Clarification in respect of applicability of Dynamic Quick Response (QR) Code on B2C invoices and compliance of notification 14/2020- Central Tax dated 21st March, 2020 – Reg.

Circular Number 156/12/2021-GST dated 21st June 2021

1. Notification No. 14/2020-Central Tax, dated 21st March 2020 had been issued which
   requires Dynamic QR Code on B2C invoice issued by taxpayers having aggregate turnover
   more than 500 crore rupees, w.e.f. 01.12.2020. Further, vide notification No. 06/2021-Central
   Tax, dated 30th March 2021, penalty has been waived for non-compliance of the provisions of
   notification No.14/2020 – Central Tax for the period from 01st December, 2020 to 30th June,
   2021, subject to the condition that the said person complies with the provisions of the said
   notification from 1st July, 2021. Further, various issues on Dynamic QR Code have been
   clarified vide Circular No. 146/2/2021-GST, dated 23.02.2021.

2. Various references have been received from trade and industry seeking clarification on
applicability of Dynamic Quick Response (QR) Code on B2C (Registered person to Customer)
invoices and compliance of notification 14/2020-Central Tax, dated 21st March, 2020 as
amended. The issues have been examined and in order to ensure uniformity in the
implementation of the provisions of the law across the field formations, the Board, in exercise
of its powers conferred under section 168(1) of the CGST Act, 2017, hereby clarifies the issues

Question 1 . Whether Dynamic QR Code is to be provided on an invoice, issued to a person, who has obtained a Unique Identity Number as per the provisions of Sub-Section 9 of Section 25 of CGST Act 2017?

Answer : Any person, who has obtained a Unique Identity Number (UIN) as per the provisions of Sub-Section 9 of Section 25 of CGST Act 2017, is not a “registered person” as per the definition of registered person provided in section 2(94) of the CGST Act 2017. Therefore, any invoice, issued to such person having a UIN, shall be considered as invoice issued for a B2C supply and shall be required to comply with the requirement of Dynamic QR Code.

Question 2: UPI ID is linked to the bank account of the payee/ person collecting money. Whether bank account and IFSC details also need to be provided separately in the Dynamic QR Code along with UPI ID?

Answer : Given that UPI ID is linked to a specific bank account of the payee/ person collecting money, separate details of bank account and IFSC may not be provided in the Dynamic QR Code.

Question 3: In cases where the payment is collected by some person other than the supplier (ECO or any other person authorized by the supplier on his/ her behalf), whether in such cases, in place of UPI ID of the supplier, the UPI ID of such person, who is authorized to collect the payment on behalf of the supplier, may be provided?

Answer : Yes. In such cases where the payment is collected by some person, authorized by the supplier on his/ her behalf, the UPI ID of such person may be provided in the Dynamic QR Code, instead of UPI ID of the supplier.

Question 4: In cases, where receiver of services is located outside India, and payment is being received by the supplier of services in foreign exchange, through RBI approved modes of payment, but as per provisions of the IGST Act
2017, the place of supply of such services is in India, then such supply of services is not considered as export of
services as per the IGST Act 2017; whether in such cases, the Dynamic QR Code is required on the invoice issued, for such supply of services, to such recipient located outside India?

Answer : No. Wherever an invoice is issued to a recipient located outside India, for supply of services, for which the place of supply is in India, as per the provisions of IGST Act 2017, and the payment is received by the supplier in foreign currency, through RBI approved mediums, such invoice may be issued without having a Dynamic QR Code, as such dynamic QR code cannot be used by the recipient located outside India for making payment to the supplier.

Question 5 : In some instances of retail sales over the counter, the payment from the customer in received on the payment counter by displaying dynamic QR code on digital display, whereas the invoice, along with invoice number, is
generated on the processing system being used by supplier/ merchant after receiving the payment. In such cases, it
may not be possible for the merchant/ supplier to provide details of invoice number in the dynamic QR code
displayed to the customer on payment counter. However, each transaction i.e. receipt of payment from a customer is
having a unique Order ID/ sales reference number, which is linked with the invoice for the said transaction. Whether in such cases, the order ID/reference number of such transaction can be provided in the dynamic QR code displayed digitally, instead of invoice number.

