As the end of the financial year approaches, it is essential for businesses to ensure that they are complying with their Goods and Services Tax (GST) obligations. The GST system can be complex, with various rules and regulations that need to be followed, which is why having a checklist can be incredibly helpful.
In this article, we will provide a comprehensive GST checklist for the end of the financial year 2022-2023. Whether you are a small business owner or a financial professional, this checklist will help you ensure that you have fulfilled all your GST obligations and are well-prepared for the next financial year.
GST Reconciliations B/W Return Forms
A comparison between the data of outward supplies in books and the GST returns (books, GSTR-1, and GSTR-3B) can help recognise possible changes to the GST returns. Turnover and taxes should also be included in this differentiation.
The differences can be identified by making a settlement between the documented rates in books and the reported rates in GSTR-1, counting tax ledgers, and 3B for the reverse charge mechanism (RCM).
Some other discrepancies, including monthly entry mistakes, missed or excess claimed ITC (input tax credit), etc., can be disclosed by making a comparison between the credit balance and cash in the GST portal and the balance documented in the books.
Making an invoice-level basis differentiation between GSTR-2B and the ITC register in the books can be beneficial. It can assist in tracking eligible and ineligible ITC and coordinate them with the ITC revealed in GSTR-3B for the fiscal year. This study should also keep track of the overflow of transactions.
If the RCM paid is in line with the RCM ITC claimed not including ineligible ITC, make a verification. It can help in identifying any discrepancies.
If compared, the combined HSN value stated in GSTR-1 and the value stated in the books can reveal any discrepancies.
Settlement of the GST e-way bill along with GSTR-1 can ensure the requirement of the e-way bill for the supply.
The comparison between the physical inventory and the inventory described in books can help in estimating a few things. This can assist in confirming the requirement of ITC reversal by identifying accounting lapses or missed ITC. Such studies can help in preparing for GSTR 9 and 9C, which are due in December 2023.
GST Liability for Outward Suppliers
Make sure that any GST debit or credit note requires to be generated for any short or excess value applicable or the consumer makes any sales return. October 31st is the deadline for credit notes. More importantly, the agreement clauses on discounts and the requisites to issue credit notes.
Make certain the adherence to Section 18(6) for the transfer or sale of Plant and Machinery. The valuation check for related-party transactions should also be considered.
Examine the utilisation of tax entries in the accounts’ books in comparison with the electronic liability ledger.
Examine the debtor’s ageing report to evaluate the tax suggestions for customers. For example, customers’ input tax credits (ITC) may not be entitled to payment. Furthermore, check for MSME non-compliance, which helps realise this.
Examine and make the required changes in GSTR-1. These amendments could be about outward supplies from B2C to B2B or the tax type. If it is required that the credit be given to the clients, make sure to do it before the deadline. A solid mandate can be provided stating the amendments are not to be accepted beyond the end of the financial year.
Make sure the tax liability is equal to the receipt of advances for services and adapt to obtain unadjusted advances. Recently, it has been clarified in the refund voucher in GSTR-1.
Cross-charge differences between individuals and related parties for the supply of regular services.
Establish that the CGST/SGST is paid instead of the IGST or vice versa. Acknowledge whether Section 77 (CGST Act) or Section 19 (IGST Act) are applicable or not.
Check which income from other sources is subject to tax under the GST. Make sure the tax position is clear. In this, employee recoveries are not payable, recently clarified incentive vs. discounting, and GST interest on late payment receipts can be included.
Accommodate the GST e-invoices generated during the year with the tax invoices.
To keep yourself away from future disputes, use standard terms in the contracts.
Examine that the ITC with reference to any credit notes generated would be inspected in reverse.
GST Input Tax Credit
Substantiate that input tax credits have been exchanged in the case of entries relating to inventory write-offs, asset write-offs, samples, destruction, theft, obsolete items, etc.
Make certain that ITC reversal is necessary as per Rule 37 in case of non-payment within 180 days. Or resumption of supply of any ITC whose payment is completed. It has been recently elucidated in Table 4B.
Confirm the availing credit time and, along with the goods or services receipt, Section 16, credits under RCM, credit on advances that are inapplicable, etc.
Recognize that through GSTR 2B, expenses and ITC are not considered.
Make a report for the credit where information is not contemplated in GSTR- 2B and consider postponed input accounts. Measure again before October of the following year. Consider demanding the amount from the vendor and giving it as expenses.
For both exempt and taxable supplies, including re-computation, take into account the effects of the annualised ITC reversal under Rule 42, except for duty scrips.
Calculate Rule 43 for capital goods using the formula, then consider the results if Rule 42 were applied.
