the payment has been received before the change in rate of tax, but the invoice for the same is issued after the change in rate of tax, the time of supply shall be the date of receipt of payment;

b) in case the goods or services or both have been supplied after the change in rate of tax. (i) where the payment is received after the change in rate of tax but the invoice has been issued prior to the change in rate of tax, the time of supply shall be the date of receipt of payment; or (ii) where the invoice has been issued and payment is received before the change in rate of tax, the time of supply shall be the date of receipt of payment or date of issue of invoice, whichever is earlier; or (iii) where the invoice has been issued after the change in rate of tax but the payment is received before the change in rate of tax, the time of supply shall be the date of issue of invoice:

Provided that the date of receipt of payment shall be the date of credit in the bank account if such credit in the bank account is after four working days from the date of change in the rate of tax. Explanation.––For the purposes of this section, “the date of receipt of payment” shall be the date on which the payment is entered in the books of account of the supplier or the date on which the payment is credited to his bank account, whichever is earlier. After implementation of GST, certain changes have been made for rate of GST vide various notifications. A list of notifications has been provided hereunder. Here, the auditor will be

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required to examine specifically such services or goods if there is any change in rate of tax and whether tax has been charged at amended rate of GST w.e.f. the effective date of amendment. If effect of the amendment has not been provided, the same is required to be reported.

List of Notifications with respective dates in relation to changes in rates of goods & services

Nature Original Notification No. Amendment Notification No. Dated

Goods

01/2017-CT(rate) 28-06-201718/2017-CT(rate) 30-06-201719/2017-CT(rate) 18-08-201727/2017-CT(rate) 22-09-201734/2017-CT(rate) 13-10-201741/2017-CT(rate) 14-11-201706/2018-CT(rate) 25-01-201808/2018-CT(rate) 25-01-2018

Nature Original Notification No. Amendment Notification No. Dated

Services

11/2017-CT (rate) 28-06-201720/2017-CT (rate) 22-08-201724/2017-CT (rate) 21-09-201731/2017-CT (rate) 13-10-201747/2017-CT (rate) 14-11-201701/2018-CT (rate) 25-01-2018

B.9 Supply ceased prior to completion of supply Whether in any case supply has been ceased prior to completion of supply, if any, whether invoice has been issued to the extent of supply made?

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Section 31(6): In a case where the supply of services ceases under a contract before the completion of the supply, the invoice shall be issued at the time when the supply ceases and such invoice shall be issued to the extent of the supply made before such cessation.

In such scenario, the auditor is required to check where supply has been ceased prior to completion of supply and tax has not been charged and remitted the same, like in works contract service in respect of construction. If tax has not been remitted then the same shall be required to furnish n audit report.

B.10 Goods sent on approval basis Whether supply of goods involves goods sent on approval basis exceeding the time limit of 6 months and not offered to tax?

Section 142(12) – Sale on approval basisWhere any goods sent on approval basis, not earlier than six months before the appointed day, are rejected or not approved by the buyer and returned to the seller on or after the appointed day, no tax shall be payable thereon if such goods are returned within six months from the appointed day:

Provided that the said period of six months may, on sufficient cause being shown, be extended by the Commissioner for a further period not exceeding two months:

Provided further that the tax shall be payable by the person returning the goods if such goods are liable to tax under this Act, and are returned after a period specified in this sub-section:

Provided also that tax shall be payable by the person who has sent the goods on approval basis if such goods are liable to tax under this Act, and are not returned within a period specified in this sub-section.

Here, the auditor needs to check where earlier goods sent on approval basis & a period of 6 months has been lapsed. If time period of 6 months has been completed and still the goods are not offered to tax, then the same is required to be reported by the auditor and shall be offered to tax along with interest.

B.11 Place of Supply Whether the registered person has determined the place of supply of goods or services in terms of section 10-13 of the IGST Act?

Section 10: Place of supply of Goods other than imported into, or exported from India 1) The place of supply of goods, other than supply of goods imported into, or exported from India, shall be as under,––

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required to examine specifically such services or goods if there is any change in rate of tax and whether tax has been charged at amended rate of GST w.e.f. the effective date of amendment. If effect of the amendment has not been provided, the same is required to be reported.

List of Notifications with respective dates in relation to changes in rates of goods & services

Nature Original Notification No. Amendment Notification No. Dated

Goods

01/2017-CT(rate) 28-06-201718/2017-CT(rate) 30-06-201719/2017-CT(rate) 18-08-201727/2017-CT(rate) 22-09-201734/2017-CT(rate) 13-10-201741/2017-CT(rate) 14-11-201706/2018-CT(rate) 25-01-201808/2018-CT(rate) 25-01-2018

Nature Original Notification No. Amendment Notification No. Dated

Services

11/2017-CT (rate) 28-06-201720/2017-CT (rate) 22-08-201724/2017-CT (rate) 21-09-201731/2017-CT (rate) 13-10-201747/2017-CT (rate) 14-11-201701/2018-CT (rate) 25-01-2018

B.9 Supply ceased prior to completion of supply Whether in any case supply has been ceased prior to completion of supply, if any, whether invoice has been issued to the extent of supply made?

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Section 31(6): In a case where the supply of services ceases under a contract before the completion of the supply, the invoice shall be issued at the time when the supply ceases and such invoice shall be issued to the extent of the supply made before such cessation.

In such scenario, the auditor is required to check where supply has been ceased prior to completion of supply and tax has not been charged and remitted the same, like in works contract service in respect of construction. If tax has not been remitted then the same shall be required to furnish n audit report.

B.10 Goods sent on approval basis Whether supply of goods involves goods sent on approval basis exceeding the time limit of 6 months and not offered to tax?

Section 142(12) – Sale on approval basisWhere any goods sent on approval basis, not earlier than six months before the appointed day, are rejected or not approved by the buyer and returned to the seller on or after the appointed day, no tax shall be payable thereon if such goods are returned within six months from the appointed day:

Provided that the said period of six months may, on sufficient cause being shown, be extended by the Commissioner for a further period not exceeding two months:

Provided further that the tax shall be payable by the person returning the goods if such goods are liable to tax under this Act, and are returned after a period specified in this sub-section:

Provided also that tax shall be payable by the person who has sent the goods on approval basis if such goods are liable to tax under this Act, and are not returned within a period specified in this sub-section.

Here, the auditor needs to check where earlier goods sent on approval basis & a period of 6 months has been lapsed. If time period of 6 months has been completed and still the goods are not offered to tax, then the same is required to be reported by the auditor and shall be offered to tax along with interest.

B.11 Place of Supply Whether the registered person has determined the place of supply of goods or services in terms of section 10-13 of the IGST Act?

Section 10: Place of supply of Goods other than imported into, or exported from India 1) The place of supply of goods, other than supply of goods imported into, or exported from India, shall be as under,––

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a) Where the supply involves movement of goods, whether by the supplier or the recipient or by any other person, the place of supply of such goods shall be the location of the goods at the time at which the movement of goods terminates for delivery to the recipient;

b) Where the goods are delivered by the supplier to a recipient or any other person on the direction of a third person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to the goods or otherwise, it shall be deemed that the said third person has received the goods and the place of supply of such goods shall be the principal place of business of such person;

c) Where the supply does not involve movement of goods, whether by the supplier or the recipient, the place of supply shall be the location of such goods at the time of the delivery to the recipient;

d) Where the goods are assembled or installed at site, the place of supply shall be the place of such installation or assembly;

e) Where the goods are supplied on board a conveyance, including a vessel, an aircraft, a train or a motor vehicle, the place of supply shall be the location at which such goods are taken on board.

2) Where the place of supply of goods cannot be determined, the place of supply shall be determined in such manner as may be prescribed.

Section 11: Place of supply of goods imported into, or exported from India The place of supply of goods,––

a) imported into India shall be the location of the importer; b) exported from India shall be the location outside India.

Section 12: Place of supply of services where location of supplier and recipient is in India 1) The provisions of this section shall apply to determine the place of supply of services where the location of supplier of services and the location of the recipient of services is in India.

2) The place of supply of services, except the services specified in sub-sections (3) to (14),–– a) made to a registered person shall be the location of such person; b) made to any person other than a registered person shall be,––

i. the location of the recipient where the address on record exists and; ii. the location of the supplier of services in other cases.

Section 2 of the IGST Act:“Import of Goods” with its grammatical variations and cognate expressions means bringing goods into India from a place outside India.“Export of Goods” with its grammatical variations and cognate expressions means taking goods out of India to a place outside India.

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3) The place of supply of services,–– a) directly in relation to an immovable property, including services provided by architects, interior decorators, surveyors, engineers and other related experts estate agents, any service provided by way of grant of rights to use immovable property or for carrying out or co-ordination of construction work; or b) by way of lodging accommodation by a hotel, inn, guest house, home stay, club or campsite, by whatever name called, and including a house boat or any other vessel; or c) by way of accommodation in any immovable property for organising any marriage or reception or matters related thereto, official, social, cultural, religious or business function including services provided in relation to such function at such property; or d) any services ancillary to the services referred to in clauses (a), (b) and (c), shall be the location at which the immovable property or boat or vessel, as the case may be, is located or intended to be located:

Provided that if the location of the immovable property or boat or vessel is located or intended to be located outside India, the place of supply shall be the location of the recipient.

Explanation.––Where the immovable property or boat or vessel is located in more than one State or Union territory, the supply of services shall be treated as made in each of the respective States or Union territories, in proportion to the value for services separately collected or determined in terms of the contract or agreement entered into in this regard or, in the absence of such contract or agreement, on such other basis as may be prescribed.

4) The place of supply of restaurant and catering services, personal grooming, fitness, beauty treatment, health service including cosmetic and plastic surgery shall be the location where the services are actually performed.

5) The place of supply of services in relation to training and performance appraisal to,–– (a) a registered person, shall be the location of such person; (b) a person other than a registered person, shall be the location where the services are

actually performed.

6) The place of supply of services provided by way of admission to a cultural, artistic, sporting, scientific, educational, entertainment event or amusement park or any other place and services ancillary thereto, shall be the place where the event is actually held or where the park or such other place is located.

7) The place of supply of services provided by way of ,— a) organisation of a cultural, artistic, sporting, scientific, educational or entertainment

event including supply of services in relation to a conference, fair, exhibition, celebration or similar events; or

b) services ancillary to organisation of any of the events or services referred to in clause (a), or assigning of sponsorship to such events,––

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a) Where the supply involves movement of goods, whether by the supplier or the recipient or by any other person, the place of supply of such goods shall be the location of the goods at the time at which the movement of goods terminates for delivery to the recipient;

b) Where the goods are delivered by the supplier to a recipient or any other person on the direction of a third person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to the goods or otherwise, it shall be deemed that the said third person has received the goods and the place of supply of such goods shall be the principal place of business of such person;

c) Where the supply does not involve movement of goods, whether by the supplier or the recipient, the place of supply shall be the location of such goods at the time of the delivery to the recipient;

d) Where the goods are assembled or installed at site, the place of supply shall be the place of such installation or assembly;

e) Where the goods are supplied on board a conveyance, including a vessel, an aircraft, a train or a motor vehicle, the place of supply shall be the location at which such goods are taken on board.

2) Where the place of supply of goods cannot be determined, the place of supply shall be determined in such manner as may be prescribed.

Section 11: Place of supply of goods imported into, or exported from India The place of supply of goods,––

a) imported into India shall be the location of the importer; b) exported from India shall be the location outside India.

Section 12: Place of supply of services where location of supplier and recipient is in India 1) The provisions of this section shall apply to determine the place of supply of services where the location of supplier of services and the location of the recipient of services is in India.

2) The place of supply of services, except the services specified in sub-sections (3) to (14),–– a) made to a registered person shall be the location of such person; b) made to any person other than a registered person shall be,––

i. the location of the recipient where the address on record exists and; ii. the location of the supplier of services in other cases.

Section 2 of the IGST Act:“Import of Goods” with its grammatical variations and cognate expressions means bringing goods into India from a place outside India.“Export of Goods” with its grammatical variations and cognate expressions means taking goods out of India to a place outside India.

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3) The place of supply of services,–– a) directly in relation to an immovable property, including services provided by architects, interior decorators, surveyors, engineers and other related experts estate agents, any service provided by way of grant of rights to use immovable property or for carrying out or co-ordination of construction work; or b) by way of lodging accommodation by a hotel, inn, guest house, home stay, club or campsite, by whatever name called, and including a house boat or any other vessel; or c) by way of accommodation in any immovable property for organising any marriage or reception or matters related thereto, official, social, cultural, religious or business function including services provided in relation to such function at such property; or d) any services ancillary to the services referred to in clauses (a), (b) and (c), shall be the location at which the immovable property or boat or vessel, as the case may be, is located or intended to be located:

Provided that if the location of the immovable property or boat or vessel is located or intended to be located outside India, the place of supply shall be the location of the recipient.

Explanation.––Where the immovable property or boat or vessel is located in more than one State or Union territory, the supply of services shall be treated as made in each of the respective States or Union territories, in proportion to the value for services separately collected or determined in terms of the contract or agreement entered into in this regard or, in the absence of such contract or agreement, on such other basis as may be prescribed.

4) The place of supply of restaurant and catering services, personal grooming, fitness, beauty treatment, health service including cosmetic and plastic surgery shall be the location where the services are actually performed.

5) The place of supply of services in relation to training and performance appraisal to,–– (a) a registered person, shall be the location of such person; (b) a person other than a registered person, shall be the location where the services are

actually performed.

6) The place of supply of services provided by way of admission to a cultural, artistic, sporting, scientific, educational, entertainment event or amusement park or any other place and services ancillary thereto, shall be the place where the event is actually held or where the park or such other place is located.

7) The place of supply of services provided by way of ,— a) organisation of a cultural, artistic, sporting, scientific, educational or entertainment

event including supply of services in relation to a conference, fair, exhibition, celebration or similar events; or

b) services ancillary to organisation of any of the events or services referred to in clause (a), or assigning of sponsorship to such events,––

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i. to a registered person, shall be the location of such person; ii. to a person other than a registered person, shall be the place where the event is

actually held and if the event is held outside India, the place of supply shall be the location of the recipient.

Explanation––Where the event is held in more than one State or Union territory and a consolidated amount is charged for supply of services relating to such event, the place of supply of such services shall be taken as being in each of the respective States or Union territories in proportion to the value for services separately collected or determined in terms of the contract or agreement entered into in this regard or, in the absence of such contract or agreement, on such other basis as may be prescribed.

8) The place of supply of services by way of transportation of goods, including by mail or courier to,––

a) a registered person, shall be the location of such person; b) a person other than a registered person, shall be the location at which such goods are

handed over for their transportation.

9) The place of supply of passenger transportation service to,— a) a registered person, shall be the location of such person; b) a person other than a registered person, shall be the place where the passenger

embarks on the conveyance for a continuous journey:

Provided that where the right to passage is given for future use and the point of embarkation is not known at the time of issue of right to passage, the place of supply of such service shall be determined in accordance with the provisions of sub-section (2).

Explanation.––For the purposes of this sub-section, the return journey shall be treated as a separate journey, even if the right to passage for onward and return journey is issued at the same time.

10) The place of supply of services on board a conveyance, including a vessel, an aircraft, a train or a motor vehicle, shall be the location of the first scheduled point of departure of that conveyance for the journey.

11) The place of supply of telecommunication services including data transfer, broadcasting, cable and direct to home television services to any person shall,—

a) in case of services by way of fixed telecommunication line, leased circuits, internet leased circuit, cable or dish antenna, be the location where the telecommunication line, leased circuit or cable connection or dish antenna is installed for receipt of services;

b) in case of mobile connection for telecommunication and internet services provided on post-paid basis, be the location of billing address of the recipient of services on the record of the supplier of services;

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c) in cases where mobile connection for telecommunication, internet service and direct to home television services are provided on pre-payment basis through a voucher or any other means,––

i. through a selling agent or a re-seller or a distributor of subscriber identity module card or re-charge voucher, be the address of the selling agent or re-seller or distributor as per the record of the supplier at the time of supply; or

ii. by any person to the final subscriber, be the location where such prepayment is received or such vouchers are sold;

d) in other cases, be the address of the recipient as per the records of the supplier of services and where such address is not available, the place of supply shall be location of the supplier of services:

Provided that where the address of the recipient as per the records of the supplier of services is not available, the place of supply shall be location of the supplier of services:

Provided further that if such pre-paid service is availed or the recharge is made through internet banking or other electronic mode of payment, the location of the recipient of services on the record of the supplier of services shall be the place of supply of such services.

Explanation.––Where the leased circuit is installed in more than one State or Union territory and a consolidated amount is charged for supply of services relating to such circuit, the place of supply of such services shall be taken as being in each of the respective States or Union territories in proportion to the value for services separately collected or determined in terms of the contract or agreement entered into in this regard or, in the absence of such contract or agreement, on such other basis as may be prescribed.

12) The place of supply of banking and other financial services, including stock broking services to any person shall be the location of the recipient of services on the records of the supplier of services:

Provided that if the location of recipient of services is not on the records of the supplier, the place of supply shall be the location of the supplier of services.

13) The place of supply of insurance services shall,–– a) to a registered person, be the location of such person; b) to a person other than a registered person, be the location of the recipient of services on

the records of the supplier of services. 14) The place of supply of advertisement services to the Central Government, a State Government, a statutory body or a local authority meant for the States or Union territories identified in the contract or agreement shall be taken as being in each of such States or Union territories and the value of such supplies specific to each State or Union territory shall be in proportion to the amount attributable to services provided by way of dissemination in the respective States or Union territories as may be determined in terms of the contract or

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i. to a registered person, shall be the location of such person; ii. to a person other than a registered person, shall be the place where the event is

actually held and if the event is held outside India, the place of supply shall be the location of the recipient.

Explanation––Where the event is held in more than one State or Union territory and a consolidated amount is charged for supply of services relating to such event, the place of supply of such services shall be taken as being in each of the respective States or Union territories in proportion to the value for services separately collected or determined in terms of the contract or agreement entered into in this regard or, in the absence of such contract or agreement, on such other basis as may be prescribed.

8) The place of supply of services by way of transportation of goods, including by mail or courier to,––

a) a registered person, shall be the location of such person; b) a person other than a registered person, shall be the location at which such goods are

handed over for their transportation.

9) The place of supply of passenger transportation service to,— a) a registered person, shall be the location of such person; b) a person other than a registered person, shall be the place where the passenger

embarks on the conveyance for a continuous journey:

Provided that where the right to passage is given for future use and the point of embarkation is not known at the time of issue of right to passage, the place of supply of such service shall be determined in accordance with the provisions of sub-section (2).

Explanation.––For the purposes of this sub-section, the return journey shall be treated as a separate journey, even if the right to passage for onward and return journey is issued at the same time.

10) The place of supply of services on board a conveyance, including a vessel, an aircraft, a train or a motor vehicle, shall be the location of the first scheduled point of departure of that conveyance for the journey.

11) The place of supply of telecommunication services including data transfer, broadcasting, cable and direct to home television services to any person shall,—

a) in case of services by way of fixed telecommunication line, leased circuits, internet leased circuit, cable or dish antenna, be the location where the telecommunication line, leased circuit or cable connection or dish antenna is installed for receipt of services;

b) in case of mobile connection for telecommunication and internet services provided on post-paid basis, be the location of billing address of the recipient of services on the record of the supplier of services;

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c) in cases where mobile connection for telecommunication, internet service and direct to home television services are provided on pre-payment basis through a voucher or any other means,––

i. through a selling agent or a re-seller or a distributor of subscriber identity module card or re-charge voucher, be the address of the selling agent or re-seller or distributor as per the record of the supplier at the time of supply; or

ii. by any person to the final subscriber, be the location where such prepayment is received or such vouchers are sold;

d) in other cases, be the address of the recipient as per the records of the supplier of services and where such address is not available, the place of supply shall be location of the supplier of services:

Provided that where the address of the recipient as per the records of the supplier of services is not available, the place of supply shall be location of the supplier of services:

Provided further that if such pre-paid service is availed or the recharge is made through internet banking or other electronic mode of payment, the location of the recipient of services on the record of the supplier of services shall be the place of supply of such services.

Explanation.––Where the leased circuit is installed in more than one State or Union territory and a consolidated amount is charged for supply of services relating to such circuit, the place of supply of such services shall be taken as being in each of the respective States or Union territories in proportion to the value for services separately collected or determined in terms of the contract or agreement entered into in this regard or, in the absence of such contract or agreement, on such other basis as may be prescribed.

12) The place of supply of banking and other financial services, including stock broking services to any person shall be the location of the recipient of services on the records of the supplier of services:

Provided that if the location of recipient of services is not on the records of the supplier, the place of supply shall be the location of the supplier of services.

13) The place of supply of insurance services shall,–– a) to a registered person, be the location of such person; b) to a person other than a registered person, be the location of the recipient of services on

the records of the supplier of services. 14) The place of supply of advertisement services to the Central Government, a State Government, a statutory body or a local authority meant for the States or Union territories identified in the contract or agreement shall be taken as being in each of such States or Union territories and the value of such supplies specific to each State or Union territory shall be in proportion to the amount attributable to services provided by way of dissemination in the respective States or Union territories as may be determined in terms of the contract or

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agreement entered into in this regard or, in the absence of such contract or agreement, on such other basis as may be prescribed.

Section 13: Place of supply of services where location of supplier or recipient is outside India 1) The provisions of this section shall apply to determine the place of supply of services where the location of the supplier of services or the location of the recipient of services is outside India.

2) The place of supply of services except the services specified in sub-sections (3) to (13) shall be the location of the recipient of services:

Provided that where the location of the recipient of services is not available in the ordinary course of business, the place of supply shall be the location of the supplier of services.

3) The place of supply of the following services shall be the location where the services are actually performed, namely:—

a) services supplied in respect of goods which are required to be made physically available by the recipient of services to the supplier of services, or to a person acting on behalf of the supplier of services in order to provide the services

Provided that when such services are provided from a remote location by way of electronic means, the place of supply shall be the location where goods are situated at the time of supply of services:

Provided further that nothing contained in this clause shall apply in the case of services supplied in respect of goods which are temporarily imported into India for repairs and are exported after repairs without being put to any other use in India, than that which is required for such repairs; b) services supplied to an individual, represented either as the recipient of services or a

person acting on behalf of the recipient, which require the physical presence of the recipient or the person acting on his behalf, with the supplier for the supply of services.

4) The place of supply of services supplied directly in relation to an immovable property, including services supplied in this regard by experts and estate agents, supply of accommodation by a hotel, inn, guest house, club or campsite, by whatever name called, grant of rights to use immovable property, services for carrying out or co-ordination of construction work, including that of architects or interior decorators, shall be the place where the immovable property is located or intended to be located.

5) The place of supply of services supplied by way of admission to, or organization of a cultural, artistic, sporting, scientific, educational or entertainment event, or a celebration, conference, fair, exhibition or similar events, and of services ancillary to such admission or organization, shall be the place where the event is actually held.

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6) Where any services referred to in sub-section (3) or sub-section (4) or sub-section (5) is supplied at more than one location, including a location in the taxable territory, its place of supply shall be the location in the taxable territory.