Answer : In such cases, where the invoice number is not available at the time of digital display of dynamic QR code in case of over the counter sales and the invoice number and invoices are generated after receipt of payment, the unique order ID/unique sales reference number, which is uniquely linked to the invoice issued for the said transaction, may be provided in the Dynamic QR Code for digital display, as long as the details of such unique order ID/ sales reference number linkage with the invoice are available on the processing system of the merchant/ supplier and the cross reference of such payment along with unique order ID/ sales reference number are also provided on the invoice.

Question 6 : When part-payment has already been received by the merchant/ supplier, either in advance or by adjustment (e.g. using a voucher, discount coupon etc), before the dynamic QR Code is generated, what amount should be provided in the Dynamic QR Code for “invoice value”?

Answer : The purpose of dynamic QR Code is to enable the recipient/ customer to scan and pay the amount to be paid to the merchant/supplier in respect of the said supply. When the part-payment for any supply has already been received from the customer/ recipient, in form of either advance or adjustment through voucher/discount coupon etc., then the dynamic QR code may provide only the remaining amount payable by the customer/recipient against “invoice value”. The details of total invoice value, along with details/ cross reference of the part payment/ advance/ adjustment done, and the remaining amount to be paid, should be provided on the invoice.

3. Circular No. 146/2/2021-GST, dated 23.02.2021 stands modified to this extent.

Changes in the e-invoice Validations Architecture

e-invoicing is implemented in India from 1^st Oct 2020 for taxpayers having turnover above ₹ 500 crores and now the threshold has been reduced to ₹ 50 crores from 1^st April 2021. The pace at which the Indian businesses have adopted is remarkable and all the credits to NIC for putting in place robust infrastructure which as ensured seamless experience to the taxpayers without any major glitches. The e-invoicing system is also undergoing constant changes from time to time based on the dynamic requirements of the taxpayers and their feedback. Some of the changes are announced and architectural changes have been made and they are

a) The existing Authentication API ver 1.03 is replaced with ver 1.04 from 10^th April 2021

b) Two new attributes have been added to the response JSON for “Get GSTIN Details” & “Sync GSTIN Details” and the newly added attributes are

i) Date of Registration

ii) Date of De-registration

c) IRNs cannot be generated if the Supplier or Recipient GSTINs are in “Suspended”, “Provisional” or “Inactive” or “Cancelled” status. This validation will ensure that IRNs are not generated for such recipients and will minimize the taxpayers exposure to that extent.

d) If the Registration status of the Supplier or Recipient is in “Cancelled” status, the document date should be between the Date of Registration and Date of De-registration. This validation will ensure that business is not impacted and the supplier will know the status of the recipient at the time of issue of invoice only and enable him to take commercial decisions accordingly.

e) If the recipient is an SEZ Unit or SEZ developer, supply types “SEZWP” or SEZWOP” are only enabled and rest of the supply types are disabled to provide better user experience with proper and meaningful validations.

f) The validation for the number of digits for the HSN code is also enhanced to meet the latest regulatory changes. The minimum number of HSN codes has been increased to 6 digits for taxpayers above ₹ 5 crores.

g) While generating E Way Bill, Vehicle Type (‘VehType’) can be set to ‘O’ (Over Dimension Vehicle) if the Transportation mode (‘TransMode’) is set as ‘4’ (Ship).

Even though the above validations are few but they are really taxpayer friendly by way of providing better user experience and also minimizing the exposure towards the errant taxpayers thereby safeguarding the genuine taxpayers. The increase in validation for HSN codes for taxpayers having turnover above ₹ 5 crores to 6 digits means that e-invoicing sooner or later will be applicable to taxpayers who are having turnover above ₹ 5 crores.

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.

e-invoice : 50 days to go in India

In the case of e-commerce transactions, the IRN can be generated by the e-commerce operator on behalf of the supplier.  

