1. Documentation and Teething problems & probable solutions (27.09.2017)
Aurangabad Branch of WIRC of ICAI
Documentation and Teething problems & probable solutions ( )
CA Avinash Poddar

2. Presentation Plan Discussion on certain critical issues of GST Law
Presentation Plan
Discussion on certain critical issues of GST Law
Important Documents under GST
Teething problems and Probable solutions

3. Discussion on certain critical issues of GST Law
Discussion on certain critical issues of GST Law

4.
Trade Circular

5. Trailer is good – picture not so good
Trailer is good – picture not so good
The idea of GST was initiated to create a national market and to avoid cascading effect of taxes.
However, the final shape of GST that has come on is not good at all.
In fact, some of GST provisions are ‘terrors’.
Most certainly the compliance costs are heavy and there is absolutely no ‘ease of doing business’.

6. Achievements National Market – about 70% achieved
Achievements
National Market – about 70% achieved
Avoid cascading effect of taxes – about 70% achieved
Problems due to overlapping of Vat and service tax – practically eliminated
Uniform GST Law all over India – 95% achieved

7. Unique features of GST as introduced in India
Unique features of GST as introduced in India
Concept of IGST is a unique idea – nowhere else tried
GST on supply and not on manufacture or sale. This changes entire structure of tax
Dual structure is unique
Distinction between goods and services considerably reduced – avoiding overlapping of taxes
Uniform law on goods and services all over India
Heavy compliance cost

8. Special features of Indian GST
Special features of Indian GST
Invoice and debit/credit note matching on such a grand scale has nowhere else been tried
Centre State Cooperation at unprecedented level. All decisions so far in GST Council by consensus and not by voting
Most complex GST law in the world

9. Basic philosophy behind GST Law
Basic philosophy behind GST Law
All taxable persons are crooks and rascals
The taxable persons are not trust worthy and they are out to cheat Government
On the other hand, all tax officers are saints and honest people
Most unfriendly tax administration

10. Brain Hard Disk has to be formatted
Brain Hard Disk has to be formatted
GST conceptually different from excise, service tax and Vat
Many concepts like captive consumption, invoice at the time of clearance find no place in GST
No basic exemption of 20 lakhs in GST
The old concepts have to be completely wiped off
Not easy to get out of hangover of the past

11. Mandatory Registration
Mandatory Registration
In some cases, even if service is exempt or under reverse charge, if some taxable service is supplied, then registration mandatory
Education services, hospital services – even Advocate Services
Petrol pumps selling lubricants and other products
Once registered, reverse charge applies – no exemption of 20 lakhs

12. CGST/SGST paid when IGST was payable and vice versa
CGST/SGST paid when IGST was payable and vice versa
Interpretation of provisions of ‘place of supply’ and ‘fixed establishment’ are critical in determining whether IGST is payable or SGST/CGST are payable.
A taxable person who has paid CGST/SGST on a transaction considered by him to be an intra-state supply, but which is subsequently held to be an inter-state supply, shall be granted refund of CGST /SGST (in SGST Act). This means that he will have to pay IGST and then claim refund of SGST/CGST paid.
There is Parallel provision in IGST Law also.
Really, there should be adjustment between State and Centre.
If the receiver had availed input tax credit, refund will not be admissible.

13.
Post supply discounts and price reductions not eligible for deduction from value
Giving trade discounts and price reductions during negotiations after supply of goods and services is very common in business. However, if such post supply discounts were not anticipated at the time of supply, it is not allowed to be deducted from value.
This provision completely ignores business reality. as post supply negotiations and price reductions are common in business.
Further, if payment is not made within 180 days, then input tax credit is to be reversed. This is double whammy.

14. Artificial disallowances of input tax credit
Artificial disallowances of input tax credit
disallowing input tax credit on rent-a-cab service makes no sense, as this service is used for legitimate business purposes. In fact, no definition of ‘rent a cab’
Some services like food and beverages and beauty treatment are legitimate business expenses for some kinds of businesses. In those cases, these should be allowable.
Interpretation of term – ‘for personal consumption’
Construction related services not eligible even if in relation to business. Input tax credit of legitimate expenditure like telecom towers and pipelines outside the factory is being denied.

15. SGST and CGST paid in one State
SGST and CGST paid in one State
Can credit of CGST and SGST paid in one State be availed in another State?
For example, hotel or rent bill in another State, can ITC be availed?
Can be done through ISD, then why not direct?

16. Payment of GST on advances received
Payment of GST on advances received
Receiving advance from customers is common. However, GST is proposed to be payable when advance is received, even if supply of goods and services is to be made at a later stage.
This will throw the accounting out of gear.
Input Tax Credit will not be available when GST is paid on advance received.
Interestingly, if you term the amount as ‘adjustable deposit’ in separate account, GST is not payable, though Company Law issues will arise.

17.
Reversal of input tax credit if payment not made to supplier within 180 days
If payment of bill and tax thereon is not made within 180 days, input tax credit is required to be proportionately reversed with interest
The purpose seems to be to avoid bogus invoices. However, since tax has been received by Government, there is no loss to Government when transactions are genuine.
It is not clear why Government is acting as recovery agent for supplier.
Some deductions from invoices, discounts are common in business. In construction industry, retention of 5%/10% amount for one or two years is common. In such cases, reversal of ITC will be required.

