System Changes form 1st April 2021 for Businesses

The new financial year starts tomorrow, and there are many activities to be done as per year ending for the organization. Apart from those year-ending activities, some changes must be done from 1^st April 2021 with respective compliances from GST, Income Tax & MCA purposes. These changes are statutory for some and for some in improving the ease of doing business. Key changes required to be carried out from 1^st April in are listed below

1. New document series

As per provisions of Goods and Service Tax, the taxpayers must maintain unique number series for the documents being issued by them for every financial year. The document sequence has to be re-set for some accounting packages. It is automatic in some accounting packages, cases where it has to be done manually; the taxpayers have to be careful and complete this step before creating any new transactions for the new financial year. Document Sequence/numbering has to be changed for the following documents in GST

• Tax Invoice
• Bill of Supply
• Tax Invoice Cum Bill of Supply
• Debit Note
• Credit Note
• Delivery Challan
• Payment Voucher
• Receipt Voucher
• Refund Voucher

2. HSN Code

There is also a change in the HSN code requirement under GST to be printed on the Tax Invoice. The following are the changes

• For taxpayers how are having turnover above ₹, five crores are required to show six digits
• For taxpayers whose turnover is below ₹, five crores are required to show four digits in business-to-business transactions. In the case of Business to Customer Transactions, it is optional.

The taxpayers have to make necessary changes for the Item master if not updated with the latest provisions.

It is recommended to make changes for the item master with eight digits as it will be applicable in the near future, and changing master data frequently is not advised. Moreover, it is time-consuming and unproductive work.

3. E-invoice

e-invoice is required to be issued by taxpayers whose aggregate turnover is above ₹ 50 crores during the last three years from 1^st April 2021.

It is recommended to make changes to the accounting or ERP system to address the above change.

If the taxpayer does not issue an e-invoice, is it not considered a tax invoice, and the recipient cannot take input tax credit at all.

It can be implemented using any of the four methods

• Application Program Interface (API)
• Secure File Transfer Protocol (SFTP)
• Bulk JSON
• Single JSON

For adopting any of the above methods, the taxpayers can approach any of the GST Suvidha Providers (GSPs or Application Service Providers (ASPs).

Even though the taxpayers will be using the Bulk or Single JSON upload for the generation of e-invoice from the department portal or ASP/GSP solution, the same will not be integrated with the Accounting/ERP system; this may pose a challenge in the future. It is strongly recommended to update the Accounting/ERP system with e-invoice details for future references.

4. LUT

Letter of Undertaking is required to be taken by taxpayers who are making Zero Rated Supplies, and a new one has to be obtained before 1^st April 2021.

It is recommended to take the same at the earliest, or it may impact your outward supplies accordingly.

5. Accounting package with audit trail and edit log

As per the latest notification from the Ministry of Corporate Affairs, all companies using accounting packages have to ensure that there is an audit log in the accounting package with the edit log.

Companies have to ensure that they are enabling the same if they maintain the same or request their accountant or CA to do the same.

There is a difference between the audit trail and edit log, in case of audit trail only Who is Who information is captured and in case of Edit log the date elements changed is also captured for future reference.

6. Change in Income Tax Rates – TDS & TCS

Due to the pandemic and lockdowns, the Government has announced a reduction in tax rates up to 31^st March 2021 for some sections, and now from 1^st April, the new rates or actual rates will be applicable.

It is recommended to verify and enter the new TDS / TCS rates in the masters with the effective date to maintain the audit trail as per MCA notification. In case of shot, deductions of TDS or recovery of TCS penal provisions are applicable.

The above listed are major changes required to be carried out and same may vary from each taxpayer based on his nature of business and turnover. The taxpayers should always remember one thing, cost of non-compliance is a costly affair compared to the cost of compliance. Wherever required the taxpayers should take professional advice and not relay in information available in public domain to their best interests.

Disclaimer

Any views or opinions represented above are personal and belong solely to the author, and do not represent those of people, institutions, or organizations that the author may or may not be associated with within a professional or personal capacity unless explicitly stated. Any views or opinions are not intended to malign any religion, ethnic group, club, organization, company, or individual.