All About Input Tax Credit Restriction

Self-Assessment of the liability and input tax credit are the two business-friendly measures rolled out in GST, and it is being misused by a section of the taxpayers. As a result of it, to curb the tax evasion on the supply side, e-way bills were introduced, and now it is completely operational. On the input tax credit side, the provisions of the act were clear that the buyer/recipient can avail input tax credit only on matching ( seller will file his return, and the same will be reflected in the buyers return, and there he was supposed to accept or reject or modify the same) and this was kept on hold based on the feedback received from the trade and industry. But off late, lots of cases of input tax credit frauds and tax evasion are being detected. To put an end to all these, the Government has decided to simplify the return filing process and also start implementing the same from the 1^st of Oct 2019, but the same is deferred till the 1^st of April 2020 basis of the decisions taken in the 37^th GST Council Meeting.

Like a bolt from the blue, on 9th Oct 2019, Notification No 49/2019 – Central Tax, dated 9th Oct 2019, was issued stating that matching is mandatory. There were a lot of interpretation issues on the effective date and amount of restricted input tax credit to be derived. To address the same, CBIC has issued a clarification on  Circular No. 123/42/2019– GST dated 11th Nov 2019.  As on date, most of the queries/interpretation issues have been cleared, baring a few. What is the restricted input tax credit, how it works etc., are explained in simple FAQs for the users to understand and comply with the latest GST Provisions.

FAQ’s on the restricted input tax credit

1. What is the effective date for matching?

The effective date of the matching and availing of the 20% restricted input tax credit is 9^th Oct 2019, which means it is applicable for filing of the returns for Sep 2019 also.

The wordings used in the “Notification No 49/2019 – Central Tax, dated 9th Oct 2019 “Save as otherwise provided in these rules, they shall come into force on the date of their publication in the Official Gazette.” The same is published in the Official Gazette on 9^th Oct 2019, only wide Gazette No REGD. NO. D. L.-33004/99. It is also confirmed wide Circular No. 123/42/2019– GST dated 11th Nov 2019.

2. What should I do as I have availed input tax credit without matching while filing the returns for Sep 2019?

At the time of filing GSTR – 3B for Oct 2019, you have to do the matching for both the months. For the unmatched invoices for the GSTR – 2A of Sep 2019, you have to reverse the same along with interest for the differential days @ 24% as per the provisions of Section 51 of CGST Act 2017.

3. On what basis GSTR – 2A and my purchase register should be matched?

As per the provisions of Rule 69 of the CGST Rules 2017, matching has between the purchase register and GSTR – 2A has to be carried out for the following

1. GSTIN of the Supplier
2. GSTIN of the Recipient / Buyer
3. Invoice or Debit Note Number
4. Invoice or Debit Note Date
5. Tax Amount

For every document, if any of the above fields do not match, then input tax credit cannot be availed.

4. What could be the reasons for the differences between GSTR – 2A and my purchase register?

1. The supplier must not have filed the return
2. The supplier has not uploaded the tax invoice
3. GSTIN wrongly entered by the Supplier
4. GSTIN wrongly entered in the accounting / ERP Package
5. Tax invoice number wrongly entered by the Supplier
6. Tax invoice number wrongly entered in the accounting / ERP Package
7. Tax invoice date wrongly entered by the Supplier
8. Tax invoice date wrongly entered in the accounting / ERP Package
9. The supplier ships goods but they are in transit
10. Goods received but not accounted – in QC/ Bills to reach the Accounts department
11. The supplier has not entered the invoice amount correctly
12. Invoice amount wrongly entered in the accounting / ERP Package
13. The invoice amount is manually overwritten for shortages/breakages or any other reason
14. The supplier has issued the invoice but not shipped the goods
15. Invoice issued by the supplier but not received by the recipient

 

5. How is the 20% restricted input tax credit derived?

20% of the restricted input tax credit is derived basis of the total of the input tax credit available in the GSTR – 2A for the month for which return is being filed. The same is explained in the example given below

Total purchases in a month where ITC is eligible is Rs 10,00,000 & actual purchases on which tax is paid is Rs 12,00,000

Amount Reflected in GSTR – 2A s Rs 7,00,000 and amount eligible for availing input tax credit is Rs 6,00,000

What is the provisional credit which can be claimed?