7) Where the services referred to in sub-section (3) or sub-section (4) or sub-section (5) are supplied in more than one State or Union territory, the place of supply of such services shall be taken as being in each of the respective States or Union territories and the value of such supplies specific to each State or Union territory shall be in proportion to the value for services separately collected or determined in terms of the contract or agreement entered into in this regard or, in the absence of such contract or agreement, on such other basis as may be prescribed.

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

a) services supplied by a banking company, or a financial institution, or a non-banking financial company, to account holders;

b) intermediary services; c) services consisting of hiring of means of transport, including yachts but excluding

aircrafts and vessels, up to a period of 1 month.

9) The place of supply of services of transportation of goods, other than by way of mail or courier, shall be the place of destination of such goods.

10) The place of supply in respect of passenger transportation services shall be the place where the passenger embarks on the conveyance for a continuous journey.

11) The place of supply of services provided on board a conveyance during the course of a passenger transport operation, including services intended to be wholly or substantially consumed while on board, shall be the first scheduled point of departure of that conveyance for the journey.

12) The place of supply of online information and database access or retrieval services shall be the location of the recipient of services.

Explanation.––For the purposes of this sub-section, person receiving such services shall be deemed to be located in the taxable territory, if any two of the following non contradictory conditions are satisfied, namely:––

a) the location of address presented by the recipient of services through internet is in the taxable territory;

b) the credit card or debit card or store value card or charge card or smart card or any other card by which the recipient of services settles payment has been issued in the taxable territory;

c) the billing address of the recipient of services is in the taxable territory;

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agreement entered into in this regard or, in the absence of such contract or agreement, on such other basis as may be prescribed.

Section 13: Place of supply of services where location of supplier or recipient is outside India 1) The provisions of this section shall apply to determine the place of supply of services where the location of the supplier of services or the location of the recipient of services is outside India.

2) The place of supply of services except the services specified in sub-sections (3) to (13) shall be the location of the recipient of services:

Provided that where the location of the recipient of services is not available in the ordinary course of business, the place of supply shall be the location of the supplier of services.

3) The place of supply of the following services shall be the location where the services are actually performed, namely:—

a) services supplied in respect of goods which are required to be made physically available by the recipient of services to the supplier of services, or to a person acting on behalf of the supplier of services in order to provide the services

Provided that when such services are provided from a remote location by way of electronic means, the place of supply shall be the location where goods are situated at the time of supply of services:

Provided further that nothing contained in this clause shall apply in the case of services supplied in respect of goods which are temporarily imported into India for repairs and are exported after repairs without being put to any other use in India, than that which is required for such repairs; b) services supplied to an individual, represented either as the recipient of services or a

person acting on behalf of the recipient, which require the physical presence of the recipient or the person acting on his behalf, with the supplier for the supply of services.

4) The place of supply of services supplied directly in relation to an immovable property, including services supplied in this regard by experts and estate agents, supply of accommodation by a hotel, inn, guest house, club or campsite, by whatever name called, grant of rights to use immovable property, services for carrying out or co-ordination of construction work, including that of architects or interior decorators, shall be the place where the immovable property is located or intended to be located.

5) The place of supply of services supplied by way of admission to, or organization of a cultural, artistic, sporting, scientific, educational or entertainment event, or a celebration, conference, fair, exhibition or similar events, and of services ancillary to such admission or organization, shall be the place where the event is actually held.

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6) Where any services referred to in sub-section (3) or sub-section (4) or sub-section (5) is supplied at more than one location, including a location in the taxable territory, its place of supply shall be the location in the taxable territory.

7) Where the services referred to in sub-section (3) or sub-section (4) or sub-section (5) are supplied in more than one State or Union territory, the place of supply of such services shall be taken as being in each of the respective States or Union territories and the value of such supplies specific to each State or Union territory shall be in proportion to the value for services separately collected or determined in terms of the contract or agreement entered into in this regard or, in the absence of such contract or agreement, on such other basis as may be prescribed.

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

a) services supplied by a banking company, or a financial institution, or a non-banking financial company, to account holders;

b) intermediary services; c) services consisting of hiring of means of transport, including yachts but excluding

aircrafts and vessels, up to a period of 1 month.

9) The place of supply of services of transportation of goods, other than by way of mail or courier, shall be the place of destination of such goods.

10) The place of supply in respect of passenger transportation services shall be the place where the passenger embarks on the conveyance for a continuous journey.

11) The place of supply of services provided on board a conveyance during the course of a passenger transport operation, including services intended to be wholly or substantially consumed while on board, shall be the first scheduled point of departure of that conveyance for the journey.

12) The place of supply of online information and database access or retrieval services shall be the location of the recipient of services.

Explanation.––For the purposes of this sub-section, person receiving such services shall be deemed to be located in the taxable territory, if any two of the following non contradictory conditions are satisfied, namely:––

a) the location of address presented by the recipient of services through internet is in the taxable territory;

b) the credit card or debit card or store value card or charge card or smart card or any other card by which the recipient of services settles payment has been issued in the taxable territory;

c) the billing address of the recipient of services is in the taxable territory;

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d) the internet protocol address of the device used by the recipient of services is in the taxable territory;

e) the bank of the recipient of services in which the account used for payment is maintained is in the taxable territory;

f) the country code of the subscriber identity module card used by the recipient of services is of taxable territory;

g) the location of the fixed land line through which the service is received by the recipient is in the taxable territory.

13) In order to prevent double taxation or non-taxation of the supply of a service, or for the uniform application of rules, the Government shall have the power to notify any description of services or circumstances in which the place of supply shall be the place of effective use and enjoyment of a service

Basis of identification of location of recipient, in case of supply of services if Place of Supply determined u/s 12(2) or 13(2) of the IGST Act

Section 2(14) of the IGST Act: “Location of recipient of service” means:a) where a supply is received at a place of business for which the registration has been obtained, the location of such place of business; b) where a supply is received at a place other than the place of business for which registration has been obtained (a fixed establishment elsewhere), the location of such fixed establishment; c) where a supply is received at more than one establishment, whether the place of business or fixed establishment, the location of the establishment most directly concerned with the receipt of the supply; and d) in absence of such places, the location of the usual place of residence of the recipient;

The major issue to be discussed here is place of supply to charge correct tax i.e. CGST & SGST and IGST and to avail ITC. If incorrect tax has been charged i.e. IGST instead of CGST & SGST, then refund claim is to be filed for such tax as inter adjustment between these taxes is not permitted and registered person has to pay CGST & SGST.

As tax will be remitted to that state government in which place of supply falls, therefore, auditor is required to examine carefully such inward supply of services or goods where place of supply falls in the state other than of registration state, as benefit of input tax credit shall not be allowed in such circumstances for services in relation to immovable property, performance based service, organisation of cultural event etc.

B.12 Value of taxable supply liable to tax Whether value of all transactions of supply has been determined in accordance with section 15 of the CGST Act?

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B.12.1 Inclusions in value of supply Section 15(1) & (2) – List of inclusions to form part of Value of Supply 1) The value of a supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply.

2) The value of supply shall include–––a) any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than this Act, the State Goods and Services Tax Act, the Union Territory Goods and Services Tax Act and the Goods and Services Tax (Compensation to States) Act, if charged separately by the supplier;b) any amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient of the supply and not included in the price actually paid or payable for the goods or services or both;c) incidental expenses, including commission and packing, charged by the supplier to the recipient of a supply and any amount charged for anything done by the supplier in respect of the supply of goods or services or both at the time of, or before delivery of goods or supply of services;d) interest or late fee or penalty for delayed payment of any consideration for any supply; ande) Subsidies directly linked to the price excluding subsidies provided by the Central Government and State Governments.

Explanation.––For the purposes of this sub-section, the amount of subsidy shall be included in the value of supply of the supplier who receives the subsidy.

Explanation.—for the purposes of this Act,––a) persons shall be deemed to be “related persons” if––

i. such persons are officers or directors of one another’s businesses; ii. such persons are legally recognized partners in business;iii. such persons are employer and employee; iv. any person directly or indirectly owns, controls or holds twenty-five per cent or more of the outstanding voting stock or shares of both of them; v. one of them directly or indirectly controls the other; vi. both of them are directly or indirectly controlled by a third person; vii. together they directly or indirectly control a third person; or viii. they are members of the same family;

b) The term “person” also includes legal persons;c) persons who are associated in the business of one another in that one is the sole agent or sole distributor or sole concessionaire, howsoever described, of the other, shall be deemed to be related.

In respect of valuation of supply (outward supply or inward supply liable to GST under RCM) on which GST is to be levied, the auditor is required to check:

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d) the internet protocol address of the device used by the recipient of services is in the taxable territory;

e) the bank of the recipient of services in which the account used for payment is maintained is in the taxable territory;

f) the country code of the subscriber identity module card used by the recipient of services is of taxable territory;

g) the location of the fixed land line through which the service is received by the recipient is in the taxable territory.

13) In order to prevent double taxation or non-taxation of the supply of a service, or for the uniform application of rules, the Government shall have the power to notify any description of services or circumstances in which the place of supply shall be the place of effective use and enjoyment of a service

Basis of identification of location of recipient, in case of supply of services if Place of Supply determined u/s 12(2) or 13(2) of the IGST Act

Section 2(14) of the IGST Act: “Location of recipient of service” means:a) where a supply is received at a place of business for which the registration has been obtained, the location of such place of business; b) where a supply is received at a place other than the place of business for which registration has been obtained (a fixed establishment elsewhere), the location of such fixed establishment; c) where a supply is received at more than one establishment, whether the place of business or fixed establishment, the location of the establishment most directly concerned with the receipt of the supply; and d) in absence of such places, the location of the usual place of residence of the recipient;

The major issue to be discussed here is place of supply to charge correct tax i.e. CGST & SGST and IGST and to avail ITC. If incorrect tax has been charged i.e. IGST instead of CGST & SGST, then refund claim is to be filed for such tax as inter adjustment between these taxes is not permitted and registered person has to pay CGST & SGST.

As tax will be remitted to that state government in which place of supply falls, therefore, auditor is required to examine carefully such inward supply of services or goods where place of supply falls in the state other than of registration state, as benefit of input tax credit shall not be allowed in such circumstances for services in relation to immovable property, performance based service, organisation of cultural event etc.

B.12 Value of taxable supply liable to tax Whether value of all transactions of supply has been determined in accordance with section 15 of the CGST Act?

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B.12.1 Inclusions in value of supply Section 15(1) & (2) – List of inclusions to form part of Value of Supply 1) The value of a supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply.

2) The value of supply shall include–––a) any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than this Act, the State Goods and Services Tax Act, the Union Territory Goods and Services Tax Act and the Goods and Services Tax (Compensation to States) Act, if charged separately by the supplier;b) any amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient of the supply and not included in the price actually paid or payable for the goods or services or both;c) incidental expenses, including commission and packing, charged by the supplier to the recipient of a supply and any amount charged for anything done by the supplier in respect of the supply of goods or services or both at the time of, or before delivery of goods or supply of services;d) interest or late fee or penalty for delayed payment of any consideration for any supply; ande) Subsidies directly linked to the price excluding subsidies provided by the Central Government and State Governments.

Explanation.––For the purposes of this sub-section, the amount of subsidy shall be included in the value of supply of the supplier who receives the subsidy.

Explanation.—for the purposes of this Act,––a) persons shall be deemed to be “related persons” if––

i. such persons are officers or directors of one another’s businesses; ii. such persons are legally recognized partners in business;iii. such persons are employer and employee; iv. any person directly or indirectly owns, controls or holds twenty-five per cent or more of the outstanding voting stock or shares of both of them; v. one of them directly or indirectly controls the other; vi. both of them are directly or indirectly controlled by a third person; vii. together they directly or indirectly control a third person; or viii. they are members of the same family;

b) The term “person” also includes legal persons;c) persons who are associated in the business of one another in that one is the sole agent or sole distributor or sole concessionaire, howsoever described, of the other, shall be deemed to be related.

In respect of valuation of supply (outward supply or inward supply liable to GST under RCM) on which GST is to be levied, the auditor is required to check:

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whether value is acceptable as transaction value in accordance with section 15 of the CGST Act or as per specific rule (rule 27 to 34) of CGST rules;

whether inclusions prescribed under section 15(2) of the CGST Act has been correctly determined;

in case of interest or late fee or penalty for delay in payment of consideration, on what rate GST has to be levied, whether rate of principal supply or otherwise;

B.12.2 Treatment of Discount Section 15 (3) – Discount adjustment in Value of SupplyThe value of the supply shall not include any discount which is given––

a) before or at the time of the supply if such discount has been duly recorded in the invoice issued in respect of such supply; andb) after the supply has been effected, if—

i. such discount is established in terms of an agreement entered into at or before the time of such supply and specifically linked to relevant invoices; andii. Input tax credit as is attributable to the discount on the basis of document issued by the supplier has been reversed by the recipient of the supply.

In respect of treatment of discount while calculating taxable value of supply, we need to verify whether amount of discount has been correctly computed in accordance with policies and agreements with respective recipient.

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B.13 Value of Supply – Rule 27-31 of CGST rules Whether the value of supply has been reflected as transaction value in the returns, however, value should have been determined in accordance with rule for determination of value of supply of CGST rules?

Rule 27 - Value of supply of goods or services where the consideration is not wholly in money Where the supply of goods or services is for a consideration not wholly in money, the value of the supply shall,

a) be the open market value of such supply; b) if open market value is not available, be the sum total of consideration in money and any such further amount in money as is equivalent to the consideration not in money if such amount is known at the time of supply; c) if the value of supply is not determinable under clause (a) or clause (b), be the value of supply of goods or services or both of like kind and quality;

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whether value is acceptable as transaction value in accordance with section 15 of the CGST Act or as per specific rule (rule 27 to 34) of CGST rules;

whether inclusions prescribed under section 15(2) of the CGST Act has been correctly determined;

in case of interest or late fee or penalty for delay in payment of consideration, on what rate GST has to be levied, whether rate of principal supply or otherwise;

B.12.2 Treatment of Discount Section 15 (3) – Discount adjustment in Value of SupplyThe value of the supply shall not include any discount which is given––

a) before or at the time of the supply if such discount has been duly recorded in the invoice issued in respect of such supply; andb) after the supply has been effected, if—

i. such discount is established in terms of an agreement entered into at or before the time of such supply and specifically linked to relevant invoices; andii. Input tax credit as is attributable to the discount on the basis of document issued by the supplier has been reversed by the recipient of the supply.

In respect of treatment of discount while calculating taxable value of supply, we need to verify whether amount of discount has been correctly computed in accordance with policies and agreements with respective recipient.

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B.13 Value of Supply – Rule 27-31 of CGST rules Whether the value of supply has been reflected as transaction value in the returns, however, value should have been determined in accordance with rule for determination of value of supply of CGST rules?

Rule 27 - Value of supply of goods or services where the consideration is not wholly in money Where the supply of goods or services is for a consideration not wholly in money, the value of the supply shall,

a) be the open market value of such supply; b) if open market value is not available, be the sum total of consideration in money and any such further amount in money as is equivalent to the consideration not in money if such amount is known at the time of supply; c) if the value of supply is not determinable under clause (a) or clause (b), be the value of supply of goods or services or both of like kind and quality;

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d) if value is not determinable under clause (a) or clause (b) or clause (c), be the sum total of consideration in money and such further amount in money that is equivalent to consideration not in money as determined by application of rule 30 or rule 31 in that order.

Illustration: (1) Where a new phone is supplied for Rs.20000 along with the exchange of an old phone and

if the price of the new phone without exchange is Rs.24000, the open market value of the new phone is Rs 24000.

(2) Where a laptop is supplied for Rs.40000 along with a barter of printer that is manufactured by the recipient and the value of the printer known at the time of supply is Rs.4000 but the open market value of the laptop is not known, the value of the supply of laptop is Rs.44000.

Rule 28 - Value of supply of goods or services or both between distinct or related persons, other than through an agent The value of the supply of goods or services or both between distinct persons as specified in sub-section (4) and (5) of section 25 or where the supplier and recipient are related, other than where the supply is made through an agent, shall,-

a) be the open market value of such supply; b) if open market value is not available, be the value of supply of goods or services of like kind and quality; c) if value is not determinable under clause (a) or (b), be the value as determined by application of rule 30 or rule 31, in that order:

Provided that where goods are intended for further supply as such by the recipient, the value shall, at the option of the supplier, be an amount equivalent to ninety percent of the price charged for the supply of goods of like kind and quality by the recipient to his customer not being a related person:

Provided where the recipient is eligible for full input tax credit, the value declared in the invoice shall be deemed to be the open market value of goods or services.

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Illustration: Where a mobile phone is available in the market and the price is not available and at the same time another mobile is available on the other brand is available in the same configuration amounting to Rs.30,000, then the value of mobile phone will be Rs.30,000.

Rule 29 - Value of supply of goods made or received through an agent The value of supply of goods between the principal and his agent shall,-

a) be the open market value of the goods being supplied, or at the option of the supplier, be ninety percent of the price charged for the supply of goods of like kind and quality by the recipient to his customer not being a related person, where the goods are intended for further supply by the said recipient;

Illustration: Where a principal supplies groundnut to his agent and the agent is supplying groundnuts of like kind and quality in subsequent supplies at a price of Rs.5000 per quintal on the day of supply. Another independent supplier is supplying groundnuts of like kind and quality to the said agent at the price of Rs.4550 per quintal. The value of the supply made by the principal shall be Rs.4550 per quintal or where he exercises the option the value shall be 90% of the Rs.5000 i.e. is Rs.4500 per quintal.

b) Where the value of a supply is not determinable under clause (a), the same shall be determined by application of rule 30 or rule 31 in that order.

Rule 30 -Value of supply of goods or services or both based on cost Where the value of a supply of goods or services or both is not determinable by any of the preceding rules, the value shall be one hundred and ten percent of the cost of production or manufacture or cost of acquisition of such goods or cost of provision of such services.

Illustration: The Cost of production of Supply is Rs. 50,000, then the value of such supply will be Rs. 55,000 (50,000+110%).

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d) if value is not determinable under clause (a) or clause (b) or clause (c), be the sum total of consideration in money and such further amount in money that is equivalent to consideration not in money as determined by application of rule 30 or rule 31 in that order.

Illustration: (1) Where a new phone is supplied for Rs.20000 along with the exchange of an old phone and

if the price of the new phone without exchange is Rs.24000, the open market value of the new phone is Rs 24000.

(2) Where a laptop is supplied for Rs.40000 along with a barter of printer that is manufactured by the recipient and the value of the printer known at the time of supply is Rs.4000 but the open market value of the laptop is not known, the value of the supply of laptop is Rs.44000.

Rule 28 - Value of supply of goods or services or both between distinct or related persons, other than through an agent The value of the supply of goods or services or both between distinct persons as specified in sub-section (4) and (5) of section 25 or where the supplier and recipient are related, other than where the supply is made through an agent, shall,-

a) be the open market value of such supply; b) if open market value is not available, be the value of supply of goods or services of like kind and quality; c) if value is not determinable under clause (a) or (b), be the value as determined by application of rule 30 or rule 31, in that order:

Provided that where goods are intended for further supply as such by the recipient, the value shall, at the option of the supplier, be an amount equivalent to ninety percent of the price charged for the supply of goods of like kind and quality by the recipient to his customer not being a related person:

Provided where the recipient is eligible for full input tax credit, the value declared in the invoice shall be deemed to be the open market value of goods or services.

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Illustration: Where a mobile phone is available in the market and the price is not available and at the same time another mobile is available on the other brand is available in the same configuration amounting to Rs.30,000, then the value of mobile phone will be Rs.30,000.

Rule 29 - Value of supply of goods made or received through an agent The value of supply of goods between the principal and his agent shall,-

a) be the open market value of the goods being supplied, or at the option of the supplier, be ninety percent of the price charged for the supply of goods of like kind and quality by the recipient to his customer not being a related person, where the goods are intended for further supply by the said recipient;

Illustration: Where a principal supplies groundnut to his agent and the agent is supplying groundnuts of like kind and quality in subsequent supplies at a price of Rs.5000 per quintal on the day of supply. Another independent supplier is supplying groundnuts of like kind and quality to the said agent at the price of Rs.4550 per quintal. The value of the supply made by the principal shall be Rs.4550 per quintal or where he exercises the option the value shall be 90% of the Rs.5000 i.e. is Rs.4500 per quintal.

b) Where the value of a supply is not determinable under clause (a), the same shall be determined by application of rule 30 or rule 31 in that order.

Rule 30 -Value of supply of goods or services or both based on cost Where the value of a supply of goods or services or both is not determinable by any of the preceding rules, the value shall be one hundred and ten percent of the cost of production or manufacture or cost of acquisition of such goods or cost of provision of such services.

Illustration: The Cost of production of Supply is Rs. 50,000, then the value of such supply will be Rs. 55,000 (50,000+110%).

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Rule 31 - Residual method for determination of value of supply of goods or services or both Where the value of supply of goods or services or both cannot be determined under rules 27 to 30, the same shall be determined using reasonable means consistent with the principles and general provisions of section 15 and these rules:

Provided that in case of supply of services, the supplier may opt for this rule, disregarding rule 30.

B.14 Value of supply- specified cases under rule 31A and 32 of CGST rulesWhether value of supply has been computed in in contravention of the provisions under Rule 31A/32 of the CGST rules?

Rule 31 A - Value of supply in case of lottery, betting, gambling and horse racing1) Notwithstanding anything contained in the provisions of this Chapter, the value in respect of supplies specified below shall be determined in the manner provided hereinafter.

2) (a) The value of supply of lottery run by State Governments shall be deemed to be 100/112 of the face value of ticket or of the price as notified in the Official Gazette by the organising State, whichever is higher. (b) The value of supply of lottery authorised by State Governments shall be deemed to be 100/128 of the face value of ticket or of the price as notified in the Official Gazette by the organising State, whichever is higher.

Explanation:– For the purposes of this sub-rule, the expressions- (a) “lottery run by State Governments” means a lottery not allowed to be sold in any State

other than the organizing State; (b) “lottery authorised by State Governments” means a lottery which is authorised to be sold in

State(s) other than the organising State also; and (c) “Organising State” has the same meaning as assigned to it in clause (f) of sub-rule (1) of

rule 2 of the Lotteries (Regulation) Rules, 2010.

3) The value of supply of actionable claim in the form of chance to win in betting, gambling or horse racing in a race club shall be 100% of the face value of the bet or the amount paid into the totalizator.

Rule 32: Determination of value in respect of certain supplies (1) Notwithstanding anything contained in the provisions of this Chapter, the value in respect of supplies specified below shall, at the option of the supplier, be determined in the manner provided hereinafter. (A) Purchase or sale of foreign currency (2) The value of supply of services in relation to the purchase or sale of foreign currency, including money changing, shall be determined by the supplier of services in the following manner, namely:-

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a) for a currency, when exchanged from, or to, Indian Rupees, the value shall be equal to the difference in the buying rate or the selling rate, as the case may be, and the Reserve Bank of India reference rate for that currency at that time, multiplied by the total units of currency:

Provided that in case where the Reserve Bank of India reference rate for a currency is not available, the value shall be one per cent. of the gross amount of Indian Rupees provided or received by the person changing the money:

Provided further that in case where neither of the currencies exchanged is Indian Rupees, the value shall be equal to one per cent. of the lesser of the two amounts the person changing the money would have received by converting any of the two currencies into Indian Rupee on that day at the reference rate provided by the Reserve Bank of India.