10 Points About Dynamic QR Code in GST

Dynamic QR (Quick Reference) code is required to be shown on all Business to Customers Tax invoices issued by a registered taxable person whose turnover exceeds rupees five hundred crores during any of the last three financial years.

1. Is there any difference between the QR code issued for e-invoice and the dynamic QR code?

Yes, there is a difference. Dynamic QR code is issued by taxpayers having turnover above rupees five hundred crores during any of the last three years for business-to-customer transactions. QR code for e-invoice is issued for a taxpayer in relation to business-to-business transactions.

2. From when is dynamic QR Code is applicable?

Initially, a Dynamic QR code is required to be issued from 1^st of April 2020 wide notification number 72/2019 – Central Tax dated 13^th December 2019. It got postponed to 1^st of October 2020 wide notification number 14/2020 central tax, dated 21^st March 2020, due to the pandemic-like situation and business were not ready to implement the same technologically. The same got postponed to 1^st Dec 2020 wide notification number 71/2020 – central tax dated 1^st Dec 2020.

As part of providing relief to the taxpayers, notification number 89/2020 – central tax dated 29^th Dec 2020 issued waving of penalty under Section 125 of the CGST Act 2017 from 1^st December 2020 to 31^st march 2021 in case if the taxpayers’ issues tax invoices without dynamic, quick reference code for business-to-customer transactions.

From 1^st of April 2021, all taxpayers having aggregate turnover above rupees five hundred crores must issue dynamic, quick reference code for business to customer transactions.

3. Why did the Government introduce the Dynamic Quick Reference Code?

The Government has issued the dynamic, quick reference code to track the invoices and payments received against such invoices.

4. What should be shown in the dynamic QR code?

The dynamic QR code should show the following information

• Supplier GSTIN number
• Supplier UPI ID
• Payee’s Bank A/C number and IFSC
• Invoice number & invoice date,
• Total Invoice Value and
• GST amount along with breakup, i.e., CGST, SGST, IGST, CESS, etc.

 The dynamic QR code generated should have the facility for the customer to make digital payment.

5. Dynamic QR codes should be generated for which documents?

Dynamic QR code has to be generated for only tax invoices only as per notification number 72/2019 – Central Tax dated 13^th December 2019.

6. In the case of exports, the overseas customer does not have a GSTIN number. Dynamic QR code has to be issued for export transactions?

No, a dynamic QR code is not required to be issued for the export invoices as e-invoice is being already issued for such transactions.

7. In multiple instances, we could see the suppliers or the retailers displays the QR code for enabling the payment by the customers. In such cases, also the Dynamic QR code has to be printed on the tax invoice?

As long as the supplier maintains the payment track, issuing tax invoices with dynamic QR codes for Business to customer transactions is not required.

The payment reference should be linked to the tax invoice/transaction id, date, time and amount of payment, mode of payment like UPI, Credit card, Debit card, online banking etc.

8. There are instances where the customers pay the retailers in cash; even in such cases, dynamic QR code has to be provided?

No, if the customer opts to pay the invoice in cash, it is not required in such cases, but the retailer has to maintain the cross-reference of the same.

9. In some instances, we come across where the retailer collects the payment before the issue of tax invoice, like sharing the OTP in case of Paytm or making payment through a link. Even in such cases, the retailer has to issue a Dynamic QR code?

In such cases, the retailer is not required to issue the tax invoice with a dynamic QR code as the payment is collected before the invoice is issued and cross-reference for the payment and invoice already exist.

10. In case of cash on delivery by the e-commerce operators or supplies made through e-commerce operations, does the tax invoice issues should have the Dynamic QR code?

In the case of supplies through e-commerce operators by e-commerce operators for cash on delivery termed as COD basis, a Dynamic QR code must be issued and printed on the tax invoice.

The Government has provided multiple postponements for the Dynamic QR code rollout, and now it is mandatory to be issued from 1^st April 2021. If the taxpayers do not follow the same, then the department officers can issue penalty under Section 122 and Section 125 of the CGST Act 2017. Going by the trend of issue of e-invoice where the threshold has been reduced from rupees five hundred crores as on 1^st Oct 2020 to rupees 50 crores from 1^st April 2021, the threshold for the issue of dynamic QR code can also be reduced going forward. Based on past experiences, the taxpayers should gear up for the same even though it is not applicable as on date.