20% of eligible credit i.e., Rs 6,00,000

20% of Rs 6,00,000 = Rs 1,20,000

Total amount of Credit eligible for the month = Rs 6,00,000 + Rs 1,20,000 = Rs 7,20,000

6. Is the 20% input tax credit restriction available for the sum of all the taxes or tax-wise?

As the same is notified in the Rules and the rules are different for the different taxes, it means the restriction is for each tax, i.e., for CGST, SGST, IGST & Compensation cess.

7. Do I need to consider the input tax credit on account of reverse charge, ISD, import of goods, etc. for computing the restricted input tax credit?

No, It is not required to considered for determining the restricted input tax credit.

8. Can i take the input tax credit if the supplier has not paid the taxes in the subsequent months?

If the supplier has not paid the taxes or filed the return of uploaded your invoice in the subsequent returns, then you have to reverse the input tax credit claimed on those invoices and pay interest on the same.

9. How to take the input tax credit if the supplier has filed and paid the taxes in the subsequent months?

If all the suppliers have filed and paid the taxes, then the differential amount of tax can be claimed in the month during which the supplier has filed or paid the taxes or uploaded the invoice.

10. How much input tax credit I can avail if the sum of the restricted credit and eligible credit is more than the amount showing in GSTR – 2A?

If the 20% restricted or provisional credit is more than the eligible amount, then the taxpayer has to avail on the eligible amount only. The same is explained in the example below

Total purchases in a month where ITC is eligible is Rs 1,00,000 & actual purchases during the month is Rs 15,00,000

Amount Reflected in GSTR – 2A s Rs 12,00,000 and amount eligible for availing input tax credit is Rs 90,000

What is the provisional credit which can be claimed?

20% of eligible credit i.e., Rs 12,00,000 i.e., is Rs 2,40,000

Eligible credit is only Rs 1,00,000, so the taxpayer can avail max of Rs 10,000 ( Rs 1,00,000 – Rs 10,000).

11. Are there any changes required in my accounting practices?

Yes, if the accounting practices are changed, it will give complete control and visibility for tracking the errant suppliers. The general practice is whatever are the amounts available in the ledger are considered for the return filing.  So, it is recommended to change the accounting policy also.

For this, new ledger accounts have to be created at each registration level if multiple registrations exist. The new ledgers to be created are

Sl.No	Ledgers
1	Interim / Suspense / Provisional ITC – SGST
2	Interim / Suspense / Provisional ITC – CGST
3	Interim / Suspense / Provisional ITC – IGST
4	Interim / Suspense / Provisional ITC – GST Cess

The existing accounting entry, which is passed/generated at the time of GRN/MRN creation or booking of the purchase invoice, also has to be changed. The existing accounting entry is

 

Ledgers	Debit / Credit
Inventory / Services / Expenses A/c	Dr
ITC – SGST A/c	Dr
ITC – CGST A/c	Dr
To Suppliers A/c	Cr

The new accounting entry which is to be passed or generated at the time of the creation of GRN / MRN or booking the purchase invoice should be

 

Ledgers	Debit / Credit
Inventory / Services / Expenses A/c	Dr
Interim / Suspense / Provisional ITC – SGST A/c	Dr
Interim / Suspense / Provisional ITC – CGST A/c	Dr
To Suppliers A/c	Cr

The accounting entry to be passed or generated at the time of matching is

Ledgers	Debit / Credit
ITC – SGST A/c	Dr
ITC – CGST A/c	Dr
Interim / Suspense / Provisional ITC – SGST A/c	Cr
Interim / Suspense / Provisional ITC – CGST A/c	Cr

As the revised accounting entries are at the supplier level, it will give complete visibility on the suppliers who have not filed the returns and also helps in follow up with the suppliers more effectively.