Provided also that a person supplying the services may exercise the option to ascertain the value in terms of clause (b) for a financial year and such option shall not be withdrawn during the remaining part of that financial year.

b) at the option of the supplier of services, the value in relation to the supply of foreign currency, including money changing, shall be deemed to be-

(i) one per cent. of the gross amount of currency exchanged for an amount up to one lakh rupees, subject to a minimum amount of two hundred and fifty rupees; (ii) one thousand rupees and half of a per cent. of the gross amount of currency exchanged for an amount exceeding one lakh rupees and up to ten lakh rupees; and (iii) five thousand and five hundred rupees and one tenth of a per cent. of the gross amount of currency exchanged for an amount exceeding ten lakh rupees, subject to a maximum amount of sixty thousand rupees.

Rule 34 - Rate of exchange of currency, other than Indian rupees, for determination of value1) The rate of exchange for determination of value of taxable goods shall be the applicable rate of exchange as notified by the Board under section 14 of the Customs Act, 1962 for the date of time of supply of such goods in terms of section 12 of the Act.

2) The rate of exchange for determination of value of taxable services shall be the applicable rate of exchange determined as per the generally accepted accounting principles for the date of time of supply of such services in terms of section 13 of the Act.

(B) Air Travel Agents (3) The value of the supply of services in relation to booking of tickets for travel by air provided by an air travel agent shall be deemed to be an amount calculated at the rate of five percent. of the basic fare in the case of domestic bookings, and at the rate of ten per cent. of the basic fare in the case of international bookings of passage for travel by air.

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Rule 31 - Residual method for determination of value of supply of goods or services or both Where the value of supply of goods or services or both cannot be determined under rules 27 to 30, the same shall be determined using reasonable means consistent with the principles and general provisions of section 15 and these rules:

Provided that in case of supply of services, the supplier may opt for this rule, disregarding rule 30.

B.14 Value of supply- specified cases under rule 31A and 32 of CGST rulesWhether value of supply has been computed in in contravention of the provisions under Rule 31A/32 of the CGST rules?

Rule 31 A - Value of supply in case of lottery, betting, gambling and horse racing1) Notwithstanding anything contained in the provisions of this Chapter, the value in respect of supplies specified below shall be determined in the manner provided hereinafter.

2) (a) The value of supply of lottery run by State Governments shall be deemed to be 100/112 of the face value of ticket or of the price as notified in the Official Gazette by the organising State, whichever is higher. (b) The value of supply of lottery authorised by State Governments shall be deemed to be 100/128 of the face value of ticket or of the price as notified in the Official Gazette by the organising State, whichever is higher.

Explanation:– For the purposes of this sub-rule, the expressions- (a) “lottery run by State Governments” means a lottery not allowed to be sold in any State

other than the organizing State; (b) “lottery authorised by State Governments” means a lottery which is authorised to be sold in

State(s) other than the organising State also; and (c) “Organising State” has the same meaning as assigned to it in clause (f) of sub-rule (1) of

rule 2 of the Lotteries (Regulation) Rules, 2010.

3) The value of supply of actionable claim in the form of chance to win in betting, gambling or horse racing in a race club shall be 100% of the face value of the bet or the amount paid into the totalizator.

Rule 32: Determination of value in respect of certain supplies (1) Notwithstanding anything contained in the provisions of this Chapter, the value in respect of supplies specified below shall, at the option of the supplier, be determined in the manner provided hereinafter. (A) Purchase or sale of foreign currency (2) The value of supply of services in relation to the purchase or sale of foreign currency, including money changing, shall be determined by the supplier of services in the following manner, namely:-

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a) for a currency, when exchanged from, or to, Indian Rupees, the value shall be equal to the difference in the buying rate or the selling rate, as the case may be, and the Reserve Bank of India reference rate for that currency at that time, multiplied by the total units of currency:

Provided that in case where the Reserve Bank of India reference rate for a currency is not available, the value shall be one per cent. of the gross amount of Indian Rupees provided or received by the person changing the money:

Provided further that in case where neither of the currencies exchanged is Indian Rupees, the value shall be equal to one per cent. of the lesser of the two amounts the person changing the money would have received by converting any of the two currencies into Indian Rupee on that day at the reference rate provided by the Reserve Bank of India.

Provided also that a person supplying the services may exercise the option to ascertain the value in terms of clause (b) for a financial year and such option shall not be withdrawn during the remaining part of that financial year.

b) at the option of the supplier of services, the value in relation to the supply of foreign currency, including money changing, shall be deemed to be-

(i) one per cent. of the gross amount of currency exchanged for an amount up to one lakh rupees, subject to a minimum amount of two hundred and fifty rupees; (ii) one thousand rupees and half of a per cent. of the gross amount of currency exchanged for an amount exceeding one lakh rupees and up to ten lakh rupees; and (iii) five thousand and five hundred rupees and one tenth of a per cent. of the gross amount of currency exchanged for an amount exceeding ten lakh rupees, subject to a maximum amount of sixty thousand rupees.

Rule 34 - Rate of exchange of currency, other than Indian rupees, for determination of value1) The rate of exchange for determination of value of taxable goods shall be the applicable rate of exchange as notified by the Board under section 14 of the Customs Act, 1962 for the date of time of supply of such goods in terms of section 12 of the Act.

2) The rate of exchange for determination of value of taxable services shall be the applicable rate of exchange determined as per the generally accepted accounting principles for the date of time of supply of such services in terms of section 13 of the Act.

(B) Air Travel Agents (3) The value of the supply of services in relation to booking of tickets for travel by air provided by an air travel agent shall be deemed to be an amount calculated at the rate of five percent. of the basic fare in the case of domestic bookings, and at the rate of ten per cent. of the basic fare in the case of international bookings of passage for travel by air.

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Explanation.- For the purposes of this sub-rule, the expression “basic fare” means that part of the air fare on which commission is normally paid to the air travel agent by the airlines.

(C) Life Insurance Business (4) The value of supply of services in relation to life insurance business shall be,-

(a) the gross premium charged from a policy holder reduced by the amount allocated for investment, or savings on behalf of the policy holder, if such an amount is intimated to the policy holder at the time of supply of service; (b) in case of single premium annuity policies other than (a), ten per cent. of single premium charged from the policy holder; or (c) in all other cases, twenty five per cent. of the premium charged from the policy holder in the first year and twelve and a half per cent. of the premium charged from the policy holder in subsequent years:

Provided that nothing contained in this sub-rule shall apply where the entire premium paid by the policy holder is only towards the risk cover in life insurance.

(D) Buying and Selling of Goods (5) Where a taxable supply is provided by a person dealing in buying and selling of second hand goods i.e., used goods as such or after such minor processing which does not change the nature of the goods and where no input tax credit has been availed on the purchase of such goods, the value of supply shall be the difference between the selling price and the purchase price and where the value of such supply is negative, it shall be ignored:

Provided that the purchase value of goods repossessed from a defaulting borrower, who is not registered, for the purpose of recovery of a loan or debt shall be deemed to be the purchase price of such goods by the defaulting borrower reduced by five percentage points for every quarter or part thereof, between the date of purchase and the date of disposal by the person making such repossession.

(E) Token, voucher or coupons (6) The value of a token, or a voucher, or a coupon, or a stamp (other than postage stamp) which is redeemable against a supply of goods or services or both shall be equal to the money value of the goods or services or both redeemable against such token, voucher, coupon, or stamp.

(7) The value of taxable services provided by such class of service providers as may be notified by the Government, on the recommendations of the Council, as referred to in paragraph 2 of Schedule I of the said Act between distinct persons as referred to in section 25, where input tax credit is available, shall be deemed to be NIL.

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B.15 Concept of Pure Agent Whether the supplier has contravened the provisions of pure agent as per rule 33 of CGST Rules, 2017?

Rule 33 - Value of supply of services in case of pure agentNotwithstanding anything contained in the provisions of this Chapter, the expenditure or costs incurred by a supplier as a pure agent of the recipient of supply shall be excluded from the value of supply, if all the following conditions are satisfied, namely,-

(i) the supplier acts as a pure agent of the recipient of the supply, when he makes the payment to the third party on authorization by such recipient; (ii) the payment made by the pure agent on behalf of the recipient of supply has been separately indicated in the invoice issued by the pure agent to the recipient of service; and (iii) the supplies procured by the pure agent from the third party as a pure agent of the recipient of supply are in addition to the services he supplies on his own account.

Explanation.- For the purposes of this rule, the expression “pure agent” means a person who- a) enters into a contractual agreement with the recipient of supply to act as his pure agent to incur expenditure or costs in the course of supply of goods or services or both; b) neither intends to hold nor holds any title to the goods or services or both so procured or supplied as pure agent of the recipient of supply; c) does not use for his own interest such goods or services so procured; and d) receives only the actual amount incurred to procure such goods or services in addition to the amount received for supply he provides on his own account.

Illustration: Corporate services firm A is engaged to handle the legal work pertaining to the incorporation of Company B. Other than its service fees, A also recovers from B, registration fee and approval fee for the name of the company paid to the Registrar of Companies. The fees charged by the Registrar of Companies for the registration and approval of the name are compulsorily levied on B. A is merely acting as a pure agent in the payment of those fees. Therefore, A’s recovery of such expenses is a disbursement and not part of the value of supply made by A to B.

In respect of value of supply (outward supply or inward supply liable to GST under RCM) onwhich GST is to be levied, the auditor is required to check:-

where value of supply in return has been reflected as transaction value, however, value should have been determined in accordance with rules like where consideration is not wholly or partly in money, supply between distinct or related persons, supply through an agent, supply based on cost etc.;

where value of supply is required to be determined in accordance with respective rue of CGST rules, whether value has been computed in accordance with such specific rule;

where supply comprises of specific nature of supply of services as per rule 31A and 32, whether value of has been determined in accordance with respective rule;

whether a supply has been incurred involving pure agent, if yes whether provision of rule 33 has been complied with;

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Explanation.- For the purposes of this sub-rule, the expression “basic fare” means that part of the air fare on which commission is normally paid to the air travel agent by the airlines.

(C) Life Insurance Business (4) The value of supply of services in relation to life insurance business shall be,-

(a) the gross premium charged from a policy holder reduced by the amount allocated for investment, or savings on behalf of the policy holder, if such an amount is intimated to the policy holder at the time of supply of service; (b) in case of single premium annuity policies other than (a), ten per cent. of single premium charged from the policy holder; or (c) in all other cases, twenty five per cent. of the premium charged from the policy holder in the first year and twelve and a half per cent. of the premium charged from the policy holder in subsequent years:

Provided that nothing contained in this sub-rule shall apply where the entire premium paid by the policy holder is only towards the risk cover in life insurance.

(D) Buying and Selling of Goods (5) Where a taxable supply is provided by a person dealing in buying and selling of second hand goods i.e., used goods as such or after such minor processing which does not change the nature of the goods and where no input tax credit has been availed on the purchase of such goods, the value of supply shall be the difference between the selling price and the purchase price and where the value of such supply is negative, it shall be ignored:

Provided that the purchase value of goods repossessed from a defaulting borrower, who is not registered, for the purpose of recovery of a loan or debt shall be deemed to be the purchase price of such goods by the defaulting borrower reduced by five percentage points for every quarter or part thereof, between the date of purchase and the date of disposal by the person making such repossession.

(E) Token, voucher or coupons (6) The value of a token, or a voucher, or a coupon, or a stamp (other than postage stamp) which is redeemable against a supply of goods or services or both shall be equal to the money value of the goods or services or both redeemable against such token, voucher, coupon, or stamp.

(7) The value of taxable services provided by such class of service providers as may be notified by the Government, on the recommendations of the Council, as referred to in paragraph 2 of Schedule I of the said Act between distinct persons as referred to in section 25, where input tax credit is available, shall be deemed to be NIL.

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B.15 Concept of Pure Agent Whether the supplier has contravened the provisions of pure agent as per rule 33 of CGST Rules, 2017?

Rule 33 - Value of supply of services in case of pure agentNotwithstanding anything contained in the provisions of this Chapter, the expenditure or costs incurred by a supplier as a pure agent of the recipient of supply shall be excluded from the value of supply, if all the following conditions are satisfied, namely,-

(i) the supplier acts as a pure agent of the recipient of the supply, when he makes the payment to the third party on authorization by such recipient; (ii) the payment made by the pure agent on behalf of the recipient of supply has been separately indicated in the invoice issued by the pure agent to the recipient of service; and (iii) the supplies procured by the pure agent from the third party as a pure agent of the recipient of supply are in addition to the services he supplies on his own account.

Explanation.- For the purposes of this rule, the expression “pure agent” means a person who- a) enters into a contractual agreement with the recipient of supply to act as his pure agent to incur expenditure or costs in the course of supply of goods or services or both; b) neither intends to hold nor holds any title to the goods or services or both so procured or supplied as pure agent of the recipient of supply; c) does not use for his own interest such goods or services so procured; and d) receives only the actual amount incurred to procure such goods or services in addition to the amount received for supply he provides on his own account.

Illustration: Corporate services firm A is engaged to handle the legal work pertaining to the incorporation of Company B. Other than its service fees, A also recovers from B, registration fee and approval fee for the name of the company paid to the Registrar of Companies. The fees charged by the Registrar of Companies for the registration and approval of the name are compulsorily levied on B. A is merely acting as a pure agent in the payment of those fees. Therefore, A’s recovery of such expenses is a disbursement and not part of the value of supply made by A to B.

In respect of value of supply (outward supply or inward supply liable to GST under RCM) onwhich GST is to be levied, the auditor is required to check:-

where value of supply in return has been reflected as transaction value, however, value should have been determined in accordance with rules like where consideration is not wholly or partly in money, supply between distinct or related persons, supply through an agent, supply based on cost etc.;

where value of supply is required to be determined in accordance with respective rue of CGST rules, whether value has been computed in accordance with such specific rule;

where supply comprises of specific nature of supply of services as per rule 31A and 32, whether value of has been determined in accordance with respective rule;

whether a supply has been incurred involving pure agent, if yes whether provision of rule 33 has been complied with;

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where supply involves import or export of goods or service, if rate of exchange used for determining the value has been adopted in accordance with rule 34 of CGST rules.

B.16 Tax liability on account of bad debts Whether the registered person has reversed any output tax liability on account of bad debts?

Section 34 – Credit and Debit Notes1) Where a tax invoice has been issued for supply of any goods or services or both and the taxable value or tax charged in that tax invoice is found to exceed the taxable value or tax payable in respect of such supply, or where the goods supplied are returned by the recipient, or where goods or services or both supplied are found to be deficient, the registered person, who has supplied such goods or services or both, may issue to the recipient a credit note containing such particulars as may be prescribed.

As per Section 34(1) of CGST Act 2017, credit note can be issued wherein the taxable value or tax charged in invoice is more than the actual tax payable in respect of any supply. Therefore in case of bad debts, Section 34(1) of the Act will come under picture and whether credit note has been raised in such case needs to be checked. The auditor is required to examine the said issue, if registered person has reversed output tax liability in case of occurance of bad debt.

B.17 Input Tax Credit Whether benefit of Input tax credit has been availed in accordance with provisions of section 16 of the CGST Act?

Section 16: Eligibility and conditions for taking input tax credit 1) Every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person. 2) Notwithstanding anything contained in this section, no registered person shall be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless,––

a) he is in possession of a tax invoice or debit note issued by a supplier registered under this Act, or such other tax paying documents as may be prescribed;

b) he has received the goods or services or both.

Explanation.—For the purposes of this clause, it shall be deemed that the registered person has received the goods where the goods are delivered by the supplier to a recipient or any other person on the direction of such registered person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to goods or otherwise;

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c) Subject to the provisions of section 41,the tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilization of input tax credit admissible in respect of the said supply; and

d) He has furnished the return under section 39:

Provided that where the goods against an invoice are received in lots or instalments, the registered person shall be entitled to take credit upon receipt of the last lot or instalment:

As per Section 31 of CGST Act 2017 read with Rule 46 of CGST Rules 2017, following are the essential particulars that must be contained in a tax invoice issued under GST Act. 1. name, address and Goods and Services Tax Identification Number of the supplier; 2. a consecutive serial number not exceeding sixteen characters, in one or multiple series, containing alphabets or numerals or special characters - hyphen or dash and slash symbolised as “-” and “/” respectively, and any combination thereof, unique for a financial year; 3. date of its issue; 4. name, address and Goods and Services Tax Identification Number or Unique Identity Number, if registered, of the recipient; 5. name and address of the recipient and the address of delivery, along with the name of the State and its code, if such recipient is un-registered and where the value of the taxable supply is fifty thousand rupees or more; 6. name and address of the recipient and the address of delivery, along with the name of the State and its code, if such recipient is un-registered and where the value of the taxable supply is less than fifty thousand rupees and the recipient requests that such details be recorded in the tax invoice; 7. Harmonised System of Nomenclature code for goods or services; 8. description of goods or services; 9. quantity in case of goods and unit or Unique Quantity Code thereof; 10. total value of supply of goods or services or both; 11. taxable value of the supply of goods or services or both taking into account discount orabatement, if any; 12. rate of tax (central tax, State tax, integrated tax, Union territory tax or cess); 13. amount of tax charged in respect of taxable goods or services (central tax, State tax, integrated tax, Union territory tax or cess); 14. place of supply along with the name of the State, in the case of a supply in the course of inter-State trade or commerce; 15. address of delivery where the same is different from the place of supply; 16. whether the tax is payable on reverse charge basis; and17. signature or digital signature of the supplier or his authorised representative:

In view of provisions contained under Section 16(2), among other things, with respect to tax invoice, input tax credit can be availed only when tax invoice as per Section 31 of CGST Act is issued, i.e. containing the particulars as mentioned supra.

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where supply involves import or export of goods or service, if rate of exchange used for determining the value has been adopted in accordance with rule 34 of CGST rules.

B.16 Tax liability on account of bad debts Whether the registered person has reversed any output tax liability on account of bad debts?

Section 34 – Credit and Debit Notes1) Where a tax invoice has been issued for supply of any goods or services or both and the taxable value or tax charged in that tax invoice is found to exceed the taxable value or tax payable in respect of such supply, or where the goods supplied are returned by the recipient, or where goods or services or both supplied are found to be deficient, the registered person, who has supplied such goods or services or both, may issue to the recipient a credit note containing such particulars as may be prescribed.

As per Section 34(1) of CGST Act 2017, credit note can be issued wherein the taxable value or tax charged in invoice is more than the actual tax payable in respect of any supply. Therefore in case of bad debts, Section 34(1) of the Act will come under picture and whether credit note has been raised in such case needs to be checked. The auditor is required to examine the said issue, if registered person has reversed output tax liability in case of occurance of bad debt.

B.17 Input Tax Credit Whether benefit of Input tax credit has been availed in accordance with provisions of section 16 of the CGST Act?

Section 16: Eligibility and conditions for taking input tax credit 1) Every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person. 2) Notwithstanding anything contained in this section, no registered person shall be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless,––

a) he is in possession of a tax invoice or debit note issued by a supplier registered under this Act, or such other tax paying documents as may be prescribed;

b) he has received the goods or services or both.

Explanation.—For the purposes of this clause, it shall be deemed that the registered person has received the goods where the goods are delivered by the supplier to a recipient or any other person on the direction of such registered person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to goods or otherwise;

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c) Subject to the provisions of section 41,the tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilization of input tax credit admissible in respect of the said supply; and

d) He has furnished the return under section 39:

Provided that where the goods against an invoice are received in lots or instalments, the registered person shall be entitled to take credit upon receipt of the last lot or instalment:

As per Section 31 of CGST Act 2017 read with Rule 46 of CGST Rules 2017, following are the essential particulars that must be contained in a tax invoice issued under GST Act. 1. name, address and Goods and Services Tax Identification Number of the supplier; 2. a consecutive serial number not exceeding sixteen characters, in one or multiple series, containing alphabets or numerals or special characters - hyphen or dash and slash symbolised as “-” and “/” respectively, and any combination thereof, unique for a financial year; 3. date of its issue; 4. name, address and Goods and Services Tax Identification Number or Unique Identity Number, if registered, of the recipient; 5. name and address of the recipient and the address of delivery, along with the name of the State and its code, if such recipient is un-registered and where the value of the taxable supply is fifty thousand rupees or more; 6. name and address of the recipient and the address of delivery, along with the name of the State and its code, if such recipient is un-registered and where the value of the taxable supply is less than fifty thousand rupees and the recipient requests that such details be recorded in the tax invoice; 7. Harmonised System of Nomenclature code for goods or services; 8. description of goods or services; 9. quantity in case of goods and unit or Unique Quantity Code thereof; 10. total value of supply of goods or services or both; 11. taxable value of the supply of goods or services or both taking into account discount orabatement, if any; 12. rate of tax (central tax, State tax, integrated tax, Union territory tax or cess); 13. amount of tax charged in respect of taxable goods or services (central tax, State tax, integrated tax, Union territory tax or cess); 14. place of supply along with the name of the State, in the case of a supply in the course of inter-State trade or commerce; 15. address of delivery where the same is different from the place of supply; 16. whether the tax is payable on reverse charge basis; and17. signature or digital signature of the supplier or his authorised representative:

In view of provisions contained under Section 16(2), among other things, with respect to tax invoice, input tax credit can be availed only when tax invoice as per Section 31 of CGST Act is issued, i.e. containing the particulars as mentioned supra.

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Provided further that where a recipient fails to pay to the supplier of goods or services or both, other than the supplies on which tax is payable on reverse charge basis, the amount towards the value of supply along with tax payable thereon within a period of one hundred and eighty days from the date of issue of invoice by the supplier, an amount equal to the input tax credit availed by the recipient shall be added to his output tax liability, along with interest thereon, in such manner as may be prescribed: Provided also that the recipient shall be entitled to avail of the credit of input tax on payment made by him of the amount towards the value of supply of goods or services or both along with tax payable thereon. B.18 Ineligible Input Tax Credit Whether apportionment of credit has been effected in terms of section 17(2) of CGST Act, 2017 read with Rule 42/43 of CGST Rules, 2017?

Section 17(2) Where the goods or services or both are used by the registered person partly for effecting taxable supplies including zero-rated supplies under this Act or under the Integrated Goods and Services Tax Act and partly for effecting exempt supplies under the said Acts, the amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies including zero-rated supplies.

Section 17(3) The value of exempt supply under sub-section (2) shall be such as may be prescribed, and shall include supplies on which the recipient is liable to pay tax on reverse charge basis, transactions in securities, sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building.

Rule 42 - Manner of determination of input tax credit in certain cases and reversal thereof

1) The input tax credit in respect of inputs or input services, which attract the provisions of sub-sections (1) or (2) of section 17, being partly used for the purposes of business and partly for other purposes, or partly used for effecting taxable supplies including zero rated supplies and partly for effecting exempted supplies, shall be attributed to the purposes of business or for effecting taxable supplies in the following manner, namely,-

a) total input tax involved on inputs and input services in a tax period, be denoted as ‘T’; b) the amount of input tax, out of ‘T’, attributable to inputs and input services intended to

be used exclusively for purposes other than business, be denoted as ‘T1’;c) the amount of input tax, out of ‘T’, attributable to inputs and input services intended to

be used exclusively for effecting exempt supplies, be denoted as ‘T2’; d) the amount of input tax, out of ‘T’, in respect of inputs on which credit is not available

under sub-section (5) of section 17, be denoted as ‘T3’;

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e) the amount of input tax credit credited to the electronic credit ledger of registered person, be denoted as ‘C1’ and calculated as:

C1 = T- (T1+T2+T3);f) the amount of input tax credit attributable to inputs and input services used exclusively

in or in relation to taxable supplies including zero rated supplies, be denoted as ‘T4’; g) ‘T1’, ‘T2’, ‘T3’ and ‘T4’ shall be determined and declared by the registered person at

the invoice level in FORM GSTR-2;h) Input tax credit left after attribution of input tax credit under clause (g) shall be called

common credit, be denoted as ‘C2’ and calculated as: C2 = C1- T4;

i) The amount of input tax credit attributable towards exempt supplies, be denoted as ‘D1’ and calculated as:

D1= (E÷F) × C2where,‘E’ is the aggregate value of exempt supplies, that is, all supplies other than taxable and zero rated supplies, during the tax period, and ‘F’ is the total turnover of the registered person during the tax period:

Provided that where the registered person does not have any turnover during the said tax period or the aforesaid information is not available, the value of ‘E/F’ shall calculated by taking values of ‘E’ and ‘F’ of the last tax period for which details of such turnover are available, previous to the month during which the said value of ‘E/F’ is to calculated;

Explanation: For the purposes of this clause, the aggregate value of exempt supplies and total turnover shall exclude the amount of any duty or tax levied under entry 84 of List I of the Seventh Schedule to the Constitution and entry 51 and 54 of List II of the said Schedule.

j) the amount of credit attributable to non-business purposes if common inputs and input services are used partly for business and partly for non-business purposes, be denoted as ‘D2’, and shall be equal to five per cent. of C2; and

k) the remainder of the common credit shall be the eligible input tax credit attributed to the purposes of business and for effecting taxable supplies including zero rated supplies and shall be denoted as ‘C3’, where,-

C3 = C2 - (D1+D2);l) The amount ‘C3’ shall be computed separately for input tax credit of central tax, State

tax, Union territory tax and integrated tax; m) The amount equal to ‘D1’ and ‘D2’ shall be added to the output tax liability of the

registered person:

Provided that if the amount of input tax relating to inputs or input services which have been used partly for purposes other than business and partly for effecting exempt supplies has been identified and segregated at invoice level by the registered person, the same shall be included in ‘T1’ and ‘T2’ respectively, and the remaining amount of credit on such input or input services shall be included in ‘T4’.

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Provided further that where a recipient fails to pay to the supplier of goods or services or both, other than the supplies on which tax is payable on reverse charge basis, the amount towards the value of supply along with tax payable thereon within a period of one hundred and eighty days from the date of issue of invoice by the supplier, an amount equal to the input tax credit availed by the recipient shall be added to his output tax liability, along with interest thereon, in such manner as may be prescribed: Provided also that the recipient shall be entitled to avail of the credit of input tax on payment made by him of the amount towards the value of supply of goods or services or both along with tax payable thereon. B.18 Ineligible Input Tax Credit Whether apportionment of credit has been effected in terms of section 17(2) of CGST Act, 2017 read with Rule 42/43 of CGST Rules, 2017?

Section 17(2) Where the goods or services or both are used by the registered person partly for effecting taxable supplies including zero-rated supplies under this Act or under the Integrated Goods and Services Tax Act and partly for effecting exempt supplies under the said Acts, the amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies including zero-rated supplies.

Section 17(3) The value of exempt supply under sub-section (2) shall be such as may be prescribed, and shall include supplies on which the recipient is liable to pay tax on reverse charge basis, transactions in securities, sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building.

Rule 42 - Manner of determination of input tax credit in certain cases and reversal thereof

1) The input tax credit in respect of inputs or input services, which attract the provisions of sub-sections (1) or (2) of section 17, being partly used for the purposes of business and partly for other purposes, or partly used for effecting taxable supplies including zero rated supplies and partly for effecting exempted supplies, shall be attributed to the purposes of business or for effecting taxable supplies in the following manner, namely,-

a) total input tax involved on inputs and input services in a tax period, be denoted as ‘T’; b) the amount of input tax, out of ‘T’, attributable to inputs and input services intended to

be used exclusively for purposes other than business, be denoted as ‘T1’;c) the amount of input tax, out of ‘T’, attributable to inputs and input services intended to

be used exclusively for effecting exempt supplies, be denoted as ‘T2’; d) the amount of input tax, out of ‘T’, in respect of inputs on which credit is not available

under sub-section (5) of section 17, be denoted as ‘T3’;

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e) the amount of input tax credit credited to the electronic credit ledger of registered person, be denoted as ‘C1’ and calculated as:

C1 = T- (T1+T2+T3);f) the amount of input tax credit attributable to inputs and input services used exclusively

in or in relation to taxable supplies including zero rated supplies, be denoted as ‘T4’; g) ‘T1’, ‘T2’, ‘T3’ and ‘T4’ shall be determined and declared by the registered person at

the invoice level in FORM GSTR-2;h) Input tax credit left after attribution of input tax credit under clause (g) shall be called

common credit, be denoted as ‘C2’ and calculated as: C2 = C1- T4;

i) The amount of input tax credit attributable towards exempt supplies, be denoted as ‘D1’ and calculated as:

D1= (E÷F) × C2where,‘E’ is the aggregate value of exempt supplies, that is, all supplies other than taxable and zero rated supplies, during the tax period, and ‘F’ is the total turnover of the registered person during the tax period:

Provided that where the registered person does not have any turnover during the said tax period or the aforesaid information is not available, the value of ‘E/F’ shall calculated by taking values of ‘E’ and ‘F’ of the last tax period for which details of such turnover are available, previous to the month during which the said value of ‘E/F’ is to calculated;

Explanation: For the purposes of this clause, the aggregate value of exempt supplies and total turnover shall exclude the amount of any duty or tax levied under entry 84 of List I of the Seventh Schedule to the Constitution and entry 51 and 54 of List II of the said Schedule.

j) the amount of credit attributable to non-business purposes if common inputs and input services are used partly for business and partly for non-business purposes, be denoted as ‘D2’, and shall be equal to five per cent. of C2; and

k) the remainder of the common credit shall be the eligible input tax credit attributed to the purposes of business and for effecting taxable supplies including zero rated supplies and shall be denoted as ‘C3’, where,-

C3 = C2 - (D1+D2);l) The amount ‘C3’ shall be computed separately for input tax credit of central tax, State

tax, Union territory tax and integrated tax; m) The amount equal to ‘D1’ and ‘D2’ shall be added to the output tax liability of the

registered person:

Provided that if the amount of input tax relating to inputs or input services which have been used partly for purposes other than business and partly for effecting exempt supplies has been identified and segregated at invoice level by the registered person, the same shall be included in ‘T1’ and ‘T2’ respectively, and the remaining amount of credit on such input or input services shall be included in ‘T4’.

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2) The input tax credit determined under sub-rule (1) shall be calculated finally for the financial year before the due date for filing the return for the month of September following the end of the financial year to which such credit relates, in the manner prescribed in the said sub-rule and,

a) where the aggregate of the amounts calculated finally in respect of ‘D1’ and ‘D2’ exceeds the aggregate of the amounts determined under sub-rule (1) in respect of ‘D1’ and ‘D2’, such excess shall be added to the output tax liability of the registered personfor a month not later than the month of September following the end of the financial year to which such credit relates and the said person shall be liable to pay interest on the said excess amount at the rate specified in sub-section (1) of section 50 for the period starting from first day of April of the succeeding financial year till the date of payment; or

b) where the aggregate of the amounts determined under sub-rule (1) in respect of ‘D1’ and ‘D2’ exceeds the aggregate of the amounts calculated finally in respect of ‘D1’ and ‘D2’, such excess amount shall be claimed as credit by the registered person in his return for a month not later than the month of September following the end of the financial year to which such credit relates.

The auditor is required to check whether: registered person is in possession of tax invoice or other relevant document; goods or service has been received or not; payment has been made to vendor if payment not made in 180 days of date of invoice,

else itc availed shall be liable to reverse along with interest; procurement of supply is in the course or furtherance of business; inward supply has not been used for further providing exempt supply; any block credits in terms of section 17(5) of the CGST act has been availed; reversal in accordance with rule 42 and 43 has been made correctly; etc. place of supply should be in same state as of the company’s registration; invoice is mapped with GSTR 2A; depreciation on the tax component is not claimed; goods classified as Capital goods capitalized in books or not; No ITC is eligible after the due date of furnishing GSTR 3 (and other returns) of

September of next FY or furnishing annual return, whichever is earlier.

Case Study 1: 1. XYZ is having Turnover of Rs.10 cr. out of which Rs.7 cr. is taxable supply and Rs.3 cr. is

exempted supply. Total Input Tax Credit available is Rs.20 Lakh. It includes: a. Rs.1 Lakh for services availed for personal consumption. b. Input Credit of Rs.1 Lakh is available on exempted services. c. XYZ purchased Motor Vehicle and Input Credit available on it is Rs.2 Lakh. d. XYZ paid for Food and Beverages for staff on which Input Tax of Rs.2 Lakh is available. e. Credit balance of Rs.10 Lakh is available exclusively for business purpose.

Calculate the credit which will be available to utilize for the month.

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Solution: Total input tax (‘T’): 20 LakhsTax paid in respect of: Inputs and input services to be used exclusively for purposes other than business (‘T1’): 1 lakhInputs and input services intended to be used for effecting exempt supplies (‘T2’): 1 lakh Inputs on which credit is not available under section 17(5) (‘T3’): 2+2=4 lakhs

Input tax credit credited to the electronic credit ledger (‘C1’):C1=20-(1+1+4) =14lakhs

Inputs and input services used exclusively for taxable supply (‘T4’): 10 lakhsCommon credit for taxable as well as exempt supply (‘C2’):

C2 = 14-10=4 lakhsAmount of input tax credit attributable towards exempt supplies i.e. ‘D1’:

D1= (E÷F) × C2 Exempt turnover: 3 cr. Total turnover: 10 cr.

D1= (3/10)*4= 120,000/- Amount of credit attributable to non-business purposes: D2= C2*5%= 4*5/100= 20,000/- Amount of common credit available for utilization: C2-(D1+D2)= 4 lakhs-(1.2+0.2 lakhs)= 2.6 lakhs Total amount available for utilization: 10+2.6=12.60 lakhs

Case Study 2. A company is having turnover of Rs.10 cr., out of which Rs.6 cr. is taxable and Rs.4 cr. is exempt. Besides that company has also invested Rs.20 cr. in securities and also sold off securities of Rs.10 cr. Total input tax credit available is Rs.40 lakhs on its inward supply of goods and services, which includes the following components:

a. Rs.5 lakhs for services availed for non-business purpose. b. Rs.10 lakhs for services availed for exempt supply of services. c. Company has paid GST of Rs.10 lakhs on inward supply of catering services for

employees of the company. d. Credit balance of Rs.10 lakhs were used exclusively for business purpose.

Calculate the eligible amount of credit available with the company to utilize.

Solution:

Total input tax (‘T’): 40 LakhsTax paid in respect of: Inputs and input services to be used exclusively for purposes other than business (‘T1’): 5 lakhsInputs and input services intended to be used for effecting exempt supplies (‘T2’): 10 lakhsInputs on which credit is not available under section 17(5) (‘T3’): 10 lakhs

Input tax credit credited to the electronic credit ledger (‘C1’):C1=40-(5+10+10) =15lakhs

Inputs and input services used exclusively for taxable supply (‘T4’): 10 lakhs

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2) The input tax credit determined under sub-rule (1) shall be calculated finally for the financial year before the due date for filing the return for the month of September following the end of the financial year to which such credit relates, in the manner prescribed in the said sub-rule and,

a) where the aggregate of the amounts calculated finally in respect of ‘D1’ and ‘D2’ exceeds the aggregate of the amounts determined under sub-rule (1) in respect of ‘D1’ and ‘D2’, such excess shall be added to the output tax liability of the registered personfor a month not later than the month of September following the end of the financial year to which such credit relates and the said person shall be liable to pay interest on the said excess amount at the rate specified in sub-section (1) of section 50 for the period starting from first day of April of the succeeding financial year till the date of payment; or

b) where the aggregate of the amounts determined under sub-rule (1) in respect of ‘D1’ and ‘D2’ exceeds the aggregate of the amounts calculated finally in respect of ‘D1’ and ‘D2’, such excess amount shall be claimed as credit by the registered person in his return for a month not later than the month of September following the end of the financial year to which such credit relates.

The auditor is required to check whether: registered person is in possession of tax invoice or other relevant document; goods or service has been received or not; payment has been made to vendor if payment not made in 180 days of date of invoice,

else itc availed shall be liable to reverse along with interest; procurement of supply is in the course or furtherance of business; inward supply has not been used for further providing exempt supply; any block credits in terms of section 17(5) of the CGST act has been availed; reversal in accordance with rule 42 and 43 has been made correctly; etc. place of supply should be in same state as of the company’s registration; invoice is mapped with GSTR 2A; depreciation on the tax component is not claimed; goods classified as Capital goods capitalized in books or not; No ITC is eligible after the due date of furnishing GSTR 3 (and other returns) of

September of next FY or furnishing annual return, whichever is earlier.

Case Study 1: 1. XYZ is having Turnover of Rs.10 cr. out of which Rs.7 cr. is taxable supply and Rs.3 cr. is

exempted supply. Total Input Tax Credit available is Rs.20 Lakh. It includes: a. Rs.1 Lakh for services availed for personal consumption. b. Input Credit of Rs.1 Lakh is available on exempted services. c. XYZ purchased Motor Vehicle and Input Credit available on it is Rs.2 Lakh. d. XYZ paid for Food and Beverages for staff on which Input Tax of Rs.2 Lakh is available. e. Credit balance of Rs.10 Lakh is available exclusively for business purpose.

Calculate the credit which will be available to utilize for the month.

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Solution: Total input tax (‘T’): 20 LakhsTax paid in respect of: Inputs and input services to be used exclusively for purposes other than business (‘T1’): 1 lakhInputs and input services intended to be used for effecting exempt supplies (‘T2’): 1 lakh Inputs on which credit is not available under section 17(5) (‘T3’): 2+2=4 lakhs

Input tax credit credited to the electronic credit ledger (‘C1’):C1=20-(1+1+4) =14lakhs

Inputs and input services used exclusively for taxable supply (‘T4’): 10 lakhsCommon credit for taxable as well as exempt supply (‘C2’):

C2 = 14-10=4 lakhsAmount of input tax credit attributable towards exempt supplies i.e. ‘D1’:

D1= (E÷F) × C2 Exempt turnover: 3 cr. Total turnover: 10 cr.

D1= (3/10)*4= 120,000/- Amount of credit attributable to non-business purposes: D2= C2*5%= 4*5/100= 20,000/- Amount of common credit available for utilization: C2-(D1+D2)= 4 lakhs-(1.2+0.2 lakhs)= 2.6 lakhs Total amount available for utilization: 10+2.6=12.60 lakhs

Case Study 2. A company is having turnover of Rs.10 cr., out of which Rs.6 cr. is taxable and Rs.4 cr. is exempt. Besides that company has also invested Rs.20 cr. in securities and also sold off securities of Rs.10 cr. Total input tax credit available is Rs.40 lakhs on its inward supply of goods and services, which includes the following components:

a. Rs.5 lakhs for services availed for non-business purpose. b. Rs.10 lakhs for services availed for exempt supply of services. c. Company has paid GST of Rs.10 lakhs on inward supply of catering services for

employees of the company. d. Credit balance of Rs.10 lakhs were used exclusively for business purpose.

Calculate the eligible amount of credit available with the company to utilize.

Solution:

Total input tax (‘T’): 40 LakhsTax paid in respect of: Inputs and input services to be used exclusively for purposes other than business (‘T1’): 5 lakhsInputs and input services intended to be used for effecting exempt supplies (‘T2’): 10 lakhsInputs on which credit is not available under section 17(5) (‘T3’): 10 lakhs

Input tax credit credited to the electronic credit ledger (‘C1’):C1=40-(5+10+10) =15lakhs

Inputs and input services used exclusively for taxable supply (‘T4’): 10 lakhs

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Common credit for taxable as well as exempt supply (‘C2’): C2 = 15-10=5 lakhs

Amount of input tax credit attributable towards exempt supplies i.e. ‘D1’: D1= (E÷F) × C2

Exempt turnover: 4 cr. plus 1% sale value of securities viz. (10 cr.*1%= 10 lakhs) = 4.1 cr. Total turnover: 10.1 cr.

D1= (4.1/10.1)*5 lakhs = 202,970/- Amount of credit attributable to non-business purposes: D2= C2*5%= 5 lakhs*5/100= 25,000/- Amount of common credit available for utilization: C2-(D1+D2):

500,000 - (202,970+25,000) = 227,970/- Total amount available for utilization: 10 lakhs + 227,970 =12, 27,970/-

B.19 ITC in case of banking/financial/NBFC Whether in case of Banking / Financial/ NBFC, credit have been availed in contravention of section 17(4) of the Act?

Section 17(4)A banking company or a financial institution including a non-banking financial company, engaged in supplying services by way of accepting deposits, extending loans or advances shall have the option to either comply with the provisions of sub-section (2), or avail of, every month, an amount equal to fifty per cent. of the eligible input tax credit on inputs, capital goods and input services in that month and the rest shall lapse:

Provided that the option once exercised shall not be withdrawn during the remaining part of the financial year:

Provided further that the restriction of fifty per cent.shall not apply to the tax paid on supplies made by one registered person to another registered person having the same Permanent Account Number.

This section provides an option to banking sector to opt for a simplified scheme wherein instead of proportional reversal of exempt supplies, they can reverse 50% of credit. It should be checked whether credit is properly classified into proper categories viz. 100% credit is taken in case of services availed from person with same PAN, no credit is taken on inputs used for non-business purposes & blocked credit and 50% is taken on rest.

B.20 Transitional credits Whether as on date of implementation of GST, transition credits have been availed in contravention of Section 139 to 142 of the Act?

Section 140 –Transitional Arrangements for Input Tax Credit1) A registered person, other than a person opting to pay tax under section 10, shall be entitled to take, in his electronic credit ledger, the amount of CENVAT credit carried forward in the

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return relating to the period ending with the day immediately preceding the appointed day, furnished by him under the existing law in such manner as may be prescribed:

Provided that the registered person shall not be allowed to take credit in the following circumstances, namely:—(i) where the said amount of credit is not admissible as input tax credit under this Act; or

(ii) where he has not furnished all the returns required under the existing law for the period of six months immediately preceding the appointed date; or

(iii) where the said amount of credit relates to goods manufactured and cleared under such exemption notifications as are notified by the Government

2) A registered person, other than a person opting to pay tax under section 10, shall be entitled to take, in his electronic credit ledger, credit of the unavailed CENVAT credit in respect of capital goods, not carried forward in a return, furnished under the existing law by him, for the period ending with the day immediately preceding the appointed day in such manner as may be prescribed:

Provided that the registered person shall not be allowed to take credit unless the said credit was admissible as CENVAT credit under the existing law and is also admissible as input tax credit under this Act.

Explanation.––For the purposes of this sub-section, the expression “unavailed CENVAT credit” means the amount that remains after subtracting the amount of CENVAT credit already availed in respect of capital goods by the taxable person under the existing law from the aggregate amount of CENVAT credit to which the said person was entitled in respect of the said capital goods under the existing law.

3) A registered person, who was not liable to be registered under the existing law, or who was engaged in the manufacture of exempted goods or provision of exempted services, or who was providing works contract service and was availing of the benefit of notification No. 26/2012 —Service Tax, dated the 20th June, 2012 or a first stage dealer or a second stage dealer or a registered importer or a depot of a manufacturer, shall be entitled to take, in his electronic credit ledger, credit of eligible duties in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the appointed day subject to the following conditions, namely:––

(i) such inputs or goods are used or intended to be used for making taxable supplies under this Act; (ii) the said registered person is eligible for input tax credit on such inputs under this Act; (iii) the said registered person is in possession of invoice or other prescribed documents evidencing payment of duty under the existing law in respect of such inputs; (iv) such invoices or other prescribed documents were issued not earlier than twelve months immediately preceding the appointed day; and (v) the supplier of services is not eligible for any abatement under this Act:

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Common credit for taxable as well as exempt supply (‘C2’): C2 = 15-10=5 lakhs

Amount of input tax credit attributable towards exempt supplies i.e. ‘D1’: D1= (E÷F) × C2

Exempt turnover: 4 cr. plus 1% sale value of securities viz. (10 cr.*1%= 10 lakhs) = 4.1 cr. Total turnover: 10.1 cr.

D1= (4.1/10.1)*5 lakhs = 202,970/- Amount of credit attributable to non-business purposes: D2= C2*5%= 5 lakhs*5/100= 25,000/- Amount of common credit available for utilization: C2-(D1+D2):

500,000 - (202,970+25,000) = 227,970/- Total amount available for utilization: 10 lakhs + 227,970 =12, 27,970/-

B.19 ITC in case of banking/financial/NBFC Whether in case of Banking / Financial/ NBFC, credit have been availed in contravention of section 17(4) of the Act?

Section 17(4)A banking company or a financial institution including a non-banking financial company, engaged in supplying services by way of accepting deposits, extending loans or advances shall have the option to either comply with the provisions of sub-section (2), or avail of, every month, an amount equal to fifty per cent. of the eligible input tax credit on inputs, capital goods and input services in that month and the rest shall lapse:

Provided that the option once exercised shall not be withdrawn during the remaining part of the financial year:

Provided further that the restriction of fifty per cent.shall not apply to the tax paid on supplies made by one registered person to another registered person having the same Permanent Account Number.

This section provides an option to banking sector to opt for a simplified scheme wherein instead of proportional reversal of exempt supplies, they can reverse 50% of credit. It should be checked whether credit is properly classified into proper categories viz. 100% credit is taken in case of services availed from person with same PAN, no credit is taken on inputs used for non-business purposes & blocked credit and 50% is taken on rest.

B.20 Transitional credits Whether as on date of implementation of GST, transition credits have been availed in contravention of Section 139 to 142 of the Act?

Section 140 –Transitional Arrangements for Input Tax Credit1) A registered person, other than a person opting to pay tax under section 10, shall be entitled to take, in his electronic credit ledger, the amount of CENVAT credit carried forward in the

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return relating to the period ending with the day immediately preceding the appointed day, furnished by him under the existing law in such manner as may be prescribed:

Provided that the registered person shall not be allowed to take credit in the following circumstances, namely:—(i) where the said amount of credit is not admissible as input tax credit under this Act; or

(ii) where he has not furnished all the returns required under the existing law for the period of six months immediately preceding the appointed date; or

(iii) where the said amount of credit relates to goods manufactured and cleared under such exemption notifications as are notified by the Government

2) A registered person, other than a person opting to pay tax under section 10, shall be entitled to take, in his electronic credit ledger, credit of the unavailed CENVAT credit in respect of capital goods, not carried forward in a return, furnished under the existing law by him, for the period ending with the day immediately preceding the appointed day in such manner as may be prescribed:

Provided that the registered person shall not be allowed to take credit unless the said credit was admissible as CENVAT credit under the existing law and is also admissible as input tax credit under this Act.

