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

2. 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

3. 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

4. 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

5. 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.

6. 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.

7. 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

8. 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.

9. 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

10. 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.

11. 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

12. 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

13. 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

14. 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

15. 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.

16. 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

17. 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

18. 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

19. 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

20. 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

21. 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

22. 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

23. 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

24. 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

25. Thank You For any Clarification, Please Contact
Indirect Taxes Committee of ICAI
Website: