GST: BEFORE YOU FINALIZE YOUR INCOME TAX RETURN

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GST: BEFORE YOU FINALIZE YOUR INCOME TAX RETURN

Things to keep in mind while finalizing books of account of first financial year since implementation of GST.

  • Matching sales / income as per books with GSTR-1/ GSTR-3B. Because of following points mentioned below, sales as per books of account and outward supply as per GSTR-3B cannot be matched.
    • Inter state stock transfer – It is treated as outward supply as per GST laws, even though it is NOT a sale transaction.
    • Amount recovered from vendor (e.g. penalty) is treated as outward supply however the same is not a sale transaction.
    • Amount recovered from employees is treated as outward supply under GST. Such transaction does not amounts to sale.
  • Adjustments, is any to be rectified in subsequent returns. Changes in transactions discovered later can be adjusted in subsequent returns.

 

  • Credit ledgers – Closing balance of ITC should match with the balance in credit ledger as displayed in GST portal.

 

  • Check proper classification of goods and services. Since, it’s first FY in GST regime, there might be issues regarding proper classification of goods and services.

 

  • Ineligible ITC – ITC is freely available in GST but subject to negative list u/s 17(5) of CGST Act. While finalizing, check whether ITC on goods / services mentioned in negative list is not taken. If taken then the same should be rectified.

 

  • Reverse charge mechanism – Amount has been paid where liability arises under reverse charge mechanism and all rules have been followed.
    • Recipient pays tax amount in cash
    • ITC taken on such tax paid
    • Self invoice issued where applicable
  • Reversal of Input tax credit (ITC) – If creditors are not paid (amount including GST) whithin 180 days from date of tax invoice, ITC availed against such invoice is required to be reversed along with Interest.

 

  • Reversal of ITC – Many are not aware that when goods are written off in books of account, ITC is to be reversed. Even gift / free sample is given, ITC on such goods is required to be reversed. Ensure to do it.

These are just few things to be kept in mind before finalizing books of account.

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