Explanation.––For the purposes of this sub-section, the expression “unavailed CENVAT credit” means the amount that remains after subtracting the amount of CENVAT credit already availed in respect of capital goods by the taxable person under the existing law from the aggregate amount of CENVAT credit to which the said person was entitled in respect of the said capital goods under the existing law.

3) A registered person, who was not liable to be registered under the existing law, or who was engaged in the manufacture of exempted goods or provision of exempted services, or who was providing works contract service and was availing of the benefit of notification No. 26/2012 —Service Tax, dated the 20th June, 2012 or a first stage dealer or a second stage dealer or a registered importer or a depot of a manufacturer, shall be entitled to take, in his electronic credit ledger, credit of eligible duties in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the appointed day subject to the following conditions, namely:––

(i) such inputs or goods are used or intended to be used for making taxable supplies under this Act; (ii) the said registered person is eligible for input tax credit on such inputs under this Act; (iii) the said registered person is in possession of invoice or other prescribed documents evidencing payment of duty under the existing law in respect of such inputs; (iv) such invoices or other prescribed documents were issued not earlier than twelve months immediately preceding the appointed day; and (v) the supplier of services is not eligible for any abatement under this Act:

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Provided that where a registered person, other than a manufacturer or a supplier of services, is not in possession of an invoice or any other documents evidencing payment of duty in respect of inputs, then, such registered person shall, subject to such conditions, limitations and safeguards as may be prescribed, including that the said taxable person shall pass on the benefit of such credit by way of reduced prices to the recipient, be allowed to take credit at such rate and in such manner as may be prescribed.

4) A registered person, who was engaged in the manufacture of taxable as well as exempted goods under the Central Excise Act, 1944 or provision of taxable as well as exempted services under Chapter V of the Finance Act, 1994, but which are liable to tax under this Act, shall be entitled to take, in his electronic credit ledger,—

a) the amount of CENVAT credit carried forward in a return furnished under the existing law by him in accordance with the provisions of sub-section (1); and b) the amount of CENVAT credit of eligible duties in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the appointed day, relating to such exempted goods or services, in accordance with the provisions of sub-section (3).

5) A registered person shall be entitled to take, in his electronic credit ledger, credit of eligible duties and taxes in respect of inputs or input services received on or after the appointed day but the duty or tax in respect of which has been paid by the supplier under the existing law, subject to the condition that the invoice or any other duty or tax paying document of the same was recorded in the books of account of such person within a period of thirty days from the appointed day:

Provided that the period of thirty days may, on sufficient cause being shown, be extended by the Commissioner for a further period not exceeding thirty days:

Provided further that said registered person shall furnish a statement, in such manner as may be prescribed, in respect of credit that has been taken under this sub-section.

6) A registered person, who was either paying tax at a fixed rate or paying a fixed amount in lieu of the tax payable under the existing law shall be entitled to take, in his electronic credit ledger, credit of eligible duties in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the appointed day subject to the following conditions, namely:––

i. such inputs or goods are used or intended to be used for making taxable supplies under this Act;

ii. the said registered person is not paying tax under section 10; iii. the said registered person is eligible for input tax credit on such inputs under this Act; iv. the said registered person is in possession of invoice or other prescribed documents

evidencing payment of duty under the existing law in respect of inputs; and v. such invoices or other prescribed documents were issued not earlier than twelve

months immediately preceding the appointed day.

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7) Notwithstanding anything to the contrary contained in this Act, the input tax credit on account of any services received prior to the appointed day by an Input Service Distributor shall be eligible for distribution as credit under this Act even if the invoices relating to such services are received on or after the appointed day.

8) Where a registered person having centralized registration under the existing law has obtained a registration under this Act, such person shall be allowed to take, in his electronic credit ledger, credit of the amount of CENVAT credit carried forward in a return, furnished under the existing law by him, in respect of the period ending with the day immediately preceding the appointed day in such manner as may be prescribed:

Provided that if the registered person furnishes his return for the period ending with the day immediately preceding the appointed day within three months of the appointed day, such credit shall be allowed subject to the condition that the said return is either an original return or a revised return where the credit has been reduced from that claimed earlier:

Provided further that the registered person shall not be allowed to take credit unless the said amount is admissible as input tax credit under this Act: Provided also that such credit may be transferred to any of the registered persons having the same Permanent Account Number for which the centralized registration was obtained under the existing law.

9) Where any CENVAT credit availed for the input services provided under the existing law has been reversed due to non-payment of the consideration within a period of three months, such credit can be reclaimed subject to the condition that the registered person has made the payment of the consideration for that supply of services within a period of three months from the appointed day.

10) The amount of credit under sub-sections (3), (4) and (6) shall be calculated in such manner as may be prescribed. Explanation 1.— Contains the meaning of ‘eligible duties’ to define what all credit(s) shall be eligible under GST.

B.21 Exports Whether the registered person is affecting export of goods or services in compliance with the relevant provisions?

Section 16 of the IGST Act: Zero rated supply (1) “zero rated supply” means any of the following supplies of goods or services or both, namely:––

(a) export of goods or services or both; or (b) supply of goods or services or both to a Special Economic Zone developer or a Special Economic Zone unit.

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Provided that where a registered person, other than a manufacturer or a supplier of services, is not in possession of an invoice or any other documents evidencing payment of duty in respect of inputs, then, such registered person shall, subject to such conditions, limitations and safeguards as may be prescribed, including that the said taxable person shall pass on the benefit of such credit by way of reduced prices to the recipient, be allowed to take credit at such rate and in such manner as may be prescribed.

4) A registered person, who was engaged in the manufacture of taxable as well as exempted goods under the Central Excise Act, 1944 or provision of taxable as well as exempted services under Chapter V of the Finance Act, 1994, but which are liable to tax under this Act, shall be entitled to take, in his electronic credit ledger,—

a) the amount of CENVAT credit carried forward in a return furnished under the existing law by him in accordance with the provisions of sub-section (1); and b) the amount of CENVAT credit of eligible duties in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the appointed day, relating to such exempted goods or services, in accordance with the provisions of sub-section (3).

5) A registered person shall be entitled to take, in his electronic credit ledger, credit of eligible duties and taxes in respect of inputs or input services received on or after the appointed day but the duty or tax in respect of which has been paid by the supplier under the existing law, subject to the condition that the invoice or any other duty or tax paying document of the same was recorded in the books of account of such person within a period of thirty days from the appointed day:

Provided that the period of thirty days may, on sufficient cause being shown, be extended by the Commissioner for a further period not exceeding thirty days:

Provided further that said registered person shall furnish a statement, in such manner as may be prescribed, in respect of credit that has been taken under this sub-section.

6) A registered person, who was either paying tax at a fixed rate or paying a fixed amount in lieu of the tax payable under the existing law shall be entitled to take, in his electronic credit ledger, credit of eligible duties in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the appointed day subject to the following conditions, namely:––

i. such inputs or goods are used or intended to be used for making taxable supplies under this Act;

ii. the said registered person is not paying tax under section 10; iii. the said registered person is eligible for input tax credit on such inputs under this Act; iv. the said registered person is in possession of invoice or other prescribed documents

evidencing payment of duty under the existing law in respect of inputs; and v. such invoices or other prescribed documents were issued not earlier than twelve

months immediately preceding the appointed day.

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7) Notwithstanding anything to the contrary contained in this Act, the input tax credit on account of any services received prior to the appointed day by an Input Service Distributor shall be eligible for distribution as credit under this Act even if the invoices relating to such services are received on or after the appointed day.

8) Where a registered person having centralized registration under the existing law has obtained a registration under this Act, such person shall be allowed to take, in his electronic credit ledger, credit of the amount of CENVAT credit carried forward in a return, furnished under the existing law by him, in respect of the period ending with the day immediately preceding the appointed day in such manner as may be prescribed:

Provided that if the registered person furnishes his return for the period ending with the day immediately preceding the appointed day within three months of the appointed day, such credit shall be allowed subject to the condition that the said return is either an original return or a revised return where the credit has been reduced from that claimed earlier:

Provided further that the registered person shall not be allowed to take credit unless the said amount is admissible as input tax credit under this Act: Provided also that such credit may be transferred to any of the registered persons having the same Permanent Account Number for which the centralized registration was obtained under the existing law.

9) Where any CENVAT credit availed for the input services provided under the existing law has been reversed due to non-payment of the consideration within a period of three months, such credit can be reclaimed subject to the condition that the registered person has made the payment of the consideration for that supply of services within a period of three months from the appointed day.

10) The amount of credit under sub-sections (3), (4) and (6) shall be calculated in such manner as may be prescribed. Explanation 1.— Contains the meaning of ‘eligible duties’ to define what all credit(s) shall be eligible under GST.

B.21 Exports Whether the registered person is affecting export of goods or services in compliance with the relevant provisions?

Section 16 of the IGST Act: Zero rated supply (1) “zero rated supply” means any of the following supplies of goods or services or both, namely:––

(a) export of goods or services or both; or (b) supply of goods or services or both to a Special Economic Zone developer or a Special Economic Zone unit.

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(2) Subject to the provisions of sub-section (5) of section 17 of the Central Goods and Services Tax Act, credit of input tax may be availed for making zero-rated supplies; notwithstanding that such supply may be an exempt supply.

(3) A registered person making zero rated supply shall be eligible to claim refund under either of the following options, namely:––

(a) he may supply goods or services or both under bond or Letter of Undertaking, subject to such conditions, safeguards and procedure as may be prescribed, without payment of integrated tax and claim refund of unutilised input tax credit; or (b) he may supply goods or services or both, subject to such conditions, safeguards and procedure as may be prescribed, on payment of integrated tax and claim refund of such tax paid on goods or services or both supplied,

in accordance with the provisions of section 54 of the Central Goods and Services Tax Act or the rules made thereunder.

For the purpose of audit the auditor is required to check whether the registered person has availed the option to supply for export without payment of integrated tax and has paid the tax or vice versa. Further, for the first option of export without payment of integrated tax under bond or letter of undertaking, rule 96A of CGST Rules, the auditor is also required to check whether goods have been exported with in a period of 3 months or further period allowed by commissioner from the date of issue of invoice and in case of export of service whether payment has been received in convertible foreign exchange from the date of issue of invoice.

B.22 Any exemption notifications or special orders applicable to the registered personWhether any exemption notifications or special orders under the Act are applicable to the registered person?

Section 11: Power to grant exemption Where the Government is satisfied that it is necessary in the public interest so to do, it may, on the recommendations of the Council, by notification, exempt generally, either absolutely or subject to such conditions as may be specified therein, goods or services or both of any specified description from the whole or any part of the tax leviable thereon with effect from such date as may be specified in such notification.

Section 2 of the IGST Act:“export of Goods” with its grammatical variations and cognate expressions means taking goods out of India to a place outside India.

“export of services” means the supply of any service when,––(i) the supplier of service is located in India;(ii) the recipient of service is located outside India;(iii) the place of supply of service is outside India;(iv) the payment for such service has been received by the supplier of service in convertible foreign exchange; and(v) the supplier of service and the recipient of service are not merely establishments of a distinct person in accordance with Explanation 1 in section 8;

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Exemption Notification Nature Original Notification No. Amendment Notification No. Dated

Exempted Goods

02/2017-CT(rate) 28-06-201728/2017-CT(rate) 22-09-201735/2017-CT(rate) 13-10-201742/2017-CT(rate) 14-11-201707/2018-CT(rate) 25-01-2018

Nature Original Notification No. Amendment Notification No. Dated

Exempted Services

12/2017-CT(rate) 28-06-201721/2017-CT(rate) 22-08-201725/2017-CT(rate) 21-09-201732/2017-CT(rate) 13-10-201702/2018-CT(rate) 25-01-2018

Section 11 of the CGST Act gives the power to exempt specific services or goods subject to some conditions. Auditor is required to check compliance with the conditions for claiming exemptions and wherever the conditions have not been complied with. The auditor is required to report the same in along with reasons to not to comply with the conditions.

A list of some of the Exemptions available to the registered person has been provided below: Description of service Conditions for availing

exemption

Services by the following persons in respective capacities –(a) business facilitator or a business correspondent to a banking company with respect to accounts in its rural area branch;(b) any person as an intermediary to a business facilitator or a business correspondent with respect to services mentioned in entry (a); or (c) business facilitator or a business correspondent to an insurance company in a rural area.

The person claiming exemption should either be a business facilitator/ correspondent or anintermediary.

Services by an artist by way of a performance in folk or classical art forms of-(a) music, or (b) dance, or

The person claiming exemption should be an artist.

Section 2(47) of the CGST Act:“exempt supply” means supply of any goods or services or both which attracts nil rate of tax or which may be wholly exempt from tax under section 11, or under section 6 of the Integrated Goods and Services Tax Act, and includes non-taxable supply;

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(2) Subject to the provisions of sub-section (5) of section 17 of the Central Goods and Services Tax Act, credit of input tax may be availed for making zero-rated supplies; notwithstanding that such supply may be an exempt supply.

(3) A registered person making zero rated supply shall be eligible to claim refund under either of the following options, namely:––

(a) he may supply goods or services or both under bond or Letter of Undertaking, subject to such conditions, safeguards and procedure as may be prescribed, without payment of integrated tax and claim refund of unutilised input tax credit; or (b) he may supply goods or services or both, subject to such conditions, safeguards and procedure as may be prescribed, on payment of integrated tax and claim refund of such tax paid on goods or services or both supplied,

in accordance with the provisions of section 54 of the Central Goods and Services Tax Act or the rules made thereunder.

For the purpose of audit the auditor is required to check whether the registered person has availed the option to supply for export without payment of integrated tax and has paid the tax or vice versa. Further, for the first option of export without payment of integrated tax under bond or letter of undertaking, rule 96A of CGST Rules, the auditor is also required to check whether goods have been exported with in a period of 3 months or further period allowed by commissioner from the date of issue of invoice and in case of export of service whether payment has been received in convertible foreign exchange from the date of issue of invoice.

B.22 Any exemption notifications or special orders applicable to the registered personWhether any exemption notifications or special orders under the Act are applicable to the registered person?

Section 11: Power to grant exemption Where the Government is satisfied that it is necessary in the public interest so to do, it may, on the recommendations of the Council, by notification, exempt generally, either absolutely or subject to such conditions as may be specified therein, goods or services or both of any specified description from the whole or any part of the tax leviable thereon with effect from such date as may be specified in such notification.

Section 2 of the IGST Act:“export of Goods” with its grammatical variations and cognate expressions means taking goods out of India to a place outside India.

“export of services” means the supply of any service when,––(i) the supplier of service is located in India;(ii) the recipient of service is located outside India;(iii) the place of supply of service is outside India;(iv) the payment for such service has been received by the supplier of service in convertible foreign exchange; and(v) the supplier of service and the recipient of service are not merely establishments of a distinct person in accordance with Explanation 1 in section 8;

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Exemption Notification Nature Original Notification No. Amendment Notification No. Dated

Exempted Goods

02/2017-CT(rate) 28-06-201728/2017-CT(rate) 22-09-201735/2017-CT(rate) 13-10-201742/2017-CT(rate) 14-11-201707/2018-CT(rate) 25-01-2018

Nature Original Notification No. Amendment Notification No. Dated

Exempted Services

12/2017-CT(rate) 28-06-201721/2017-CT(rate) 22-08-201725/2017-CT(rate) 21-09-201732/2017-CT(rate) 13-10-201702/2018-CT(rate) 25-01-2018

Section 11 of the CGST Act gives the power to exempt specific services or goods subject to some conditions. Auditor is required to check compliance with the conditions for claiming exemptions and wherever the conditions have not been complied with. The auditor is required to report the same in along with reasons to not to comply with the conditions.

A list of some of the Exemptions available to the registered person has been provided below: Description of service Conditions for availing

exemption

Services by the following persons in respective capacities –(a) business facilitator or a business correspondent to a banking company with respect to accounts in its rural area branch;(b) any person as an intermediary to a business facilitator or a business correspondent with respect to services mentioned in entry (a); or (c) business facilitator or a business correspondent to an insurance company in a rural area.

The person claiming exemption should either be a business facilitator/ correspondent or anintermediary.

Services by an artist by way of a performance in folk or classical art forms of-(a) music, or (b) dance, or

The person claiming exemption should be an artist.

Section 2(47) of the CGST Act:“exempt supply” means supply of any goods or services or both which attracts nil rate of tax or which may be wholly exempt from tax under section 11, or under section 6 of the Integrated Goods and Services Tax Act, and includes non-taxable supply;

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(c) theatre, if the consideration charged for such performance is not more than one lakh and fifty thousand rupees: Provided that the exemption shall not apply to service provided by such artist as a brand ambassador.Transport of passengers, with or without accompanied belongings, by –(a) air, embarking from or terminating in an airport located in the state of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, or Tripura or at Bagdogra located in West Bengal; (b) non-air conditioned contract carriage other than radio taxi, for transportation of passengers, excluding tourism, conducted tour, charter or hire; or (c) stage carriage other than air conditioned stage carriage.

Exemption shall be available for providing the transport of passengers.

Services by way of-(a) health care services by a clinical establishment, an authorised medical practitioner or para-medics; (b) services provided by way of transportation of a patient in an ambulance, other than those specified in (a) above.

Exemption shall be available for providing services related to health care.

B.23 Compliance of section 18 of CGST Act Whether all the certificate(s) required under the section 18, has / have been obtained?

Section 18 – Availability of credit in special circumstances(1) Subject to such conditions and restrictions as may be prescribed—

(a) a person who has applied for registration under this Act within thirty days from the date on which he becomes liable to registration and has been granted such registration shall be entitled to take credit of input tax in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the day immediately preceding the date from which he becomes liable to pay tax under the provisions of this Act;

(b) a person who takes registration under sub-section (3) of section 25 shall be entitled to take credit of input tax in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the day immediately preceding the date of grant of registration;

Section 25 – Procedure of registration(3) A person, though not liable to be registered under section 22 or section 24 may get himself registered voluntarily, and all provisions of this Act, as are applicable to a registered person, shall apply to such person.

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The auditor needs to check whether registered person has obtained all relevant certificate s as required under section 18 of the CGST Act.

B.24 Job Work Where registered person is the principal, whether tax has been discharged by him in accordance with Section 143 read with Rule 45?

Section 143: Job work procedure 1) A registered person (hereafter in this section referred to as the “principal”) may under intimation and subject to such conditions as may be prescribed, send any inputs or capital goods, without payment of tax, to a job worker for job work and from there subsequently send to another job worker and likewise, and shall,––

a) bring back inputs, after completion of job work or otherwise, or capital goods, other than moulds and dies, jigs and fixtures, or tools, within 1 year and 3 years, respectively, of their being sent out, to any of his place of business, without payment of tax; b) supply such inputs, after completion of job work or otherwise, or capital goods, other than moulds and dies, jigs and fixtures, or tools, within 1 year and 3 years, respectively, of their being sent out from the place of business of a job worker on payment of tax within India, or with or without payment of tax for export, as the case may be:

Provided that the principal shall not supply the goods from the place of business of a job worker in accordance with the provisions of this clause unless the said principal declares the place of business of the job worker as his additional place of business except in a case—

i. where the job worker is registered under section 25; orii. where the principal is engaged in the supply of such goods as may be notified by the

Commissioner.

2) The responsibility for keeping proper accounts for the inputs or capital goods shall lie with the principal.

3) Where the inputs sent for job work are not received back by the principal after completion of job work or otherwise in accordance with the provisions of clause (a) of sub-section (1) or are not supplied from the place of business of the job worker in accordance with the provisions of clause (b) of sub-section (1) within a period of one year of their being sent out, it shall be deemed that such inputs had been supplied by the principal to the job worker on the day when the said inputs were sent out.

4) Where the capital goods, other than moulds and dies, jigs and fixtures, or tools, sent for job work are not received back by the principal in accordance with the provisions of clause (a) of sub-section (1) or are not supplied from the place of business of the job worker in accordance with the provisions of clause (b) of sub-section (1) within a period of 3 years of their being sent out, it shall be deemed that such capital goods had been supplied by the principal to the job worker on the day when the said capital goods were sent out.

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(c) theatre, if the consideration charged for such performance is not more than one lakh and fifty thousand rupees: Provided that the exemption shall not apply to service provided by such artist as a brand ambassador.Transport of passengers, with or without accompanied belongings, by –(a) air, embarking from or terminating in an airport located in the state of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, or Tripura or at Bagdogra located in West Bengal; (b) non-air conditioned contract carriage other than radio taxi, for transportation of passengers, excluding tourism, conducted tour, charter or hire; or (c) stage carriage other than air conditioned stage carriage.

Exemption shall be available for providing the transport of passengers.

Services by way of-(a) health care services by a clinical establishment, an authorised medical practitioner or para-medics; (b) services provided by way of transportation of a patient in an ambulance, other than those specified in (a) above.

Exemption shall be available for providing services related to health care.

B.23 Compliance of section 18 of CGST Act Whether all the certificate(s) required under the section 18, has / have been obtained?

Section 18 – Availability of credit in special circumstances(1) Subject to such conditions and restrictions as may be prescribed—

(a) a person who has applied for registration under this Act within thirty days from the date on which he becomes liable to registration and has been granted such registration shall be entitled to take credit of input tax in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the day immediately preceding the date from which he becomes liable to pay tax under the provisions of this Act;

(b) a person who takes registration under sub-section (3) of section 25 shall be entitled to take credit of input tax in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the day immediately preceding the date of grant of registration;

Section 25 – Procedure of registration(3) A person, though not liable to be registered under section 22 or section 24 may get himself registered voluntarily, and all provisions of this Act, as are applicable to a registered person, shall apply to such person.

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The auditor needs to check whether registered person has obtained all relevant certificate s as required under section 18 of the CGST Act.

B.24 Job Work Where registered person is the principal, whether tax has been discharged by him in accordance with Section 143 read with Rule 45?

Section 143: Job work procedure 1) A registered person (hereafter in this section referred to as the “principal”) may under intimation and subject to such conditions as may be prescribed, send any inputs or capital goods, without payment of tax, to a job worker for job work and from there subsequently send to another job worker and likewise, and shall,––

a) bring back inputs, after completion of job work or otherwise, or capital goods, other than moulds and dies, jigs and fixtures, or tools, within 1 year and 3 years, respectively, of their being sent out, to any of his place of business, without payment of tax; b) supply such inputs, after completion of job work or otherwise, or capital goods, other than moulds and dies, jigs and fixtures, or tools, within 1 year and 3 years, respectively, of their being sent out from the place of business of a job worker on payment of tax within India, or with or without payment of tax for export, as the case may be:

Provided that the principal shall not supply the goods from the place of business of a job worker in accordance with the provisions of this clause unless the said principal declares the place of business of the job worker as his additional place of business except in a case—

i. where the job worker is registered under section 25; orii. where the principal is engaged in the supply of such goods as may be notified by the

Commissioner.

