Common Errors to Correct Goods and Services Tax IDTC-ICAI Webcast Mar 11, 2017

General Errors Review relevance of current litigation Recover pre-deposit into transition credit Goods are wrongly classified Expect change in exemptions enjoyed Limited use of IT-systems no longer feasible Centralized accounts no longer feasible Method of billings would have to be changed Physical stocks to match with books

Transition Principle of ‘closing credits’ in last returns Non-creditable taxes embedded in stocks Overlapping contracts – choice of tax-to-pay Restore reversed credits u/r 6(3) Reallocation of credit if centrally registered SCN under earlier law can be issued later Capital goods sent to job worker not covered by Transitional provisions

Traders Complete partial rebating for branch transfers Watch transfer of stocks which remain unsold Be conservative about realization of ‘forms’ Do not delay registration under Central Excise Do not miss option to pay VAT but deliver later The credit will be carried forward only if the proper invoice is available VAT credits to be captured properly in the return

Manufacturers ED on FG no longer payable???? Missed out Cenvat credits to be identified and availed Examine whether to avail doubtful Cenvat credits Credit reversed on the instruction of department officers – Can it be re-availed with intimation if eligible. Credits availed on ineligible inputs/services to be reversed Look for Capital goods credit not claimed.

Manufacturers Wrong classification of capital goods as inputs and availing 100% credit taken instead of 50% - recovery provisions may be invoked Ensure that balance credit on capital goods is availed in April 2017. Not claiming the Cenvat credit when goods procured from registered dealer. Not demanding the excise invoice when goods procured from dealer.

Manufacturers Invoices lying at stores for clarifications on which no credits availed. Reconciliation of invoices with the receipts. Closing out supplementary invoices to be raised / received and avail credits Credit not claimed on the courier bill of entry Ensure credits are availed within one year from the date of invoice Credits on invoices raised on agents in case of CHA services

Manufacturers Reconciliation of stocks with job work. Ensuring compliance as to 180 days and reverse credits before appointed date – examine whether it can treated as removal of input as such and give credit to Job worker. Be prepared for stock declaration. Scrap accounting and disposal before/after cut off date.

Manufacturers Not collecting / submitting the exemption forms. Improper availment of exemptions. Not claiming Cenvat credit on sale return Not claiming the Cenvat credit on branch expenses such as rent, commission, Telephone etc. Cenvat credit claimed on inputs/capital goods when assesse opted for 2% concessional rate Credits claimed on goods which are covered under 2% concessional rate

Manufacturers Examining the option of 6% or formula based credit reversal u/r 6 of CCR Check the computation of Rule 6 (3) of CCR credits – Trading turnover 100% instead of considering 10% of COGS or profit which is more. Non-segregation of inputs/input servcies used exclusively for taxable goods/services. Applying ratio on total credit including capital goods credit.

Manufacturers Improper or omission to amortise tools cost. Improper method of valuation for captive consumption. Non-payment of duty on captive consumption Non-availment of credit on inputs and input services consumed at job-workers premises. Proper availment of credit of receipts from EOU. Treatment of goods lying at different location gone for exhibition/testing

Manufacturers Checking the appropriate status of credit balance and claiming refund/rebate. Collecting and submitting proof shipment in case of export of goods Receipt of forex to ensure no recovery of drawback and other benefits are denied. Cenvat credit not claimed on closing stock when the assesse opted out of SSI exemption

Manufacturers Follow up with the department of any credits to be permitted for transfer in case of shifting/transfer of factory Not filing the statutory return with proper disclosure

Service Providers Not surrendering registration of non-operational premises Missing out any premise for enrollment to GST Not collecting service tax on advance amounts from customers Non bifurcation of value of goods and services wherever possible on advance amounts on continuing contracts Non identification as deposits or advance amounts in contracts – separate treatment in GST

Service providers Wrongly charged ST on exempted services – Suo-motu adjustment not possible. Customers may deny payment. Non issue of credit notes for post-service discounts, amount adjustments. Rule 6(3) adjustment could be denied. Claim of wrong abatements / adjustment for ST payment may lead to demand which would cost as no credit.

Service providers Wrong utilization of credits – SAD / SBC Non availment of ED / CVD credit on capital goods for carry forward to GST Claiming IT depreciation even on credit amount in case of capital goods Non availment of credits reversed under protest, if any with intimation to department

Service providers Not availing re-credits of earlier reversed credit due to non-payment in 3 months Non availment of Cenvat credit – RCM tax payments Non payment of ST on amounts credited to accounts of associated enterprises – RCM Non payment of ST under RCM – Payment in GST regime may result in losing credits Non claim of deductions towards R&D cess paid towards ST liability

Service providers Not ascertaining impact of long term procurement contracts entered – Pricing, taxes Not intimating the impact of possible higher GST rate to customers Not communicating impact of change in POS in GST regime compared to present ST provisions Not amending the contracts which are inclusive of taxes

Service providers Not issuing invoices for taxable services provided Not demanding invoices from vendors for advance amounts paid Not planning for negotiating the prices of goods / services with vendors in GST regime

Importers Imports arriving on implementation date Goods in bonded warehouse: Ex-bond sales liable to BCD+IGST Impact on imports against ‘firm price’ contracts Continue SAD refund under current law Verify inventory on LIFO-basis with BE Returnable exports and incidence of GST Document transactions in coastal goods

Exporters Ensure realization of export proceeds: Cenvat effect u/r 6(8) Error in carried over credit balance Continue export-refund under current law Returnable imports and incidence of GST Effect of drawback revision due to GST Do not continue exempt and taxable supply in same State

EOU-SEZ Ab initio exemptions to go; optimize imports Discontinue use of ab initio exemption forms Minimize duty-free equipment carried over Review ‘centralized’ activity; branches distinct Pros of separate business vertical registration Completion of Export Obligation Usage of materials within bonding period

Works contractors No deduction of sub-con and labour charges Examine ‘right’ time to exit from COT Suppliers /sub-con to allign with transition plan Capital goods ‘at site’ not covered by job-work Review ‘in situ’ manufacture impact Do not accumulate ‘WIP’ at site GST impact on unadjusted advance received

General Errors GST enrolment / registration: Plan requirement of registration Optimize number of States to be registered Do not enter GST being ‘unregistered’ Do not delay GST enrolment Closure of non-operational/non-economical locations PoS not the same as situs under current law Non-availing of various refunds/benefits which are eligible under earlier law Non-checking of the status of the cases as future action can be decided Non reconciliation of books of account with returns to match credits, liabilities

Thank You For any Clarification, Please Contact Indirect Taxes Committee of ICAI Email: idtc@icai.in, Website: www.idtc.icai.org