CAG Audit Report on GST

CAG has submitted Audit Report to the Parliament on 24th March 2021 for the period ending 31st March 2019 and 2020.

The report can be accessed from here

Selection of Core Business Activity on GSTN Portal

GST has enabled a new feature on the GST portal. At the login time, the portal prompts the user to select the “Core Business Activity.” This is required for the department to understand the nature of the business carried out by the taxpayers.

The portal prompts three options initially

Manufacture – A manufacturer is a registered person who produces new products from raw materials and components using tools, equipment, and machines and then sells them to the consumers, wholesalers, distributors, retailers, or other manufacturers. A manufacturer may sell some more brought-out items or may provide some ancillary services with his manufactured goods. Still, he would continue to be classified as a manufacturer because it is the Primary Business Activity.

Trader – A trader is a registered person who engages in the buying and selling of goods. Traders have been further classified as –

• Wholesaler or Distributor
• Retailer

Retailer includes a registered person selling goods through e-commerce operators.

Service Provider & Others – A service provider is a registered person who provides service to a recipient and is neither a manufacturer nor a trader—Example Banking service, Information Technology service, works-contract service, agents, intermediaries, Goods Transport Agency etc.

The taxpayers must select only one of the Activity prompted.

The taxpayer should select one Activity which is providing him the major source of Revenue. Say, for example, if the taxpayer is having a manufacturing turnover of rupees one crore and forty lakhs and services of rupees twenty lakhs, in this case, the taxpayer has to select manufacturing as it is contributing maximum Revenue to him/her.

If the taxpayer is providing works contract services or others, then he/she can select the “Service Provider & Others.”

If the taxpayer is selecting “Trader,” then the system will prompt the taxpayer to select either of the following “Wholesaler/Distributor” or “Retailer.”

The options selected by the taxpayers can be modified at a later date by navigating through My Profile on the GST portal.

Important changes applicable from 1st of April 2021 in GST

From 1^st April 2021, some changes are being made in Goods and Service Tax which taxpayers have to follow and implement the same.

e-invoice

e-invoice is required to be issued by all registered taxpayers having turnover above rupees fifty crores for all B2B transactions.

• Display of HSN codes on Tax Invoice

Taxpayers having turnover above rupees five crores are required to show six HSN code digits on all tax invoices.

Taxpayers who are having turnover below rupees five crores are required to show four digits of the HSN code in case of B2B (Business to Business) and B2C (Business to Customers) optional to show HSN codes.

• Changes in HSN Summary while filing GSTR – 1

While filing GSTR – 1 on a monthly or quarterly basis, the taxpayers have to report the HSN codes as discussed in Point Number 2 in the HSN Summary that is in Table 12 of GSTR – 1.

Cost of Non-Compliance

The cost of non-compliance is always higher than than the cost of compliance. In case if the taxpayers are not adhering to the above changes, then the department can levy a penalty under Section 125 of CGST Act 2017, residuary penal provision of rupees twenty-five thousand for Central Goods and Service Tax and another twenty-five thousand rupees for the State Goods and Service Tax thereby making the penalty amount to rupees fifty thousand.

Taxpayers are requested to make necessary changes in their business process and accounting or billing software or return filing solutions accordingly else the penalties will be levied.

e-invoice threshold changes from 1st April 2021

e-invoice is being implemented in India very aggressively compared to other nations across the globe. Within a span of 6 months we could see the changes in the threshold and also the number of e-invoices issued. It all started from 1st Oct 2020 for taxpayers having turnover above Rs 500 Crores. The same has been decreased to Rs 100 Crores from 1st Jan 2021 and now it is further reduced to Rs 50 Crores from 1st April 2021.

The number of e-invoices issued has already crossed 25 crores on 3rd Feb 2021 and the count is increasing.

As per Notification no 5-Central dated 8th March 2021, e-invoice is applicable for taxpayers having turnover above Rs 50 crores. This is a good news compared to the initial talks of Rs 5 crores from 1st April 2021.