2) The responsibility for keeping proper accounts for the inputs or capital goods shall lie with the principal.

3) Where the inputs sent for job work are not received back by the principal after completion of job work or otherwise in accordance with the provisions of clause (a) of sub-section (1) or are not supplied from the place of business of the job worker in accordance with the provisions of clause (b) of sub-section (1) within a period of one year of their being sent out, it shall be deemed that such inputs had been supplied by the principal to the job worker on the day when the said inputs were sent out.

4) Where the capital goods, other than moulds and dies, jigs and fixtures, or tools, sent for job work are not received back by the principal in accordance with the provisions of clause (a) of sub-section (1) or are not supplied from the place of business of the job worker in accordance with the provisions of clause (b) of sub-section (1) within a period of 3 years of their being sent out, it shall be deemed that such capital goods had been supplied by the principal to the job worker on the day when the said capital goods were sent out.

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5) Notwithstanding anything contained in sub-sections (1) and (2), any waste and scrap generated during the job work may be supplied by the job worker directly from his place of business on payment of tax, if such job worker is registered, or by the principal, if the job worker is not registered.

Explanation.––For the purposes of job work, input includes intermediate goods arising from any treatment or process carried out on the inputs by the principal or the job worker.

Rule 45: Conditions and restrictions in respect of inputs and capital goods sent to the job worker

(1)The inputs, semi-finished goods or capital goods shall be sent to the job worker under the cover of a challan issued by the principal, including where such goods are sent directly to a job-worker, [and where the goods are sent from one job worker to another job worker, the challan may be issued either by the principal or the job worker sending the goods to another job worker.

Provided that the challan issued by the principal may be endorsed by the job worker, indicating therein the quantity and description of goods where the goods are sent by one job worker to another or are returned to the principal:

Provided further that the challan endorsed by the job worker may be further endorsed by another job worker, indicating therein the quantity and description of goods where the goods are sent by one job worker to another or are returned to the principal. (2) The challan issued by the principal to the job worker shall contain the details specified in rule 55.

(3) The details of challans in respect of goods dispatched to a job worker or received from a job worker or sent from one job worker to another during a quarter shall be included in FORM GST ITC-04furnished for that period on or before the twenty-fifth day of the month succeeding the said quarter[or within such further period as may be extended by the Commissioner by a notification in this behalf.

(4) Where the inputs or capital goods are not returned to the principal within the time stipulated in section 143, it shall be deemed that such inputs or capital goods had been supplied by the principal to the job worker on the day when the said inputs or capital goods were sent out and the said supply shall be declared in FORM GSTR-1 and the principal shall be liable to pay the tax along with applicable interest.

The auditor needs to check whether: registered person is a principal in terms of section 143 of the CGST Act and is

complying with the relevant provisions;

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goods have been received back or supplied from the premises of job worker with in the prescribed limit of 1 year and 3 years respectively;

B.25 Returns and other forms Whether the registered person has duly filed the relevant returns/forms within the prescribed period of time?

Following is the list of returns along with due date (as per law) which the registered person is required to file during the period covered under audit. However, extension of date has been granted many times during the relevant period

Type of return Periodicity Due DateGSTR-1 Monthly / Quarterly 10th day of following month/quarterGSTR-3B Monthly 20th day of following month

In respect of returns, the auditor is required to observe whether the above returns for the relevant period have been duly within the prescribed time in accordance with notifications issued for extension of due date of filing of returns.

The auditor is also required to check if other forms wherever applicable, like ITC 01, ITC 02, ITC 03, ITC 04, GST TRAN 01 and GST TRAN 02 have been duly filed within the due date or extended due date, if any.

B.26 Payments - Electronic cash ledger and Electronic credit ledger [Section 49 (1&2)]Whether there are any mismatches between the electronic cash ledger and electronic credit ledger with respect to records/books of accounts?

Payment of tax liability under GST can be made through two modes –Electronic Credit Ledger – The liability of tax on outward supplies can be set off through utilisation of Input tax credit as self-assessed in the return of the registered person.

Electronic Cash Ledger – The liability of tax on outward supplies remaining after utilistation of the available credit balance shall be credited to the electronic cash ledger of such person. Such deposit made towards tax, interest, penalty, fee or any other amount by a person can be made through internet banking or by using credit or debit cards or National Electronic Fund Transfer or Real Time Gross Settlement.

B.27 Liability of Interest on Delayed Payment of Taxes and in case of undue or excess claim of Input Tax Credit Whether any interest is payable on delayed payment of taxes and the same has been remitted?

Section 50: Interest on delayed payment of tax 1) Every person who is liable to pay tax in accordance with the provisions of this Act or the rules made thereunder, but fails to pay the tax or any part thereof to the Government within the

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5) Notwithstanding anything contained in sub-sections (1) and (2), any waste and scrap generated during the job work may be supplied by the job worker directly from his place of business on payment of tax, if such job worker is registered, or by the principal, if the job worker is not registered.

Explanation.––For the purposes of job work, input includes intermediate goods arising from any treatment or process carried out on the inputs by the principal or the job worker.

Rule 45: Conditions and restrictions in respect of inputs and capital goods sent to the job worker

(1)The inputs, semi-finished goods or capital goods shall be sent to the job worker under the cover of a challan issued by the principal, including where such goods are sent directly to a job-worker, [and where the goods are sent from one job worker to another job worker, the challan may be issued either by the principal or the job worker sending the goods to another job worker.

Provided that the challan issued by the principal may be endorsed by the job worker, indicating therein the quantity and description of goods where the goods are sent by one job worker to another or are returned to the principal:

Provided further that the challan endorsed by the job worker may be further endorsed by another job worker, indicating therein the quantity and description of goods where the goods are sent by one job worker to another or are returned to the principal. (2) The challan issued by the principal to the job worker shall contain the details specified in rule 55.

(3) The details of challans in respect of goods dispatched to a job worker or received from a job worker or sent from one job worker to another during a quarter shall be included in FORM GST ITC-04furnished for that period on or before the twenty-fifth day of the month succeeding the said quarter[or within such further period as may be extended by the Commissioner by a notification in this behalf.

(4) Where the inputs or capital goods are not returned to the principal within the time stipulated in section 143, it shall be deemed that such inputs or capital goods had been supplied by the principal to the job worker on the day when the said inputs or capital goods were sent out and the said supply shall be declared in FORM GSTR-1 and the principal shall be liable to pay the tax along with applicable interest.

The auditor needs to check whether: registered person is a principal in terms of section 143 of the CGST Act and is

complying with the relevant provisions;

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goods have been received back or supplied from the premises of job worker with in the prescribed limit of 1 year and 3 years respectively;

B.25 Returns and other forms Whether the registered person has duly filed the relevant returns/forms within the prescribed period of time?

Following is the list of returns along with due date (as per law) which the registered person is required to file during the period covered under audit. However, extension of date has been granted many times during the relevant period

Type of return Periodicity Due DateGSTR-1 Monthly / Quarterly 10th day of following month/quarterGSTR-3B Monthly 20th day of following month

In respect of returns, the auditor is required to observe whether the above returns for the relevant period have been duly within the prescribed time in accordance with notifications issued for extension of due date of filing of returns.

The auditor is also required to check if other forms wherever applicable, like ITC 01, ITC 02, ITC 03, ITC 04, GST TRAN 01 and GST TRAN 02 have been duly filed within the due date or extended due date, if any.

B.26 Payments - Electronic cash ledger and Electronic credit ledger [Section 49 (1&2)]Whether there are any mismatches between the electronic cash ledger and electronic credit ledger with respect to records/books of accounts?

Payment of tax liability under GST can be made through two modes –Electronic Credit Ledger – The liability of tax on outward supplies can be set off through utilisation of Input tax credit as self-assessed in the return of the registered person.

Electronic Cash Ledger – The liability of tax on outward supplies remaining after utilistation of the available credit balance shall be credited to the electronic cash ledger of such person. Such deposit made towards tax, interest, penalty, fee or any other amount by a person can be made through internet banking or by using credit or debit cards or National Electronic Fund Transfer or Real Time Gross Settlement.

B.27 Liability of Interest on Delayed Payment of Taxes and in case of undue or excess claim of Input Tax Credit Whether any interest is payable on delayed payment of taxes and the same has been remitted?

Section 50: Interest on delayed payment of tax 1) Every person who is liable to pay tax in accordance with the provisions of this Act or the rules made thereunder, but fails to pay the tax or any part thereof to the Government within the

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period prescribed, shall for the period for which the tax or any part thereof remains unpaid, pay, on his own, interest at such rate, not exceeding eighteen per cent., as may be notified by the Government on the recommendations of the Council.

2) The interest under sub-section (1) shall be calculated, in such manner as may be prescribed, from the day succeeding the day on which such tax was due to be paid.

3) A taxable person who makes an undue or excess claim of input tax credit under sub-section (10) of section 42 or undue or excess reduction in output tax liability under sub-section (10) of section 43, shall pay interest on such undue or excess claim or on such undue or excess reduction, as the case may be, at such rate not exceeding twenty-four per cent., as may be notified by the Government on the recommendations of the Council.

Whether in any case tax has been collected by the registered person but not deposited with the Government? [Section 73 (9&11)]

Penalty shall be payable where any amount of self-assessed tax or any amount collected as tax has not been paid within a period of thirty days from the due date of payment of such tax.

The amount of tax, interest and a penalty shall be equivalent to ten per cent. of tax or ten thousand rupees, whichever is higher, due from the person chargeable to pay tax.

The auditor is required to examine whether:

there is any difference between electronic cash ledger and electronic credit ledger with respect to books of account;

interest is payable on delayed payment of taxes and the same has been remitted periodically;

tax has been collected from the recipient and has not been deposited with the Government.

B.28 Miscellaneous The auditor needs to check various other aspects as mentioned below; which are not covered above:

In respect of registration, whether the person has registered in all such states where the place of business is established?

Whether the registered person has claimed any transition credit as well as refunds under the erstwhile laws.

Whether the registered person is in possession of document issued by Input Service Distributor for the purpose of availment of credit? Whether document raised by ISD contains all particulars as prescribed?

Whether the basis of distribution viz. turnover of preceding financial year or last quarter, as the case may be is appropriately implied or not?

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Where the registered person is eligible for refund under Section 54 of the Act, specify under which cases refund has been claimed?

Whether the registered person has issued the relevant documents like tax invoice, invoice in case of RCM, bill of supply, receipt voucher, refund voucher, payment voucher, credit note, debit note, delivery challan etc. in accordance with the relevant provisions of the act and rules framed thereunder:

Whether e-waybills (intra-state, if any) are applicable in case of movement of goods caused by the registered person during the period under audit? If yes, whether all the movements have been caused using proper e-waybills, wherever applicable?

B.29 GSTR-9 and GSTR-9C GSTR-9 is annual return, required to be furnished under section 44(1) of the CGST Act by every registered person, other than an Input Service Distributor, a person paying tax under section 51 or section 52, a casual taxable person and a non-resident taxable person.

GSTR-9C is audit report along with reconciliation statement required to be certified by the appointed auditors for registered persons liable for GST Audit.

Format of Annual Return viz. Form GSTR-9 and Reconciliation Statement & Certification viz. Form GSTR-9C has been introduced by Government of India vide NN 39/2018-CT dated 4th

September, 2018 and NN 49/2018-CT dated 13th September, 2018.

Form GSTR-9 & GSTR-9C along with instruction as per Government and author’s point of view have been compiled here for better understanding.

However, “Author cannot be held responsible for any action taken on the basis of Author’s opinion. This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. Further, some confusion persists as regards to certain issues for which clarification is required from the government and thus, changes will be required in Author’s opinion as well depending on such clarification.”

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period prescribed, shall for the period for which the tax or any part thereof remains unpaid, pay, on his own, interest at such rate, not exceeding eighteen per cent., as may be notified by the Government on the recommendations of the Council.

2) The interest under sub-section (1) shall be calculated, in such manner as may be prescribed, from the day succeeding the day on which such tax was due to be paid.

3) A taxable person who makes an undue or excess claim of input tax credit under sub-section (10) of section 42 or undue or excess reduction in output tax liability under sub-section (10) of section 43, shall pay interest on such undue or excess claim or on such undue or excess reduction, as the case may be, at such rate not exceeding twenty-four per cent., as may be notified by the Government on the recommendations of the Council.

Whether in any case tax has been collected by the registered person but not deposited with the Government? [Section 73 (9&11)]

Penalty shall be payable where any amount of self-assessed tax or any amount collected as tax has not been paid within a period of thirty days from the due date of payment of such tax.

The amount of tax, interest and a penalty shall be equivalent to ten per cent. of tax or ten thousand rupees, whichever is higher, due from the person chargeable to pay tax.

The auditor is required to examine whether:

there is any difference between electronic cash ledger and electronic credit ledger with respect to books of account;

interest is payable on delayed payment of taxes and the same has been remitted periodically;

tax has been collected from the recipient and has not been deposited with the Government.

B.28 Miscellaneous The auditor needs to check various other aspects as mentioned below; which are not covered above:

In respect of registration, whether the person has registered in all such states where the place of business is established?

Whether the registered person has claimed any transition credit as well as refunds under the erstwhile laws.

Whether the registered person is in possession of document issued by Input Service Distributor for the purpose of availment of credit? Whether document raised by ISD contains all particulars as prescribed?

Whether the basis of distribution viz. turnover of preceding financial year or last quarter, as the case may be is appropriately implied or not?

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Where the registered person is eligible for refund under Section 54 of the Act, specify under which cases refund has been claimed?

Whether the registered person has issued the relevant documents like tax invoice, invoice in case of RCM, bill of supply, receipt voucher, refund voucher, payment voucher, credit note, debit note, delivery challan etc. in accordance with the relevant provisions of the act and rules framed thereunder:

Whether e-waybills (intra-state, if any) are applicable in case of movement of goods caused by the registered person during the period under audit? If yes, whether all the movements have been caused using proper e-waybills, wherever applicable?

B.29 GSTR-9 and GSTR-9C GSTR-9 is annual return, required to be furnished under section 44(1) of the CGST Act by every registered person, other than an Input Service Distributor, a person paying tax under section 51 or section 52, a casual taxable person and a non-resident taxable person.

GSTR-9C is audit report along with reconciliation statement required to be certified by the appointed auditors for registered persons liable for GST Audit.

Format of Annual Return viz. Form GSTR-9 and Reconciliation Statement & Certification viz. Form GSTR-9C has been introduced by Government of India vide NN 39/2018-CT dated 4th

September, 2018 and NN 49/2018-CT dated 13th September, 2018.

Form GSTR-9 & GSTR-9C along with instruction as per Government and author’s point of view have been compiled here for better understanding.

However, “Author cannot be held responsible for any action taken on the basis of Author’s opinion. This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. Further, some confusion persists as regards to certain issues for which clarification is required from the government and thus, changes will be required in Author’s opinion as well depending on such clarification.”

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FORM GSTR-9 FORM GSTR-9: Annual Return

Pt. I Basic Details1 Financial Year <auto-populated>2 GSTIN <auto-populated>

3A Legal Name <auto-populated>3B Trade Name (if any) <auto-populated>

Pt. II Details of Outward and inward supplies declared during the financial year

4Details of advances, inward and outward supplies on which tax is payable as declared in

returns filed during the financial yearColumn Heading Instructions as per government Author's interpretation

ASupplies made to un-registered persons (B2C)

This column requires to provide aggregate value of supplies made to consumers and unregistered persons on which tax has been paid. These will include details of supplies made through E-Commerce operators and are to be declared as net of credit notes or debit notes issued in this regard. Table 5, Table 7 along with respective amendments. (Refer Table 9 and Table 10 of FORM GSTR-1)

All the B2C (registered to unregistered) supplies during the period declared in GSTR 1 of the month in July 2017 to March 2018 (net of amendments, debit notes and credit notes) should be declared here. However, Amendments, debit notes and credit notes shown in return of April to September of next financial year should not be taken in this figure. Source table in GSTR 1 would be Table 7 (For B2CS), Table 5 (B2CL), Table 9B (debit/credit notes of B2CL), Table 10 (amendment to B2CS supplies).

BSupplies made to registered persons (B2B)

It entails to provide aggregate value of supplies (without taking impact of credit note and debit note issued) made to registered persons including supplies made to UINs (and excluding supplies on which tax is to be paid under RCM) on which tax has been paid and supplies made through E-Commerce operators. (Refer Table 4A and Table 4C of FORM GSTR-1)

All the B2B (registered to registered) supplies during the period declared in GSTR 1 of the month in July 2017 to March 2018 (without effects of amendments, debit notes and credit notes) should be declared here. Source table in GSTR 1 would be Table 4A. Table 4C was not applicable during FY 2017-18 as TCS was not notified during this period. If invoices pertaining to months up to March were declared later in Table 4A of GSTR 1 of month of April to September, it shall not be shown here.

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C

Zero rated supply (Export) on payment of tax (except supplies to SEZs)

Aggregate value of exports (except supplies made to SEZs) which are made on payment of IGST shall be declared here. (Refer Table 6A of FORM GSTR-1)

Aggregate value of exports with payment of IGST shall be declared here. Supplies made to SEZs would not be included here. Source table in GSTR 1 would be 6A.

D Supply to SEZs on payment of tax

Aggregate value of supplies to SEZs on which tax has been paid shall be provided here. (Table 6B of GSTR-1)

Aggregate value of supplies to SEZs with payment of IGST shall be provided here. Source table in GSTR 1 would be 6B.

E Deemed Exports

It requires to provide aggregate value of supplies in the nature of deemed exports on which tax has been paid. (Refer: Table 6C of FORM GSTR-1)

It requires to provide aggregate value of supplies in the nature of deemed exports (under section 147 of the CGST Act read with NN 48/2017-CT dated 18.10.2017) made on payment of tax. Following are the supplies notified as Deemed Exports:1. Supply of goods by a registered person against Advance Authorization2. Supply of capital goods by a registered person against Export Promotion Capital Goods Authorization3. Supply of goods by a registered person to Export Oriented Unit4. Supply of gold by a bank or Public Sector Undertaking specified in the notification No. 50/2017-Customs, dated the 30th June, 2017 (as amended) against Advance Authorization.Source table in GSTR 1 would be 6C.

F

Advances on which tax has been paid but invoice has not been issued (not covered under (A) to (E) above)

Details of all unadjusted advances i.e. advance has been received and tax has been paid but invoice has not been issued in the current year shall be declared here. Table 11A of FORM GSTR-1 may be used for filling up these details.

Particulars of all unsettled advances i.e. advance received in current year and tax has been paid on receipt of advance in accordance with Time of supply provisions as per Section 12 and 13 but invoice has not been issued in the current year shall be declared here. Source table in GSTR 1 would be 11A net of 11B (advance adjusted) and 9B (refund voucher).

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G

Inward supplies on which tax is to be paid on reverse charge basis

Aggregate value of all inward supplies (including advances and net of credit and debit notes) on which tax is to be paid by the recipient (i.e.by the person filing the annual return) on reverse charge basis under section 9(3) and 9(4) of the CGST Act. This shall include aggregate value of all import of services. (Refer: Table 3.1(d) of FORM GSTR-3B)

Aggregate value of all inward supplies (including advances and net of credit and debit notes) on which tax is payable under reverse charge u/s 9(3) and 9(4) of the CGST Act. This shall include aggregate value of all import of services but not import of goods. Source return would be GSTR 3B because details of inward supplies are not captured in GSTR 1. Further, GSTR 2 which captures such details is not yet operational for filing. Source table in GSTR 3B would be 3.1(d).

H Sub-total (A to G above)

I

Credit Notes issued in respect of transactions specified in (B) to (E) above (-)

Aggregate value of credit notes issued upto 31st March in respect of B to B supplies (4B), exports (4C), supplies to SEZs (4D) and deemed exports (4E) shall be declared here. (Refer: Table 9B of FORM GSTR-1)

Aggregate value of credit notes issued upto 31st March in respect of B2B supplies (4B), exports (4C), supplies to SEZs (4D) and deemed exports (4E) shall be declared here. Source table in GSTR 1 would be 9B (credit notes). Credit note in respect of B2C transaction shall not be considered here. This shall not include credit notes issued in respect of invoices issued before GST regime. Further, credit notes shown in return of April to September of next financial year should not be taken in this figure.

J

Debit Notes issued in respect of transactions specified in (B) to (E) above (+)

Aggregate value of debit notes issued upto 31st March in respect of B to B supplies (4B), exports (4C), supplies to SEZs (4D) and deemed exports (4E) shall be declared here. (Refer: Table 9B of FORM GSTR-1)

Aggregate value of debit notes issued upto 31st March in respect of B2B supplies (4B), exports (4C), supplies to SEZs (4D) and deemed exports (4E) shall be declared here. Source table in GSTR 1 would be 9B (debit notes). Debit note in respect of B2C transaction shall not be considered here. This shall not include debit notes issued in respect of invoices issued before GST regime. Further, debit notes shown in

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return of April to September of next financial year should not be taken in this figure.

KSupplies/tax declared through Amendments (+)

Details of amendments made to B to B supplies (4B), exports (4C), supplies to SEZs (4D) and deemed exports (4E), credit notes (4I), debit notes (4J) and refund vouchers shall be declared here. Table 9A and Table 9C of FORM GSTR-1 may be used for filling up these details.

This column requires to provide amendments made (upto 31st March) to B2B supplies (4B), exports (4C), supplies to SEZs (4D) and deemed exports (4E), credit notes (4I), debit notes (4J) and refund vouchers which increase the value of supply or tax. Only the amount of addition in the value is to be mentioned here. Source table in GSTR 1 would be 9A (invoice amendment) and 9C (amendment of documents in 9B). Further, amendments shown in return of April to september of nextfinancial year should not be taken in this figure.

LSupplies/tax reduced through Amendments (-)

This column requires to provide amendments made (upto 31st March) to B2B supplies (4B), exports (4C), supplies to SEZs (4D) and deemed exports (4E), credit notes (4I), debit notes (4J) and refund vouchers shall be declared here which reduce the value of supply or tax. Only the amount of reduction in the value is to be mentioned here. Source table in GSTR 1 would be 9A(invoice amendment) and 9C (amendment of documents in 9B). Further, amendments shown in return of April to September of next financial year should not be taken in this figure.

M Sub-total (I to L above)

NSupplies and advances on which tax is to be paid (H + M) above

This figure would be auto-populated. It is Total taxable turnover during the year. Reconciliation in GSTR 9C between books of accounts is made with this figure only for

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taxable turnover.

5Details of Outward supplies on which tax is not payable as declared in returns filed during

the financial yearColumn Heading Instructions as per government Author's interpretation

AZero rated supply (Export) without payment of tax

Aggregate value of exports (except supplies to SEZs) made without payment of tax shall be provided here. (Refer: Table 6A of FORM GSTR-1)

Aggregate value of exports without payment of IGST shall be declared here. Supplies made to SEZs would not be included here. Source table in GSTR 1 would be 6A. This column contains all those supplies on which tax is not payable by supplier.

BSupply to SEZs without payment of tax

Aggregate value of supplies to SEZs made without payment of tax shall be declared here. (Refer: Table 6B of GSTR-1)

Aggregate value of supplies to SEZs without payment of IGST shall be provided here. Source table in GSTR 1 would be 6B.