18. GST on fringe benefits to employees
GST on fringe benefits to employees
Employer and employee have been defined as ‘related persons’. Hence, fringe benefits provided to employees will be subject to GST.
It will be similar to fringe benefit tax, which will lead to tremendous litigation.
Gifts upto Rs 50,000 to employees may be exempted. However, reversal of input tax credit may be required.

19.
Electronic way Bill
E-way Bill is required to be generated if value of goods exceeds Rs 50,000
Transporters have to prepare fresh e-way bill if goods are transhipped (from one vehicle to another)
Transport time one day upto 100 Kms
Presently postponed but will come soon

20. Reverse charge if supply received from unregistered person
Reverse charge if supply received from unregistered person
There is provision of payment of GST under reverse charge if procurement is from unregistered person.
This will create tremendous accounting and record keeping challenges
In many cases, this will be revenue neutral exercise as input tax credit will be available.
Heavy compliance cost in maintaining records of petty expenses and preparing invoices

21. System is the master not human being
System is the master not human being
There is not likely to be human touch in many aspects of GST – registration and refund also computer based
This is particularly in case of input tax credit where human will be helpless against system
Mismatches, adjustment of payments on FIFO basis – all at mercy of system
Huge amount of data uploading and date crunching required – 300 crore invoices per month
If system fails, whole mechanism of input tax credit fails.
IT Infrastructure highly insufficient to take this load

22. Confusion about place of supply and location of supplier
Confusion about place of supply and location of supplier
Place of supply only determines whether IGST is payable or CGST and SGST payable
Place of supply does not mean registration required at that place
Registration only if a person has fixed establishment at that place
Casual Registration is not mandatory
Renting, erection and commissioning, repairs

23. Customs and Foreign Trade Policy
Customs and Foreign Trade Policy
Duty drawback will be mostly restricted to customs portion
IGST payable at time of imports by EOU
Advance Authorisations, Duty Credit Scrips, EPCG only for basic customs duty
IGST on value plus basic customs duty plus education cess
Imports to be uploaded in GSTR 2 and credit will be matched by customs
GSTIN number and Invice Number in shipping Bill
Refund of duty paid at the time of exports after ship or aircraft leaves
If no payment within one year, then export benefits to be reversed
Bond/LTU but no ARE1

24. Transitory provisions
Transitory provisions
Many questions – few answers
If no duty paying document then only 40% /60% credit – only for traders – not for manufacturers or service suppliers or works contracts
Service tax paid after e.g. cash basis or reverse charge – GST should be paid – but how to file return
Textile – can deemed credit of excise be availed?
Works contract – credit of excise on steel, cemen

25. Anti profiteering measures
Anti profiteering measures
Benefit of input tax credit and reduction in tax rates should be passed on to customer
Political gimmick but good source of harassment to taxable persons – no penalty provisions
Show should be made of price reduction when GST comes
After some time, bring prices to normal

26. Accounting challenges
Accounting challenges
GST on advance – correlation when actual supply made
Reversal of input tax credit if payment not made in 180 days
Bill entry and passing system has to be changed
Provisional entry when goods despatched by supplier to take ITC
Bill should be passed in full and then issue credit/debit note – otherwise no invoice matching

27. Important Documents under GST
Important Documents
under GST

28. Important Documents under GST
Important Documents under GST
Invoice
Delivery Challan
Challan for Goods sent on approval
Debit / Credit Note
E-Way Bill

29. Teething problems and Probable solutions
Teething problems and Probable solutions

30. Whether problems of GSTN are Teething problems...?
Whether problems of GSTN are Teething problems...?

31. Teething problems and Probable solutions
Teething problems and Probable solutions
Non preparedness of Government, GSTN Portal, GSPs and ASPs
Applied in July and got registered in August
Invoice issued on the basis of ARN
Editing data in GSTR-3B
Refund Forms
HSN Code (Classification) of some items – for e.g. item of Chapter 87, Water, Safety items for electricity arresters, etc.
Invoicing under Reverse Charge Mechanism
Appeals and Advance Ruling application not get functional

32. Teething problems and Probable solutions
Teething problems and Probable solutions
Penalty of GSTR – 3B paid for July month
Amendment of Core-filed of Registration
Linking of IEC code to GSTN even after entering details while applying for registration
B2B data of GSTR – 1 will be reflected in other person’s GSTR – 2A but other person is not able to Accept or Reject or Modify.
Previous year and present year (up to June) Turnover will be entered with Tax or without Tax
Form ITC-01 not available for taking Credit for new registrants

33. Many more critical issues
Many more critical issues
What we have discussed in only tip of iceberg. Many more complications would arise in due course.
No worry about job security to persons in GST department and consultants of GST
Let us hope that GST, as it finally comes out is ‘Good and Sensible Tax’.

35. Email - caavinash@gmail.com
Thank You
CA Avinash Poddar -