12. How should I do the reconciliation?

Reconciliation has to be carried out for each invoice and every month. The challenge is if the supplier files the GSTR Returns in the subsequent tax periods, then the same will be updated in the GSTR – 2A for the period in which the invoice is generated. The taxpayers have to check the GSTR – 2A of the previous months till the supplier files the returns or till filing of the September months return or filing of the annual return whichever is earlier. The reconciliation statement has to be maintained for each month, along with a consolidated statement.

13. Can I adopt technology to address the same?

Yes, there are a lot of tools available for the reconciliation, and also most of the ERP’s support the availing of the input tax credit on a provisional basis and availing the same only at the time of matching. If the existing accounting software or ERP provides the same, it should be implemented immediately as it will save a lot of time and effort.

14. Is it mandatory to avail the restricted input tax credit?

No, it is not mandatory to avail the restricted input tax credit; the option is given to the taxpayers to avail or not.

15. What are the other alternatives I have if I do not like to avail the restricted or provisional credit?

There are other options like while awarding the contract or purchase order to the suppliers, who are filing the GST Returns in time. The supplier’s tax filing compliance also has to be verified along with the price, quality, after supply service, along with the previous track record.

Now it clear that the matching is mandatory and also the process on how to derive the restricted 20% input tax credit. Now the taxpayers have to follow the same from the 9^th of Oct 2019, but due to interpretation issues, many of the tax professionals have concluded that it is effective for the filing of Oct 2019 returns. The taxpayers have to take a clear decision on to avail the 20% of the restricted credit along with the eligible input tax credit or avail only the eligible input tax credit after considering the following points

1. Borrowing cost for the restricted 20%
2. Cost of time and efforts required for deriving the 20% restricted credit
3. Training the respective stakeholders
4. Cost of automation – if the same is provided in their existing accounting or ERP or separate software is required.

Unless and the taxpayers do a cost-benefit analysis for availing the 20% restricted credit or not based on the above-discussed points, it would be difficult to ascertain the same. It is typically required for large corporates where they have 1000’s of purchase invoices monthly. Whatever is the decision, it will be applicable from the next month’s transactions and for filing of the returns for Oct 2019, they have to do reconciliation if the decision is not taken.

Source – https://icmai.in/upload/Taxation/TaxBulletin/Tax-Bulletin-52.pdf

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 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 – 381

The claim of input tax credit shall be considered as matched where the amount of input tax credit claimed in GSTR – 2 of the recipient is equal to or less than the output tax on such tax invoice or debit note in the GSTR -1 of the Supplier.

GST Tip – 379

The details of inward supplies added, corrected or deleted by the recipient in his FORM GSTR-2 shall be made available to the supplier electronically in FORM GSTR-1A through the common portal and such supplier may either accept or reject the modifications made by the recipient and FORM GSTR-1 furnished earlier by the supplier shall stand amended to the extent of modifications accepted by him.

Demystifying the reasons for mismatch between Supplier’s GSTR – 1 and Recipients GSTR – 2

It is almost 120 days after the rollout of GST and we are yet to file the first month returns, i.e., for the month of July 2017. Is technology the main culprit for this delay? The answer is “Yes” and “No.” Yes, in case of taxpayers who have a large number of invoices and becomes really tough to match the data entered and filed by the supplier and match it with the inward supplies. This is applicable in cases where the inward supplies are more than 500+ transactions per month. The answer in case of “No” is lack of understanding of the GST Law and implementation of the same. In either case, we do not have a choice but to file a valid return.

