Input Tax Credit Utilization

Changes have been announced in the input tax credit utilization in the GST and now the taxpayers have to first utilize the input tax credit of IGST and then only utilize the other taxes input for offsetting the various tax liabilities in GST.

These changes are announced in the CGST Amendment Act 2018.

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FAQ – 9

Can a taxpayer take input tax credit after the due date of September month return or filing of Annual Return?

No, you cannot take credit of the previous fiscal year after the due date of the September month return or filing of annual return whichever basis on the provisions of Sub-Section 4, Section 16 of the CGST Act.

GST ITC Impact on financial year closing

The input tax credit availed in GST is under provisional basis…the reason is matching is not done…….so what are the financial implications? Do i need to state it as contingent item or make  a provision for the same in the financials? – point to ponder before close of financial statement for the FY 2017 – 18?

DEMYSTIFYING ANTI-PROFITEERING IN GOODS AND SERVICE TAX

Anti-profiteering is introduced in the GST Act based on the experience gained at the time of implementation of VAT in India and all other countries where GST / VAT is rolled out. The Government across the nations felt that the until and unless there is a provision in the law the benefits of the new tax regime are not being passed.

The benefit of the ITC is clearly evident in the MRP based goods, the prices are fixed based on the assumption that in the erstwhile tax regime Central Excise Taxes are not eligible for Input Tax Credit but with GST all the taxes are eligible for the ITC across the supply chain cycle, this means that ITC on the taxes can be claimed at all stages of supply. Say for example, Central Excise taxes were not eligible for ITC by the wholesaler or distributor or the end retailer, therefore Central Excise duties were part of the MRP but in GST, all the taxes are eligible for ITC, so the MRP’s have to revisited and reduced accordingly. Recently we have seen a case where one of the major FMCG company has not passed on the rate reduction, the company has paid Rs 119 crores as fine.

It is really a herculean task but not an impossible task to determine the reduction of the cost on account of additional ITC in the supply chain, reduction of taxes and taxes subsumed in GST.  Many of the taxpayers are of the assumption that there is no change in the pricing as they were taking ITC in the erstwhile tax regime and now also, but they have to look beyond then only come to a conclusion. The reduction in the MRP can be used and widely publicized as in the Australian Model where it is required to show the pre-GST and post GST Prices. Though display of dual MRP is not a mandatory feature in GST, the same can be used and shown predominantly on the goods. Adhering to the provisions of the anti-profiteering is also part of the corporate governance.

Let me explain the same with a small illustration practically A Ltd and B Ltd are two manufacturers of a health dink brands H and I.  A decided to reduce the price of the product H and use the Australian Model of dual GST and whereas B Ltd has not reduced the price as it did not consider the same to be required. In the departmental stores both the brands H & I are placed in the same rack. When the customers walk in to buy the health drink, he is attracted to brand H as he says the price is being reduced and also following the compliance even though he is using the brand I for a long time. The loyalty of the customer shifts from the brand I to brand H of company A Ltd.

This is one of the products I have seen in the departmental store for the reduction of the GST, this is how this company is publicizing the price reduction.

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It is a known fact that cost of acquisition the customer is very high and retaining the customer is also high. Here the cost benefit analysis is also not required as it is a statutory obligation and also as part of the corporate governance it has to adhered.

Anti-profiteering as seen is not anti-business but it can be used as a tool to improve the market share and profitability on account of volumes and lesser spend on the marketing costs. This benefit is available only for the corporates who act proactively and the early adopters.

It is known to all that the Director General of Safeguards has issued notices to companies and the investigation is in under process. In today’s dynamic world any negative news on the brand or the company will have an immediate impact on the sales and could also impact the profitability as well as the market capitalization if listed in the exchanges.

As part of the corporate governance and statutory obligations in the GST Act, any reduction in the rates or the availability of the Input Tax Credit has to be passed to the end customer.

The author can be reached for any further clarifications on the same on the mail id mallikarjunagupta@india-gst.in

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 owner may or may not be associated with in 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.

GST Tip – 308

As per section 29 of the CGST Act at the time of cancellation of registration, the taxpayer has to reduce the input tax credit claimed at rate of 5% per quarter on the capital goods, plant, and machinery.

GOOD AND SIMPLE TAX – GST FOR YOU

My third book on GST, ‘GOOD AND SIMPLE TAX – GST FOR YOU” is now available at https://notionpress.com/read/good-and-simple-tax-gst-for-you

ISBN – 9781947697737

The Goods and Service Tax rolled out in India on 1st July 2017 subsuming a plethora of taxes into a single tax and enabling input tax credit at every stage of the supply chain, thereby making the products and services cheaper to the end consumer. The rollout of GST also improves the ease of doing business in India.

The way the business is carried out in India is undergoing a major change as the terms of manufacture, purchase, sale, and service is replaced with a single word called “Supply.” The author covers all these topics like Supply, Place of Supply, Time of Supply and Valuation with easy to understand examples so that the trade and industry can benefit at large from the same and change their business practices accordingly.

“GOOD AND SIMPLE TAX – GST FOR YOU” is a written in layman’s language and it explains the complex GST requirements in a simple and lucid language with examples.

  • – CS Vasudeva Rao Devaki, DV Rao and Associates

Kindle version and e-book will be released shortly

book 3

 

GST Tip – 297

GSTR – 3B has to be filed by 20th Aug 2017 for the month of July transaction with GST. Following are the key points

  1. Every tax payers under GST except registered under composition has to file this return.
  2. Data entered in GSTR – 3B will be reconciled with the GSTR – 2 and GSTR – 2 to e filed subsequently
  3.  Taxpayers have to discharge the liability of GST only by payment and existing ITC cannot be utilized, stress on cash flows.
  4. While entering data in GSTR – 3B, complete the returns of GSTR – 1, so that there will be minimal reconciliation issues
  5. No offline utility, return has to be filed online only