- INTRODUCTION
The financial year (“FY”) end mandates for some important activities to be carried out by organizations under the goods and services tax (“GST”) legislations for a smooth transition to FY 2022-23, and some of these activities have deadlines approaching in the next few months. Missing out on these deadlines can result in difficulties for these organizations in the future, including during the time of audits and assessments, as well as lead to revenue leakages.
For ease of reference, some of the important year end activities are listed below. The following may act as guidance for organizations.
- YEAR END ACTIVITIES
2.1 Availment of correct Input Tax Credit (“ITC”) for the FY 2021-22
(a) Prepare the yearly reconciliation of ITC booked in books and ITC availed in GSTR 3B during the FY 2021-22, also of the ITC availed in the subsequent month's GSTR 3B till due date of filing GSTR 3B for September or November 2022. Reconciliation of the same with GSTR 2A or 2B may also be undertaken.
(b) Follow up with suppliers to furnish or report transactions in their GSTR-1 with payment of taxes in GSTR 3B in case the stated transactions are not populated in your GSTR 2A or 2B.
(c) Identify the ineligible ITC (either blocked credit or ITC on exempt supplies) already availed in GSTR 3B of FY 2021-22 and reverse or pay the same along with interest at 18% to avoid any litigation and demand of interest and penalty in future. Further, note that no interest and penalty is leviable on reversal of wrongly availed credit but not utilized.
(d) Ensure that any payments to suppliers are not pending beyond 180 days from the date of issuance of suppliers' invoices. If ITC in such cases is availed without making payment within 180 days from date of issuance of invoice, then the availed ITC needs to be reversed along with interest at the rate of 18%. Further, such ITC can be re-availed in subsequent month's GSTR-3B when the payment is made.
(e) Ensure that ITC is not booked nor availed in GSTR 3B in case of purchases made from any composition supplier. If the ITC is availed, then it should be reversed in the books as well as in the return.
(f) Compile and reconcile ITC auto populated in GSTR 2A or GSTR 2B for the entire FY 2021-22 and for the period from April to September or November 2022 (relevant for transactions done in FY 2021-22).
(g) Identify the suppliers whose registration has been either cancelled or suspended for any reason during the FY 2021-22 and ensure no ITC is availed going forward for such suppliers unless registration is restored.
(h) Check for the transactions covered under reverse charge mechanism (“RCM”) from suppliers and make the payment of tax under RCM as per time of supply provisions and claim ITC if not done earlier. Also, raise a self-invoice in case of specified goods or services covered under RCM are received from an unregistered person.
2.2 Reporting of correct outward supplies for the FY 2021-22
(a) Prepare and reconcile the turnover as reported in GSTR 1 or GSTR 3B with books of accounts for FY 2021-22. Also, check that it has been classified under correct Harmonized System Nomenclature or Services Accounting Code , correct GST rate has been levied, and taxes have been discharged.
Further, any outward supplies of FY 2021-22 shown in the period from April to September or November 2022 should be captured properly for proper disclosure in annual returns of FY 2021- 22.
(b) Prepare the reconciliation of e-way bills generated during FY 2021-22 with tax invoices reported in GSTR 1. In case of any discrepancy, ensure that appropriate tax on such supplies has been paid to the government.
(c) Check whether the GST paid on advances received in FY 2021-22 towards the supply of services made or agreed to be made has been properly adjusted in GSTR 1 and GSTR 3B.
(d) In case of material sent for job work, check whether the material has been returned within the time limit prescribed (1 year for inputs and 3 years for capital goods), and whether it has been duly reported in ITC 04.
2.3 Other Important Activities to be undertaken
(a) An important step to be taken by exporters before the beginning of FY 2022-23 is applying for letter of undertaking in form GST RFD 11 for FY 2022-23 to continue export of goods, services or supplies to Special Economic Zone without payment of GST from April 1, 2022.
(b) Credit notes under GST for FY 2021-22, for supplies made during FY 2021-22 should be raised by the due date of filing of GSTR-3B for the month of September following the end of FY 2021-22 or the date of filing of annual return for FY 2021-22, whichever is earlier.
2.4 Other Important Aspects for FY 2021-22
(a) Check whether the purchase register prepared for FY 2021-22 contains all necessary details or information like tax invoice number, date, description of goods or services, nature of goods or services such as inputs, capital goods, or input services, account head, which match with the suppliers' invoices.
(b) Check whether the sales register for output taxes captures all the necessary details or information, as required.
(c) Check whether the tax has been correctly calculated and paid under RCM including in case of import of services (including advertisements), sitting fees paid to directors, goods transport agency, security services, rent a cab, and advocate fees.
(d) Ensure that all the other provisions of GST legislations (as may be relevant to the Company's business operation) have been duly complied with.
- CONCLUSION
Please note that the above provided list is not exhaustive and businesses need to conform to all other compliances as may be prescribed under the indirect tax laws as may be applicable to each specific sector. This article has captured some of the general compliances required to be undertaken and may be considered as a mere guidance alone.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