Some of the common reasons for the data mismatch are

1. Invoicing Date – the goods or services might have been billed or shipped at the fag end of the month. This could have resulted in the tax invoices not reaching the finance/accounts department.
2. Goods not yet received – this also could be one the reasons, the supplier must have shipped the goods, but the same is not yet received by the recipient on account of distance, longer travel time or breakdown of the vehicle or some reasons beyond the control of both the parties.
3. Wrong GSTIN – there could be cases where the supplier must have entered the GSTIN of the recipient wrongly. In such cases, the data will not be reflected in the actual recipient’s GST return. The date entry issues are caused as there might not be a proper accounting or ERP software with interfaces for the filing of returns, and manually data has to be entered. Manual data entry sometime lead to errors.
4. Material received but not accounted – This is one of the most common cases, in many manufacturing organizations, there is a time lag between the receipt entry or creation and accounting in finance. Personal experience shows that it will take about 20 – 45 days minimum for the Material Receipt Note (MRN) or Goods Receipt Note (GRN) to reach finance/accounts department. If this time lag is reduced, it will definitely ease the pressure on working capital requirements of the organization. It also helps the recipient to process the payments to suppliers as most of the recipients pay from the date of accounting in the books of accounts for the purchases / inward supplies.
5. Improper accounting of invoices/debit notes/credit notes – this is another major reason for the mismatch between the supplier’s and recipient’s records. Normally in our country, we account for the net amount payable to the supplier and thereby causing the mismatch. Under GST the provisions are very clear that supplier of goods or services only issues the debit note or credit note. Under GST, the recipient has to account for the full amount of the invoice issued by the supplier and then take it up for the differential amount on account of shortages/breakages / quality issues or price differential.
6. GSTR – 1 of the supplier, is not submitted – it is also observed that many of the suppliers are not aware of the process of filing of the GSTR – 1 or in some cases the erstwhile tax regime returns have not be filed, as a result they were not able to carry forward the closing balances, or C forms are pending from the customers. Some of the taxpayers are not filing the same as they have to pay the differential amount for the non-receipt of C forms or other forms. This is also causing the hardships in the GST return filing process.
7. GSTR – 1 of the supplier is not filed – as GST is a new system many of the vendors or suppliers in the MSME sector are not fully aware of the GST and process of filing of returns. As a result of this, it is observed that in some case, the supplier of goods or services has only submitted the return but not filed, this will lead to a mismatch between the records. In some cases, it is observed that the GSTR – 1 has been only submitted not filed.
8. Accounted as imprest or in IOU – it is a normal business process to have inward supplies of goods or services through imprest basis at factories or at sites. Normally they are submitted at periodic intervals to the head office or any other office, for reimbursement. Purchases from a registered taxpayer are made in one month, and the statement is submitted in the subsequent month, this also causes the mismatch between the records.
9. Software upgradation – As GST is a new tax regime and most of the accounting or ERP’s are not upgraded to carter the requirements of GST. This has also caused some issues in the initial days of data capturing and updates. In some cases, it is also observed that the upgrades have been done, but the solutions are not developed. As a result, some gaps are there.
10. Knowledge of GST – As it is a new system many of the suppliers and recipients in the MSME segment are not fully aware of the GST and its implications. There is also a lack of trained manpower on GST, and some organizations have implemented on their own with understanding issues. This also has resulted in some wrong filing and mismatch of records. Frequent changes in the new law is also causing some understanding issues, to avoid this, professional should be engaged.
11. Frequent Changes – as it is a new law and everyone is in the learning process and based on the feedback of the trade and industry there are some changes. The changes are in tax rates or process of GST or on reverse charge front etc.,
12. Not fully operations GSTN Software – the GSTN software is not operational fully and few bugs are also observed, this is also causing some issues in the filing of the GST returns.
13. Wrong data entry – as the return filing process is at the transactional level, there are understanding issues, and data is being entered wrongly in the returns, this has also resulted in a mismatch of the records. Like invoice amount being entered in the taxable amount columns or tax amounts entered wrongly at the time of filing of returns.