C

Supplies on which tax is to be paid by the recipient on reverse charge basis

Aggregate value of supplies made to registered persons on which tax is payable by the recipient on reverse charge basis without considering effect of debit and credit note issued, if any. Details of debit and credit notes are to be mentioned separately. (Refer: Table 4B of FORM GSTR-1)

This column shall include aggregate value of supplies made to registered persons covered u/s 9(3) of CGST Act without considering effect of debit and credit note issued, if any. Details of debit and credit notes are to be mentioned separately. Source table in GSTR 1 would be 4B.

D Exempted

In column D, E and F, total value of exempted, Nil Rated and Non-GST supplies shall be declared. (Refer: Table 8 of FORM GSTR-1) The value of “no supply” as per Schedule III to section 7 shall also be declared here.

In these columns D, E and F, total value of exempted and Nil Rated (Section 11) and Non-GST supplies (Outside Section 9) shall be declared as per Table 8 of GSTR-1. As per instructions, value of “no supply” as per Schedule III shall also be declared here but it is not clear as to in which column it should be shown. In absence of any clarification, it would be better to show in in Col. F (Non-GST supply)

E Nil Rated

F Non-GST supply

G Sub-total (A to F above)

H

Credit Notes issued in respect of transactions specified in A to F above (-)

Aggregate value of credit notes issued in respect of supplies declared in 5A, 5B, 5C, 5D, 5E and 5F shall be declared here. (Refer:

Aggregate value of credit notes issued in respect of supplies declared in 5A, 5B, 5C, 5D, 5E and 5F shall be declared here.

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Table 9B of FORM GSTR-1) Source table in GSTR 1 would be 9B. This shall not include credit notes issued in respect of invoices issued before GST regime. Further, credit notes shown in return of April to September of next financial year should not be taken in this figure.

I

Debit Notes issued in respect of transactions specified in A to F above (+)

Aggregate value of debit notes issued in respect of supplies declared in 5A, 5B, 5C, 5D, 5E and 5F shall be declared here. (Refer: Table 9B of FORM GSTR-1)

Aggregate value of debit notes issued in respect of supplies declared in 5A, 5B, 5C, 5D, 5E and 5F shall be declared here. Source table in GSTR 1 would be 9B. This shall not include debit notes issued in respect of invoices issued before GST regime. Further, debit notes shown in return of April to September of next financial year should not be taken in this figure.

JSupplies declared through Amendments (+)

Particulars of amendments made (upto 31st March) to exports and supplies to SEZs on which tax has not been paid shall be provided here. (Refer: Table 9A and Table 9C of FORM GSTR-1)

Particulars of amendments made (upto 31st March) to exports and supplies to SEZs without amendment shall be provided here. Source table in GSTR 1 would be 9A (invoice amendment) and 9C (amendment of documents in 9B). Further, amendments shown in return of April to September of next financial year should be taken in this figure.

KSupplies reduced through Amendments (-)

L Sub-Total (H to K above)

MTurnover on which tax is not to be paid (G + L above)

NTotal Turnover (including advances) (4N + 5M - 4G above)

Total turnover including the sum of all the supplies (with additional supplies and amendments) on which tax is payable and tax is not payable shall be declared here. This shall also include amount of advances on which tax is paid but invoices have not been issued in the current year. However, this shall not include the aggregate

This figure would be auto-populated. It is Total turnover during the year. Reconciliation in GSTR 9C between books of accounts is made with this figure only. This shall also include amount of advances on which tax is paid but invoices have not been issued in the current year. However, this

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value of inward supplies on which tax is paid by the recipient (i.e. by the person filing the annual return) on reverse charge basis.

shall not include the aggregate value of inward supplies on which tax is paid by the recipient (i.e. by the person filing the annual return) on reverse charge basis.

Pt. III (6)

Details of ITC availed as declared in returns filed during the financial year

Column Heading Instructions as per government Author's interpretation

A

Total amount of input tax credit availed through FORM GSTR-3B (sum total of Table 4A of FORM GSTR-3B)

Total input tax credit availed in Table 4A of FORM GSTR-3B for the taxpayer would be auto-populated here.

Total input tax credit availed in Table 4A of FORM GSTR-3B for the taxpayer would be auto-populated here.

B

Inward supplies (other than imports and inward supplies liable to reverse charge but includes services received from SEZs)

Aggregate value of input tax credit availed on all inward supplies except those on which tax is payable on reverse charge basis but includes supply of services received from SEZs shall be declared here. It may be noted that the total ITC availed is to be classified as ITC on inputs, capital goods and input services. (Refer: Table 4(A)(5) of FORM GSTR-3B).Note: This shall not include ITC which was availed, reversed and then reclaimed in the ITC ledger. This is to be declared separately under 6(H) below.

It needs to be bifurcated in to Inputs, input services and Capital goods.

Aggregate value of ITC availed on all normal inward supplies i.e. inward supplies excluding those on which tax is payable on reverse charge basis, import of goods, input credit from ISD. It includes supply of services received from SEZs (as it not covered under RCM). Categorization into ITC on inputs, capital goods and input services is required in this return which will not be available from GSTR 3B. So GSTR 3B working should properly contain such categorization. Source column would be Table 4(A)(5) of GSTR 3B.

C

Inward supplies received from unregistered persons liable to reverse charge (other than B above) on which tax is paid & ITC availed

Aggregate value of input tax credit availed on all inward supplies received from unregistered persons (other than import of services) on which tax is payable on reverse charge basis shall be declared here. It may be noted that the total ITC availed is to be classified as ITC on inputs, capital goods and input services. Table 4(A)(3) of FORM GSTR-3B may be used for filling up these details.

Aggregate value of ITC availed on all inward supplies received from unregistered persons (other than import of services) on which tax is payable on reverse charge basis shall be declared here. It will include:1. Supplies as per section 9(4) for the period 01.07.2017 to 12.10.2017 (as 9(4) was not applicable after that period); and2. Supplies from unregistered persons specified in Sec 9(3)

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for whole year.It also requires categorizationinto ITC on inputs, capital goods and input services. Source Table would be Table 4(A) (3) of GSTR 3B.

D

Inward supplies received from registered persons liable to reverse charge (other than B above) on which tax is paid and ITC availed

Aggregate value of input tax credit availed on all inward supplies received from registered persons on which tax is payable on reverse charge basis as per section 9(3) shall be declared here. It may be noted that the total ITC availed is to be classified as ITC on inputs, capital goods and input services. (Refer: Table 4(A)(3) of FORM GSTR-3B).It needs to be bifurcated in to Inputs, input services and Capital goods.

Aggregate value of input tax credit availed on all inward supplies from registered persons specified in Sec 9(3) on which tax is payable on reverse charge basis. It also requires categorization into ITC on inputs, capital goods and input services. Source Table would be Table 4(A) (3) of GSTR 3B.

EImport of goods (including supplies from SEZs)

Aggregate value of input tax credit availed on all inward supplies received from registered persons on which tax is payable on reverse charge basis shall be declared here. It may be noted that the total ITC availed is to be classified as ITC on inputs, capital goods and input services. Table 4(A)(3) of FORM GSTR-3B may be used for filling up these details.

Details of input tax credit availed on import of goods including supply of goods received from SEZs shall be declared here. It may be noted that the total ITC availed is to be classified as ITC on inputs and capital goods. (Refer: Table 4(A)(1) of FORM GSTR-3B).

FImport of services (excluding inward supplies from SEZs)

Details of input tax credit availed on import of services (excluding inward supplies from SEZs) shall be declared here. (Refer: Table 4(A)(2) of FORM GSTR-3B)

Details of input tax credit availed on import of services (excluding inward supplies from SEZs) shall be declared here. (Refer: Table 4(A)(2) of FORM GSTR-3B)

G Input Tax credit received from ISD

Aggregate value of input tax credit received from input service distributor shall be declared here. (Refer: Table 4(A)(4) of FORM GSTR-3B)

Aggregate value of input tax credit received from input service distributor shall be declared here. (Refer: Table 4(A)(4) of FORM GSTR-3B)

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H

Amount of ITC reclaimed (other than B above) under the provisions of the Act

Aggregate value of input tax credit availed, reversed and reclaimed under the provisions of the Act shall be declared here.

Aggregate value of input tax credit availed, reversed and reclaimed under 2nd proviso to Section 16(2) read with Rule 37 of CGST Rules shall be declared here.

E.g. During July 2017 to March 2018, total ITC availed was Rs.100. Out of that credit reversed as per Rule 37 was Rs.30 which was shown in Table 4(B)(2) of GSTR 3B. Out of the amount reversed, payment for amount pertaining to credit of Rs.20 was made in March itself and such credit was reclaimed in Table 4(A)(5). Now in 6(A), amount getting auto-populated would be Rs.120 (Rs.100 original + Rs.20 reclaimed as both amount are shown in Table 4(A)(5).In 6(B), Rs.100 would be shown i.e. original availment and in this column (i.e. 6(H)), Rs.20 i.e. amount claimed, reversed and reclaimed would come here. The amount reversed but not reclaimed (i.e. Rs.10) would be shown in 7(A).

I Sub-total (B to H above)

J Difference (I - Aabove)

The difference between the total amount of input tax credit availed through FORM GSTR-3B and input tax credit declared in row B to H shall be declared here. Ideally, this amount should be zero.

The difference between the total amount of input tax credit availed through FORM GSTR-3B and input tax credit declared in row B to H shall be declared here. Ideally, this amount should be zero.

K

Transition Credit through TRAN-I(including revisions if any)

Details of transition credit received in the electronic credit ledger on filing of FORM GST TRAN-Iincluding revision of TRAN-I(whether upwards or downwards), if any shall be declared here.

Details of transition credit received in the electronic credit ledger on filing of FORM GST TRAN-I including revision of TRAN-I (whether upwards or downwards), if any shall be declared here.

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L Transition Credit through TRAN-II

Details of transition credit received in the electronic credit ledger after filing of FORM GST TRAN-II shall be declared here.

Details of transition credit received in the electronic credit ledger after filing of FORM GST TRAN-II shall be declared here.

MAny other ITC availed but not specified above

Details of ITC availed which is not covered in any of heads specified under 6B to 6L above shall be declared here. Details of ITC availed through FORM ITC-01 and FORM ITC-02 in the financial year shall be declared here.

Details of ITC availed which is not covered in any of heads specified under 6B to 6L above shall be declared here. Details of ITC availed through FORM ITC-01 and FORM ITC-02 in the financial year shall be declared here.

N Sub-total (K to M above)

O Total ITC availed (I + N above)

7Details of ITC Reversed and Ineligible ITC as declared in returns filed during the

financial yearColumn Heading Instructions as per government Author's interpretation

A As per Rule 37

For column 7A to 7H: Details of input tax credit reversed due to ineligibility or reversals required under rule 37, 39,42 and 43 of the CGST Rules, 2017 shall be declared here. This column should also contain details of any input tax credit reversed under section 17(5) of the CGST Act, 2017 and details of ineligible transition credit claimed under FORM GST TRAN-I or FORM GST TRAN-II and then subsequently reversed. (Refer: Table 4(B) of FORM GSTR-3B). Any ITC reversed through FORM ITC -03 shall be declared in 7H.

Rule 37: Reversal of input tax credit in the case of non-payment of consideration.

B As per Rule 39Rule 39: Reversal due to wrong distribution of input tax credit by Input Service Distributor.

C As per Rule 42

Rule 42: Manner of determination of input tax credit in respect of inputs or input services and reversal thereof.

D As per Rule 43

Rule 43: Manner of determination of input tax credit in respect of capital goods and reversal thereof in certain cases

E As per section 17(5)

Section 17(5): Blocked Credit wrongly availed and then reversed in Table 4(A)(2) shall be declared here. If such ITC was not claimed at all, it should not come here.

F Reversal of TRAN-Icredit

TRAN I credit wrongly availed shall be reversed in GSTR 3B and declared here.

G Reversal of TRAN-II credit

TRAN II credit wrongly availed shall be reversed in GSTR 3B and declared here.

H Other reversals (pl. Any ITC reversed through

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specify) FORM ITC-03 shall come here.

I Total ITC Reversed (A to H above)

J Net ITC Available for Utilization (6O - 7I)

This figure represents total ITC actually available for utilisation (after reversal of ineligible credit) during the year.

8Other ITC related information

Column Heading Instructions as per government Author's interpretation

A ITC as per GSTR-2A (Table 3 & 5 thereof)

The total credit available for inwards supplies (other than imports and inwards supplies liable to reverse charge but includes services received from SEZs) received during 2017-18 and reflected in FORM GSTR-2A (table 3 & 5 only) shall be auto-populated in this table. This would be the aggregate of all the input tax credit that has been declared by the corresponding suppliers in their FORM GSTR-I.

The total credit available for inwards supplies (other than imports and inwards supplies liable to reverse charge but includes services received from SEZs) received during 2017-18 and reflected in FORM GSTR-2A (table 3 & 5 only) shall be auto-populated in this table. This would be the aggregate of all the input tax credit that has been declared by the corresponding suppliers in their GSTR-I.

BITC as per sum total of 6(B) and 6(H) above

The input tax credit as declared in Table 6B and 6H shall be auto-populated here.

The input tax credit as declared in Table 6B and 6H shall be auto-populated here. Continuing above example Rs.120 (Rs.100+20) would appear here but in 8(A), Rs.100 would appear here and it will cause a mismatch. Therefore, a clarification is required from govt. as to how these amounts should be shown in these columns.

C

ITC on inward supplies (other than imports and inward supplies liable to reverse charge but includes services received from SEZs) received during 2017-18 but availed during April to September, 2018

Aggregate value of input tax credit availed on all inward supplies (except those on which tax is payable on reverse charge basis but includes supply of services received from SEZs) received during July 2017 to March 2018 but credit on which was availed between April to September 2018 shall be declared here. (Refer: Table 4(A)(5) of FORM GSTR-3B)

Aggregate value of input tax credit availed on all inward supplies (except those on which tax is payable on reverse charge basis but includes supply of services received from SEZs) received during July 2017 to March 2018 but credit on which was availed between April to September 2018 shall be declared here. (Refer: Table 4(A)(5) of FORM GSTR-3B)

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D Difference [A-(B+C)]

This figure will represent amount of ITC on invoices pertaining to financial year under audit but on which credit was not availed during time limit given in Section 16 and hence such ITC has lapsed.

E ITC available but not availed (out of D) Aggregate value of the input tax

credit which was available in FORM GSTR-2A (table 3 & 5 only) but not availed in any of the FORM GSTR-3B returns shall be declared here. The credit shall be classified as credit which was available and not availed or the credit was not availed as the same was ineligible. The sum total of both the rows should be equal to difference in 8D.

Above figure will include two types of amounts viz. those tax invoices on which credit on which credit was not eligible per se (like supplies covered u/s 17(5) and those tax invoices on which credit could have been availed but could not be availed. This column shall contain latter figure only as it is the actual loss to business entity.

F ITC available but ineligible (out of D)

Above figure will include two types of amounts viz. those tax invoices on which credit on which credit was not eligible per se (like supplies covered u/s 17(5) and those tax invoices on which credit could have been availed but could not be availed. This column shall contain former figure which is not actual loss to business entity.

GIGST paid on import of goods (including supplies from SEZ)

Aggregate value of IGST paid at the time of imports (including imports from SEZs) during the financial year shall be declared here.

Actual aggregate value of IGST paid at the time of imports (including imports from SEZs) during the financial year shall be declared here.

HIGST credit availed on import of goods (as per 6(E) above)

The input tax credit as declared in Table 6E shall be auto-populated here.

The input tax credit as declared in Table 6E shall be auto-populated here.

I Difference (G-H)This figure will represent amount of ITC on import which is not availed.

JITC available but not availed on import of goods (Equal to I)

KTotal ITC to be lapsed in current financial year (E + F + J)

The total input tax credit which shall lapse for the current financial year shall be computed in this row.

The total input tax credit which shall lapse for the current financial year shall be computed in this row. It is actual loss to business entity

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during the year.

Pt. IV

Details of tax paid as declared in returns filed during the financial year

Part IV is the actual tax paid during the financial year. Payment of tax under Table 6.1 of FORM GSTR-3B may be used for filling up these details.

Part IV is the actual tax paid during the financial year. Payment of tax under Table 6.1 of FORM GSTR-3B may be used for filling up these details.

Pt. V Particulars of the transactions for the previous FY declared in returns of April to September of current FY or upto date of filing of annual return of previous FY whichever is earlier

Column Heading Instructions as per government Author's interpretation

10Supplies/tax declared through Amendments (+) (net of debit notes)

For column 10 & 11: Details of additions or amendments to any of the supplies already declared in the returns of the previous financial year but such amendments were furnished in Table 9A, Table 9B and Table 9C of FORM GSTR-1 of April to September of the current financial year or date of filing of Annual Return for the previous financial year, whichever is earlier shall be declared here.

For column 10 & 11: Details of additions or amendments to any of the supplies already declared in the returns of the previous financial year but such amendments were furnished in Table 9A, Table 9B and Table 9C of FORM GSTR-1 of April to September of the current financial year or date of filing of Annual Return for the previous financial year, whichever is earlier shall be declared here. If invoices pertaining to months up to March was declared later in Table 4A of GSTR 1 of month of April to September, it shall be shown here.

11Supplies / tax reduced through Amendments (-) (net of credit notes)

12Reversal of ITC availed during previous financial year

Aggregate value of reversal of ITC which was availed in the previous financial year but reversed in returns filed for the months of April to September of the current financial year or date of filing of Annual Return for previous financial year , whichever is earlier shall be declared here. (Refer: Table 4(B) of FORM GSTR-3B)

Aggregate value of reversal of ITC which was availed in the previous financial year but reversed in returns filed for the months of April to September of the current financial year or date of filing of Annual Return for previous financial year , whichever is earlier shall be declared here. (Refer: Table 4(B) of FORM GSTR-3B)

13 ITC availed for the previous financial year

Details of ITC for goods or services received in the previous financial year but ITC for the same was availed in returns filed for the months of April to September of the current financial year or date of filing of Annual Return for the previous financial year whichever is earlier shall be declared here. (Refer: Table 4(A) of FORM

Details of ITC for goods or services received in the previous financial year but ITC for the same was availed in returns filed for the months of April to September of the current financial year or date of filing of Annual Return for the previous financial year whichever is earlier shall be

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GSTR-3B). declared here. (Refer: Table 4(A) of FORM GSTR-3B).

14

Differential tax paid on account of

declaration in 10 & 11 above

Pt. VI Other Information

15Particulars of Demands and Refunds

Column Heading Instructions as per government Author's interpretation

A Total Refund claimedFor A, B, C, D: Aggregate value of refunds claimed, sanctioned, rejected and pending for processing shall be declared here. Refund claimed will be the aggregate value of all the refund claims filed in the financial year and will include refunds which have been sanctioned, rejected or are pending for processing. These will not include details of non-GST refund claims.

Refund claimed means the aggregate value of all refund claim applications.

B Total Refund sanctioned

Refund sanctioned means the aggregate value of all refund sanction orders.

C Total Refund RejectedRefund rejected means the aggregate value of all refund rejection orders.

D Total Refund Pending

Refund pending will be the aggregate amount in all refund application for which acknowledgement has been received and will exclude provisional refunds received.

E Total demand of Taxes

For E, F, G: Aggregate value of demands of taxes for which an order confirming the demand has been issued by the adjudicating authority shall be declared here. Aggregate value of taxes paid out of the total value of confirmed demand as declared in 15E aboveshall be declared here. Aggregate value of demands pending recovery out of 15E above shall be declared here.

Aggregate value of demands of taxes for which an order confirming the demand has been issued by the adjudicating authority shall be declared here.

F Total taxes paid in respect of E above

Aggregate value of taxes paid out of the total value of confirmed demand as declared in 15E above shall be declared here.

GTotal demands pending out of E above

Aggregate value of demands pending recovery out of 15E above shall be declared here.

16 Information on supplies received from composition taxpayers, deemed supply under section 143 and goods sent on approval basis

Column Heading Instructions as per government Author's interpretation

ASupplies received from Composition taxpayers

Aggregate value of supplies received from composition taxpayers shall be declared here. (Refer: Table 5 of FORM GSTR-3B)

Aggregate value of supplies received from composition taxpayers shall be declared here. (Refer: Table 5 of FORM GSTR-3B)

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B Deemed supply under Section 143

Aggregate value of all deemed supplies from the principal to the job-worker in terms of sub-section (3) and sub-section (4) of Section 143 of the CGST Act shall be declared here.

Aggregate value of all deemed supplies from the principal to the job-worker in terms of sub-section (3) and sub-section (4) of Section 143 of the CGST Act shall be declared here. It means inputs/capial goods sent to job worker but not received back within 1/3 years shall be declared here. ITC 04 should be used for filling up this detail.

CGoods sent on approval basis but not returned

Aggregate value of all deemed supplies for goods which were sent on approval basis but were not returned to the principal supplier within one eighty days of such supply shall be declared here.

Aggregate value of all deemed supplies for goods which were sent on approval basis but were not returned to the principal supplier within one eighty days of such supply shall be declared here as Time of supply on such goods have come as per Section 12 readwith Section 31 of CGST Act.

17 HSN Wise Summary of outward supplies

Summary of supplies effected and received against a particular HSN code to be reported. It will be optional for taxpayers having annual turnover upto Rs.1.50 Cr. It will be mandatory to report HSN code at two digits level for taxpayers having annual turnover in the preceding year above Rs.1.50 Cr but upto Rs.5.00 Cr and at four digits’ level for taxpayers having annual turnover above Rs.5.00 Cr. UQC details to be furnished only for supply of goods. Quantity is to be reported net of returns. (Refer: Table 12 of FORM GSTR-1 for outward supplies).

Summary of supplies effected and received against a particular HSN code to be reported. Quantity is to be reported net of returns. Table 12 of GSTR-1 can be referred for filling this table. However, such table does not require rate wise bifurcation which is requried in this table, therefore, detailed working of such table would be required.

18 HSN Wise Summary of Inward supplies

Summary of supplies received against a particular HSN code to be reported. Quantity is to be reported net of returns. Such detail is captured in GSTR 2 which is not yet operational, so therefore, this figure should be reported from workings prepared for GSTR 3B.

19 Late fee payable and paid

Late fee will be payable if annual return is filed after the due date.

Late fee u/s 47(2) of Rs.200 per day (Rs.100 CGST and SGST each) will be payable if annual return is filed after the due date (31 December of next FY).

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FORM GSTR-9C

PART – A – Reconciliation Statement

Pt. I Basic Details

1 Financial Year

2 GSTIN

3A Legal Name Legal name and trade name will get auto populated here, once GSTIN is entered.3B Trade Name, (if any)

4 Are you liable to audit under any Act? Income tax audit, Cost audit

Pt. II Reconciliation of turnover declared in audited Annual Financial Statement with turnover declared in Annual Return (GSTR9)

5Reconciliation of Gross Turnover

Column Heading Instructions as per government Author’s interpretation

A

Turnover (including exports) as per audited financial statements for the State / UT (For multi-GSTIN units under same PAN the turnover shall be derived from the audited Annual Financial Statement)

The turnover as per the audited Annual Financial Statement shall be declared here. There may be cases where multiple GSTINs (State-wise) registrations exist on the same PAN. This is common for persons/entities with presence over multiple states. Such persons/entities will have to internally derive their GSTIN wise turnover and declare the same here. This shall include export turnover (if any). It may be noted that reference to audited Annual Financial Statement includes reference to books of accounts in case of persons/entities having presence over multiple States

The turnover as per the audited Annual Financial Statement (Profit and Loss account) shall be declared here. In case an assessee has taken multiple registration, he needs to take figure from Trial Balance/Profit and Loss account prepared for a particular GSTIN. Proper working needs to be prepared for the same along with proper configuration in accounting software of the client.