When closing the books, make sure that capital assets are treated correctly in order to maximise input credits. Think about the eligibility for buildings versus P&M, for vehicles versus P&M, and for capital expenditures on civil works versus other civil works.
Determine whether any reversals are required as opposed to rejected and returned purchases or other credits to the expense ledgers, and make sure the impact has been taken into account in the GST return.
Check for compliance with ISD (Input Service Distributor) requirements and see if a cross charge can be put together to make sure that just a procedural lapse occurred.
Check to see if credit for CGST or SGST was used for IGST or the other way around.
Check to see if the same assessee or a different GSTIN is used to obtain credit (PAN).
Recheck the ITC masters and the categorization criteria to confirm ITC eligibility.
Validate vendor credit notes reflected in GSTR 2B that call for the reversal of ITC (as recently clarified, tracking and verification of such credit notes to auto-populate in 4.A.5 (net) is more difficult).
Import of goods: Bill of Entry (BOE) vs. ICEGATE vs. GSTR 2B, these should be systematically checked to make sure there are no missed items.
Reverse Charge Mechanism
Confirm the treatment of the accounting for the transaction considered in reverse charge. And also check for the limitations made by the system in documenting such transactions as direct expenses. For example, freight is subject to RCM.
Evaluate the liability for Reverse Charge Mechanism on transactions with entities, including foreign-associated ones, in reference to the provision entries in the books.
Study different expenses and make sure the settlement includes GST provisions. The compliance includes:
- Freight and transportation payments (recently allowed is FCM @ 5%)
- Residential holdings by commercial entities (not accountable since 18.17.22 following the 48th council meeting)
- Legal expenses for advocates
- Security services (will not apply if the provider is a corporate body.)
- Renting any motor vehicle from non-body corporates (refer to sl. 15 in GST Circular 177/09/2022 for clarity)
- Importing services (with or without consideration) (useful sources include Form 27Q and Form 15CA/CB)
- Sponsorship/advertisement/marketing fees and marketing fees and licences are granted to many governments (by CG, SG, and LA only, including different exemptions present in NN 12/2017-CTR).
Examine the GST settlement for the amount related to the real estate division as per Section 9(4) of the GST Act.
The deadline for making corrections, deletions, and modifications to GST returns for the respective Financial Year is 30th November 2023. It is the last date for the October 2023 GST returns.
Other Compliance
The Letter of Undertaking (LUT) application for distribution or renewal should be submitted for the fiscal year 2023–24.
An individual is required to submit Form CMP-02 on the common platform before March 31, 2023, to get the composition scheme for the financial year 2023–24.
If an applicant who is already registered has applied for the composition scheme for the fiscal years 2022–23, he is required to file Form GSTR-4 on or before April 30, 2023.
April 30, 2023, is the deadline to opt-in or opt out of the QRMP.
The applicant should verify the e-BRC receipt of export proceeds within nine months (linked to FEMA). If it is not done before the given period, questions about the eligibility of “zero-rated supply” will be raised.
Submit a file of refund applications in accordance with the updated time limit extended by the Supreme Court.
A time period has been decided for goods sent on job work or approval, which is 1+1 year inputs/3+2 years CG. So keep track of the status of these supplies and make sure they are being received within the specified time duration. In case of delay, the invoice must be issued accordingly.
Confirm year-end accrual and provision entries for transactions involving related parties and evaluate the GST implications along with the chances of importing services.
Displaying the HSN 6-digit level in tax invoices from 01.04.2021 is necessary for turnover exceeding Rs. 5 crores. Make sure the information is accurate.
GST registrations from other states can also be useful if obtained from the state where supplies are made. It can be done by getting along with the concept of fixed establishment, supply, and other requirements.
Tax heads are liable to pay interest at 18% per annum on the utilisation of ITC.
Keep a copy of the letter of protest if tax is paid over the protest (pre-notice/department visit) or if an ITC is reversed over the protest.
Keep records of notices, letter covers, replies/responses (mail+RPAD), etc. in a separate correspondence file.
Maintain records of inward, outward, RCM, EWB, and documentation for six years following the due date of FY 22–23 annual return, or six years following December 31, 2023.
Start a new billing cycle on April 1st, 2023, for the fiscal year 2023–2024.
Companies having an annual turnover of over Rs. 10 crores in any FY between 2017–18 and 2022–23 are needed to generate e-invoices.
The attachment of GST compliance requires a separate focus and thoroughness. Taxpayers are required to make sure that they are not the only ones associated with the regulations. Their vendors also complied with the rules as well.
Going along with these expectations makes the establishment of a robust internal command essential. Moreover, it also necessitates the adoption of technology and ongoing training and education for the GST compliance team.