The above are some of the major reasons for the mismatch between the supplier’s returns and recipient’s returns. In view of the above challenges, the government is also responding and extending the due dates of filing of returns from time to time. One thing we all should keep in mind is that the for matching of the returns there is a window period of two months and not required to be matched in the same month/period of return filing.  As it is a new system, it takes time to stabilize and also for the taxpayers to understand the same. No new system is stable, and change is also difficult to adopt either for the taxpayers or for the consumers or for the tax officials. The recent experience in Malaysia where GST was rolled out on 1^st April 2015, took one year for the same to stabilize and for us, only four months have passed after the rollout. One good thing in our country is all the stakeholders are responding positively to the changes and striving for the successful implementation.

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 – 327

If the supplier of goods or services does not file his GSTR – 1 by the said date and the recipient of the goods or services or both have filed GSTR – 2, then the supplier of goods or services or both cannot modify the invoice, the supplier has to accept or reject the same.

Does GTA Services fall under Notification No.8/2017-Central Tax (Rate)?

Before we go and conclude on the topic “Does GTA Services fall under Notification No.8/2017- Central Tax (Rate)” first let’s understand what is reverse charge? where it is applicable along with in which cases it is exempted.

In the normal course of business, taxes are paid by the recipient of goods or services or both to the supplier of goods or services or both and the supplier, in turn, remits the amount of tax collected to the respective tax authorities. In case of reverse charge, the recipient will pay on behalf of the supplier of goods or services or both.  This is clearly defined in sub-section 98 of Section 2 of CGST Act

“reverse charge” means the liability to pay tax by the recipient of supply of goods or services or both instead of the supplier of such goods or services or both under sub-section (3) or sub-section (4) of section 9, or under sub-section (3) or subsection (4) of section 5 of the Integrated Goods and Services Tax Act;

The category of goods or services on which reverse charge is applicable is clearly defined sub-section (3)  of section 9 of CGST Act

The Government may, on the recommendations of the Council, by notification, specify categories of supply of goods or services or both, the tax on which shall be paid on reverse charge basis by the recipient of such goods or services or both and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both.

 Sub-section (4)  of section 9 of CGST Act defines clearly states that in case of supply of goods from unregistered taxpayers, the recipient should pay taxes.

The central tax in respect of the supply of taxable goods or services or both by a supplier, who is not registered, to a registered person shall be paid by such person on reverse charge basis as the recipient and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both.

Notification No.4/2017-Central Tax (Rate), clearly gives the list of goods on which reverse charge is applicable.

RS Goods_2

Notification No. 13/2017- Central Tax (Rate) provides the list of services under which reverse charge is applicable on the list of services under CGST Act.

From the above two notifications, it is clear that Reverse charge is applicable on all inward supplies of goods and services. Previously Reverse Charge was applicable only for the services and now under GST it is applicable for the goods also. As GST is a new and taxpayers who are registered under VAT in the erstwhile regime may or not may not be aware in all the states. In order to provide some ease of doing business, the government has given some exemptions for the applicability of Reverse Charge on inward supplies wide Notification No.8/2017-Central Tax (Rate), the same is given below

G.S.R. (E).- In exercise of the powers conferred by sub-section (1) of section 11 of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Central Government, on being satisfied that it is necessary in the public interest so to do, on the recommendations of the Council, hereby exempts intra-State supplies of goods or services or both received by a registered person from any supplier, who is not registered, from the whole of the central tax leviable thereon under sub-section (4) of section 9 of the Central Goods and Services Tax Act, 2017 (12 of 2017):

Provided that the said exemption shall not be applicable where the aggregate value of such supplies of goods or service or both received by a registered person from any or all the suppliers, who is or are not registered, exceeds five thousand rupees in a day.

Now in the trade, one question which is asked very frequently is that is reverse charge exemption applicable on services like GTA, hamali charges or other freight charges paid by the taxpayers on day to day basis?

If we go through Notification No.8/2017-Central Tax (Rate), it is given for all the inwards supplies from unregistered tax payers by a registered taxpayer. So the above question does not arise that. If the inward supplies based on the above are below Rs 5000 in a day, then reverse charge is not applicable and benefit of the said notification can be taken.

If you have any different view, please share your views in the comments section so that it will be helpful for coming to a common understanding.