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BUnbilled revenue at

the beginning of Financial Year

Unbilled revenue which was recorded in the books of accounts on the basis of accrual system of accounting in the last financial year and was carried forward to the current financial year shall be declared here. In other words, when GST is payable during the financial year on such revenue (which was recognized earlier), the value of such revenue shall be declared here.

(For example, if rupees Ten crores of unbilled revenue existed for the financial year 2016-17, and during the current financial year, GST was paid on rupees Four Crores of such revenue, then value of rupees Four Crores rupees shall be declared here)

Unbilled revenue at the beginning of FY is that revenue for which provision has been made, however, tax was not charged and paid because tax is required to be paid at the time of invoice or payment, whichever is earlier (in case ofgoods, at the time of issuance of invoice). Although, invoice for full amount will be raised in the year under audit, however, revenue would have been recognized in the financial only for the amount which has been accrued during the year under Audit. Therefore, such unbilled revenue will be added in Gross Turnover of the year under presuming invoice has been raised.For eg: Billing cycle of a post-paid telephone connection is 21st March to 20th April amounting to Rs.3,100 per month and invoice is being raised on or after 20th April of following financial year. In some cases, taxable person make the provision in respect of accrued income which have been accrued upto 31st March (i.e. Rs.1,100 for 11 days). However, invoice for complete income i.e. Rs.3,100 is raised on 20th April. In month of April, income booked would be Rs.2,000 (for 20 days). To match this with Invoice amount given in GST returns, opening unbilled revenue of Rs.1,100 will be added to turnover as per books of account through this column.

CUnadjusted

advances at the end of the Financial Year

Value of all advances for which GST has been paid but the same has not been recognized as revenue in the audited Annual Financial Statement shall be declared here.

Particulars of all unsettled advances i.e. advance received in current year and tax has been paid on receipt of advance in accordance with Time of supply provisions as per

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Section 12 and 13 but income is not booked in respect of such advance in the current year shall be declared here.

D Deemed Supply under Schedule I

Aggregate value of deemed supplies under Schedule I of the CGST Act, 2017, which has not been recognized in financials of the taxable person shall be declared here. Any deemed supply which is already part of the turnover in the audited Annual Financial Statement is not required to be included here.

Deemed supply under Section 7(1)(b) read with Schedule I of CGST Act: Since, they are done without consideration, no amount would be appearing in books even though tax has been paid on the same.Activities to be treated as supply even if made without consideration1. Permanent transfer or disposal of business assets where input tax credit has been availed on such assets.2. Supply of goods or services or both between related persons or between distinct persons as specified in section 25, when made in the course or furtherance of business:Provided that gifts not exceeding fifty thousand rupees in value in a financial year by an employer to an employee shall not be treated as supply ofgoods or services or both.3. Supply of goods—(a) by a principal to his agent where the agent undertakes to supply such goods on behalf of the principal; or(b) by an agent to his principal where the agent undertakes to receive such goods on behalf of the principal.4. Import of services by a taxable person from a related person or from any of his other establishments outside India, in the course or furtherance of business.

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E

Credit Notes issued after the end of the financial year but reflected in the annual return

Aggregate value of credit notes which were issued after 31st of March for any supply accounted in the current financial year but such credit notes were reflected in the annual return (GSTR-9) shall be declared here.

Credit notes issued after the end of financial year are required to be added here as the impact of same has already been considered in financial statements of the taxable person.

F

Trade Discounts accounted for in the audited Annual Financial Statement but are not permissible under GST

Trade discounts which are accounted for in the audited Annual Financial Statement but on which GST was leviable (being not permissible) shall be declared here.

Discounts which have been accounted for in the financial statements, however, conditions of section 15(3) of the CGST Act have not been complied with are required to be added to compute accurate of turnover leviable to GST.

G Turnover from April 2017 to June 2017

Turnover included in the audited Annual Financial Statement for April 2017 to June 2017 shall be declared here.

For the FY 2017-18, turnover for the period April 2017 to June 2017 is to be deducted to compute accurate value because the period is not covered under the ambit of GST laws.

H Unbilled revenue at the end of Financial Year

Unbilled revenue which was recorded in the books of accounts on the basis of accrual system of accounting during the current financial year but GST was not payable on such revenue in the same financial year shall be declared here.

Unbilled revenue at the end of FY is that revenue for which provision has been made; however, tax was not charged and paid because tax is required to be paid at the time of invoice or payment, whichever is earlier. Therefore, such unbilled revenue will be reduced from Gross Turnover of the year under Audit because taxability will arise at the time of issuance of invoice or payment whichever is earlier (in case of goods, at the time of issuance of invoice).For eg: Billing cycle of a post-paid telephone connection is 21st March to 20th April amounting to Rs. 3,100 per month and invoice is being raised on or after 20th April of following financial year. In some cases, taxable person make the provision in respect of accrued income which have been accrued upto 31st March (i.e. Rs. 1,100 for 11 days).

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However, invoice for complete income i.e. Rs. 3,100 is raised on 20th April. To match this with amount given in GST returns, closing unbilled revenue of Rs. 1,100 will be subtracted from turnover as per books of account through this column.

IUnadjusted Advances at the beginning of the Financial Year

Value of all advances for which GST has not been paid but the same has been recognized as revenue in the audited Annual Financial Statement shall be declared here.

GST on these unadjusted advances has already been paid in previous year but will be recognized as revenue in the respective financial year. Therefore, for the purpose of reconciliation it is required to be reduced.

J

Credit notes accounted for in the audited Annual Financial Statement but are not permissible under GST

Aggregate value of credit notes which have been accounted for in the audited Annual Financial Statement but were not admissible under Section 34 of the CGST Act shall be declared here.

Those credit notes which havebeen issued 1st October onwards of succeeding financial year and effect of which has been considered in books of accounts, which is not actually allowed to be considered in GST returns.

KAdjustments on account of supply of goods by SEZ units to DTA Units

Aggregate value of all goods supplied by SEZs to DTA units for which the DTA units have filed bill of entry shall be declared here.

This column is required for the suppliers located in SEZ area or suppliers being SEZ units for DTA clearances. These supplies would have been reflected in books of accounts, however, the same have not been considered in returns (because they are treated as imports). Therefore, the same is required to be reduced to compute the accurate value of taxable turnover to be considered.

LTurnover for the period under composition scheme

There may be cases where registered persons might have opted out of the composition scheme during the current financial year. Their turnover as per the audited Annual Financial Statement would include turnover both as composition taxpayer as well as normal taxpayer. Therefore, the turnover for which GST was

There may be cases where registered persons might have opted out of the composition scheme during the current financial year. Their turnover as per the audited Annual Financial Statement would include turnover both as composition taxpayer as well as normal taxpayer. Therefore, to

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paid under the composition scheme shall be declared here.

match it with turnover as per GSTR 9 (which includes turnover for the period under normal registration only), turnover under composition scheme shall be subtracted.

MAdjustments in turnover under section 15 and rules thereunder

There may be cases where the taxable value and the invoice value differ due to valuation principles under section 15 of the CGST Act, 2017 and rules thereunder. Therefore, any difference between the turnover reported in the Annual Return (GSTR 9) and turnover reported in the audited Annual Financial Statement due to difference in valuation of supplies shall be declared here.

There may be some cases where value of supply as per GST law and as per books may differ because of valuation provisions say:Interest, penalty for delay in payment of consideration has not been considered, taxes, duties etc. other CGST/SGST/IGST has not been taken, amount that the supplier is liable to pay but has been incurred by recipient i.e. reimbursements, where consideration is not wholly in money, supply between related persons etc. for which value of such adjustment is essential to compute accurate value of turnover liable to GST.Adjustment on account of these may result into addition or reduction in value of supply

NAdjustments in turnover due to foreign exchange Fluctuations

Any difference between the turnover reported in the Annual Return (GSTR9) and turnover reported in the audited Annual Financial Statement due to foreign exchange fluctuations shall be declared here.

In some cases where supplier is doing export of goods or services, where invoice has been raised in convertible foreign exchange and for this forex rate as per GAAP has been considered in books of accounts. However, for the purpose of GST, CBIC rate isto be considered. Thus, because of this change in rate value of supply may differ and impact of such adjustment is to be taken to compute correct value.

OAdjustments in

turnover due to reasons not listed above

Any difference between the turnover reported in the Annual Return (GSTR9) and turnover reported in the audited Annual Financial Statement due to reasons not listed above shall be declared here.

Any difference between the turnover reported in the Annual Return (GSTR9) and turnover reported in the audited Annual Financial Statement due to reasons not listed above shall be declared here like income as

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per AS 7, deferred revenue, provisional income etc.

P Annual turnover after adjustments as above

Q Turnover as declared in Annual Return (GSTR9)

Annual turnover as declared in the Annual Return (GSTR 9) shall be declared here. This turnover may be derived from Sr. No. 5N, 10 and 11 of Annual Return (GSTR 9).

Annual turnover as declared in the Annual Return (GSTR 9) shall be declared here. This turnover may be derived from Sr. No. 5N, 10 and 11 of Annual Return (GSTR 9).

R Un-Reconciled turnover (Q - P)

6Reasons for Un -Reconciled difference in Annual Gross Turnover

Reasons for non-reconciliation between the annual turnover declared in the audited Annual Financial Statement and turnover as declared in the Annual Return (GSTR 9) shall be specified here.

No column for tax amounts is given. Only amount of income/taxable value is asked.

7 Reconciliation of Taxable Turnover

The table provides for reconciliation of taxable turnover from the audited annual turnover after adjustments with the taxable turnover declared in annual return (GSTR-9).

The table provides for reconciliation of taxable turnover from the audited annual turnover after adjustments with the taxable turnover declared in annual return (GSTR-9).

AAnnual turnover after

adjustments (from 5P above)

Annual turnover as derived in Table 5P above would be auto-populated here.

Annual turnover as derived in Table 5P above would be auto-populated here.

B

Value of Exempted, Nil Rated, Non-GST supplies, No-Supply Turnover

Value of exempted, nil rated, non-GST and no-supply turnover shall be declared here. This shall be reported net of credit notes, debit notes and amendments if any.

Value of exempted, nil rated, non-GST and no-supply turnover shall be declared here. This shall be reported net of credit notes, debit notes and amendments (declared in any return up to month of September of next Financial year, if its effect was taken in audited financial statements).

C Zero rated supplies without payment of tax

Value of zero rated supplies (including supplies to SEZs) on which tax is not paid shall be declared here. This shall be reported net of credit notes, debit notes and amendments if any.

Value of zero rated supplies (including supplies to SEZs) on which tax is not paid shall be declared here. This shall be reported net of credit notes, debit notes and amendments if any.

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D

Supplies on which tax is to be paid by the recipient on reverse charge basis

Value of reverse charge supplies on which tax is to be paid by the recipient shall be declared here. This shall be reported net of credit notes, debit notes and amendments if any.

Value of outward supplies on which tax is to be paid by the recipient under reverse charge u/s 9(3) (and not by the supplier) shall be declared here. This shall be reported net of credit notes, debit notes and amendments if any.

ETaxable turnover as per adjustments above (A-B-C-D)

The taxable turnover is derived as the difference between the annual turnover after adjustments declared in Table 7A above and the sum of all supplies (exempted, non-GST, reverse charge etc.) declared in Table 7B, 7C and 7D above.

The taxable turnover is derived as the difference between the annual turnover after adjustments declared in Table 7A above and the sum of all supplies (exempted, non-GST, reverse charge etc.) declared in Table 7B, 7C and 7D above.

FTaxable turnover as per liability declared in Annual Return (GSTR9)

Taxable turnover as declared in Table 4N of the Annual Return (GSTR9) shall be declared here.

Taxable turnover as declared in Table 4N of the Annual Return (GSTR9) shall be declared here.

G Un-reconciled taxable turnover (F-E)

Reconciliation is done with figure in Table 4N of GSTR 9. However, figure in Table 4N includes figure of Inward supplies of a person leviable to reverse charge mechanism. Such amount was appropriately reduced from Table 5N but not from this figure which will result in difference in this column.

8Reasons for Un -Reconciled difference in taxable turnover

Reasons for non-reconciliation between adjusted annual taxable turnover as derived from Table 7E above and the taxable turnover declared in Table 7F shall be specified here.

Reasons for non-reconciliation between adjusted annual taxable turnover as derivedfrom Table 7E above and the taxable turnover declared in Table 7F shall be specified here.

Pt. III

Reconciliation of tax paid

9

Reconciliation of rate wise liability and amount payable thereon

The table provides for reconciliation of tax paid as per reconciliation statement and amount of tax paid as declared in Annual Return (GSTR 9). Under the head labelled ―RC, supplies where tax was paid on reverse charge basis by the recipient (i.e. the person for whom reconciliation statement has been prepared) shall

Correct forward and reverse charge liability, rate wise, along with Interest, late fee, penalty and other amount payable shall be declared here.

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D

Supplies on which tax is to be paid by the recipient on reverse charge basis

Value of reverse charge supplies on which tax is to be paid by the recipient shall be declared here. This shall be reported net of credit notes, debit notes and amendments if any.

Value of outward supplies on which tax is to be paid by the recipient under reverse charge u/s 9(3) (and not by the supplier) shall be declared here. This shall be reported net of credit notes, debit notes and amendments if any.

ETaxable turnover as per adjustments above (A-B-C-D)

The taxable turnover is derived as the difference between the annual turnover after adjustments declared in Table 7A above and the sum of all supplies (exempted, non-GST, reverse charge etc.) declared in Table 7B, 7C and 7D above.

The taxable turnover is derived as the difference between the annual turnover after adjustments declared in Table 7A above and the sum of all supplies (exempted, non-GST, reverse charge etc.) declared in Table 7B, 7C and 7D above.

FTaxable turnover as per liability declared in Annual Return (GSTR9)

Taxable turnover as declared in Table 4N of the Annual Return (GSTR9) shall be declared here.

Taxable turnover as declared in Table 4N of the Annual Return (GSTR9) shall be declared here.

G Un-reconciled taxable turnover (F-E)

Reconciliation is done with figure in Table 4N of GSTR 9. However, figure in Table 4N includes figure of Inward supplies of a person leviable to reverse charge mechanism. Such amount was appropriately reduced from Table 5N but not from this figure which will result in difference in this column.

8Reasons for Un -Reconciled difference in taxable turnover

Reasons for non-reconciliation between adjusted annual taxable turnover as derived from Table 7E above and the taxable turnover declared in Table 7F shall be specified here.

Reasons for non-reconciliation between adjusted annual taxable turnover as derivedfrom Table 7E above and the taxable turnover declared in Table 7F shall be specified here.

Pt. III

Reconciliation of tax paid

9

Reconciliation of rate wise liability and amount payable thereon

The table provides for reconciliation of tax paid as per reconciliation statement and amount of tax paid as declared in Annual Return (GSTR 9). Under the head labelled ―RC, supplies where tax was paid on reverse charge basis by the recipient (i.e. the person for whom reconciliation statement has been prepared) shall

Correct forward and reverse charge liability, rate wise, along with Interest, late fee, penalty and other amount payable shall be declared here.

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be declared.

P Total amount to be paid as per tables above

The total amount to be paid as per liability declared in Table 9A to 9O is auto populated here.

The total amount to be paid as per liability declared in Table 9A to 9O is auto populated here.

QTotal amount paid as declared in Annual Return (GSTR 9)

The amount payable as declared in Table 9 of the Annual Return (GSTR9) shall be declared here. It should also contain any differential tax paid on Table 10 or 11 of the Annual Return (GSTR9).

The amount payable as declared in Table 9 of theAnnual Return (GSTR9) shall be declared here. It should also contain any differential tax paid on Table 10 or 11 of the Annual Return (GSTR9).

RUn-reconciled

payment of amount PT 1

10Reasons for un-reconciled payment of amount

Reasons for non-reconciliation between payable / liability declared in Table 9P above and the amount payable in Table 9Q shall be specified here.

Reasons for non-reconciliation between payable / liability declared in Table 9P above and the amount payable in Table 9Q shall be specified here.

11

Additional amount payable but not paid (due to reasons specified under Tables 6,8 and 10 above)

Any amount which is payable due to reasons specified under Table 6, 8 and 10 above shall be declared here.

Any amount which is payable due to reasons specified under Table 6, 8 and 10 above shall be declared here.

Pt. IV Reconciliation of Input Tax Credit (ITC)

12Reconciliation of Net Input Tax Credit (ITC)

Column Heading Instructions as per government Author’s interpretation

A

ITC availed as per audited Annual Financial Statement for the State/UT (For multi GSTIN units under same PAN this should be derived from books of accounts)

ITC availed (after reversals) as per the audited Annual Financial Statement shall be declared here. There may be cases where multiple GSTINs (State-wise) registrationsexist on the same PAN. This is common for persons/ entities with presence over multiple States. Such persons/entities will have to internally derive their ITC for each individual GSTIN and declare the same here. It may be noted that reference to audited Annual Financial Statement includes reference to books of accounts in case of persons/entities having presence over multiple States

ITC availed (after reversals) as per the audited Annual Financial Statement shall be declared here. In case an assessee has taken multiple registration, he needs to take figure from Financial statements prepared for a particular GSTIN. Proper working needs to be prepared for the same along with proper configuration in accounting software of the client.

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BITC booked in earlier Financial Years claimed in current Financial Year

Any ITC which was booked in the audited Annual Financial Statement of earlier financial year(s) but availed in the ITC ledger in the financial year for which the reconciliation statement is being filed for shall be declared here. This shall include transitional credit which was booked in earlier years but availed during Financial Year 2017-18.

GST law provides time limit for availment of ITC up to date of filing of return of September of following financial year or date of filing of Annual return for the period under audit, whichever is earlier. This point will cover invoices booked in earlier period for which ITC has been availed in current F.Y. This point is not applicable for audit for the period July, 2017to March, 2018.

C

ITC booked in current Financial Year to be claimed in subsequent Financial Years

Any ITC which has been booked in the audited Annual Financial Statement of the current financial year but the same has not been credited to the ITC ledger for the said financial year shall be declared here.

GST law provides time limit for availment of ITC up to date of filing of return of September of following financial year or date of filing of Annual return for the period under audit, whichever is earlier. Thus, if Invoice booked in March, 2018 but ITC availed in April, 2018 in required to be reduced because the same would have been considered in return of subsequent financial year to period covered under audit.

D

ITC availed as per audited financial statements or books of Account

ITC availed as per audited Annual Financial Statement or books of accounts as derived from values declared in Table 12A, 12B and 12C above will be auto-populated here.

ITC availed as per audited Annual Financial Statement or books of accounts as derived from values declared in Table 12A, 12B and 12C above will be auto-populated here. It means the figure of ITC on invoices pertaining to the period under audit and declared in GST returns of that period only.

E ITC claimed in Annual Return (GSTR9)

Net ITC available for utilization as declared in Table 7J of Annual Return (GSTR9) shall be declared here.

Net ITC available for utilization as declared in Table 7J of Annual Return (GSTR9) shall be declared here.

F Un-reconciled ITC

13Reasons for un-reconciled difference in ITC

Reasons for non-reconciliation of ITC as per audited Annual Financial Statement or books of account (Table 12D) and the net ITC (Table12E) availed in the Annual Return (GSTR9) shall be

Reasons for non-reconciliation of ITC as per audited Annual Financial Statement or books of account (Table 12D) and the net ITC (Table12E) availed in the Annual Return (GSTR9)

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specified here. shall be specified here.

14

Reconciliation of ITC declared in Annual Return (GSTR9) with ITC availed on expenses as per audited Annual Financial Statement or books of account

This table is for reconciliation of ITC declared in the Annual Return (GSTR9) against the expenses booked in the audited Annual Financial Statement or books of account. The various sub-heads specified under this table are general expenses in the audited Annual Financial Statement or books of account on which ITC may or may not be available. Further, this is only an indicative list of heads under which expenses are generally booked. Taxpayers may add or delete any of these heads but all heads of expenses on which GST has been paid / was payable are to be declared here.

This table is for reconciliation of ITC declared in the Annual Return (GSTR9) against the expenses booked in the audited Annual Financial Statement or books of account. The various sub-heads specified under this table are general expenses in the audited Annual Financial Statement or books of account on which ITC may or may not be available. Further, this is only an indicative list of heads under which expenses are generally booked. Taxpayers may add or delete any of these heads but all heads of expenses on which GST has been paid / was payable are to be declared here.

R Total amount of eligible ITC availed

Total ITC declared in Table 14A to 14Q above shall be auto populated here

<Auto-populate>

S ITC claimed in Annual Return (GSTR9)

Net ITC availed as declared in the Annual Return (GSTR9) shall be declared here. Table 7J of the Annual Return (GSTR9) may be used for filing this Table.

<Auto-populate>

T Un-reconciled ITC

Figure of ITC on invoices pertaining to the year under audit but declared in GST returns of the months after that year (i.e. declared during April to September of next financial year) and accounted for in books of accounts would be coming in figure of 14R but not in 14S which will result in a difference in this column.

15Reasons for un -reconciled difference in ITC

Reasons for non-reconciliation between ITC availed on the various expenses declared in Table 14R and ITC declared in Table 14S shall be specified here.

Reasons for non-reconciliation between ITC availed on the various expenses declared in Table 14R and ITC declared in Table 14S shall be specified here.

16

Tax payable on un-reconciled difference in ITC (due to reasons specified in 13 and 15

Any amount which is payable due to reasons specified in Table 13 and 15 above shall be declared here.

Any amount which is payable due to reasons specified in Table 13 and 15 above shall be declared here.

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above)

V

Auditor's recommendation on additional Liability due to non-reconciliation

Part V consists of the auditor‘s recommendation on the additional liability to be discharged by the taxpayer due to non-reconciliation of turnover or non-reconciliation of input tax credit. The auditor shall also recommend if there is any other amount to be paid for supplies not included in the Annual Return. Any refund which has been erroneously taken and shall be paid back to the Government shall also be declared in this table. Lastly, any other outstanding demand which is recommended to be settled by the auditor shall be declared in this Table. Towards, the end of the reconciliation statement taxpayers shall be given an option to pay their taxes as recommended by the auditor.

Part V consists of the auditor‘s recommendation on the additional liability to be discharged by the taxpayer due to non-reconciliation of turnover or non-reconciliation of input tax credit. The auditor shall also recommend if there is any other amount to be paid for supplies not included in the Annual Return. Any refund which has been erroneously taken and shall be paid back to the Government shall also be declared in this table. Lastly, any other outstanding demandwhich is recommended to be settled by the auditor shall be declared in this Table. Towards, the end of the reconciliation statement taxpayers shall be given an option to pay their taxes as recommended by the auditor.

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