With the completion of the first financial year coinciding with the introduction of GST, most businesses are now
close to finalising their financials for FY 2017-18. The GST provisions has adopted the financial year cycle to
provide for a definitive timeline for availing input credits, including tax adjustments via credit notes etc. This
timeline has been linked to the date for filing returns for September 2018; beyond that eligible credits
would potentially lapse. Given this, businesses need to be cognizant of certain actions that need to be taken
over the next 2 months to ensure that (all) valid credits are availed1
Claim of input tax credit if not claimed due to various reasons
the businesses will be required to ascertain its entitlement and claim all the credits pertaining to FY 2017-18. Beyond the prescribed date (upto date for filing returns for September 2018) , these credits may not be statutorily eligible
Identify Mismatch Credit
Identification of credits where there is a mismatch between credit claimed and liability declared by the vendors
1. The vendor has declared liability but credit is not availed in GST returns: Such credits should be availed at the
2. The vendor has not declared liability on supplies made but businesses have availed credit on such procurements in the GST returns: Businesses should follow up with the vendor to ensure that the liability is declared. Else, risks of such credits being disallowed may arise.
3. Mismatch between liability declared by the vendor and credit availed: The reasons for differences should be identified and reconciled appropriately (e.g. by issuing debit notes/credit notes etc) before 30 September, 2018.
4. Mismatch in other key parameters: There can be mismatch in other key parameters for matching such as GSTIN of the supplier/recipient, number and date of the invoice/debit note etc. Such mismatches also need to be rectified.
Issue debit notes/credit notes
As per section 34 of CGST Act, the debit/credit notes for any supply made in a particular financial year are required to be issued and disclosed latest in the return for following September (i.e. September 30). Issuance of a credit note also requires credit reversals by the customer. For credit notes issued /claimed after the stipulated date, deductions would not be mutually available to the vendor and customer.
Final computation of reversal of input tax credits.
Rule 42 of the CGST Rules, 2017 prescribes that taxpayers with taxable and exempt revenues are required to reverse the input tax credits pertaining to exempt supplies, including on common inputs/input services on a provisional basis each month. Subsequently, the final amount of reversal for the entire financial year needs to be computed and taxes paid /recovered by the prescribed date.
Delay in computing this reversal (which in certain instances can be a complex exercise) can potentially expose the business to interest or an inability to re-coup excess credit reversed.
Identification of reversal due to non-payment of consideration to the vendors within 180 days
Section 16(2) of the CGST Act, states that taxpayers are required to reverse the credit if payments are not released to vendor by 180 days; beyond that, an interest liability triggers. The tax credit can be subsequently reclaimed after making payment.