GST – SPECIAL AUDIT

Introduction

GST is a trust based taxation regime wherein the assessee is required to self-assess his returns and determine tax liability without any intervention by the tax official. Therefore a tax regime that relies on self-assessment has to put in place a robust audit mechanism to measure and ensure compliance of the provisions of law by the taxable person.

“Audit” has been defined in section 2(13) of the CGST Act, 2017 and it means the examination of records, returns and other documents maintained or furnished by the registered person under the GST Acts or the rules made there under or under any other law for the time being in force to verify the correctness of turnover declared, taxes paid, refund claimed and input tax credit availed, and to assess his compliance with the provisions of the GST Acts or the rules made thereunder.

Types of Audit

GST envisages three types of Audit. The first audit is by a chartered accountant or a cost accountant. Every registered person whose aggregate turnover during a financial year exceeds two crore rupees has to get his accounts audited by a chartered accountant or a cost accountant and furnish a copy of audited annual accounts and a reconciliation statement, duly certified, in FORM GSTR-9C.

In the second type which is the normal audit, the Commissioner or any officer authorised by him, can undertake audit of any registered person for such period, at such frequency and in such manner as may be prescribed.

The third type of audit is called the Special Audit. In Special Audit the registered person can be directed to get his records including books of account examined and audited by a chartered accountant or a cost accountant during any stage of scrutiny, inquiry, investigation or any other proceedings; depending upon the complexity of the case.

Procedure

• During the scrutiny, inquiry, investigation or any other proceedings of a registered person, the Assistant Commissioner or any officer senior to him, having regard to the nature and complexity of the case and the interest of revenue, might be of the opinion that the value has not been correctly declared or the credit availed is not within the normal limits.

• In such cases, with the prior approval of the Commissioner, the Assistant Commissioner or any officer senior to him can direct the registered person in FORM GST ADT-03 to get his records including books of account examined and audited by a specified chartered accountant or a cost accountant. The chartered accountant or a cost accountant will be nominated by the Commissioner.

• The chartered accountant or cost accountant so nominated has to submit a report of such audit within the period of ninety days, duly signed and certified by him to the Assistant Commissioner.

• On an application made by the registered person or the chartered accountant or cost accountant or for any material and sufficient reason, the Assistant Commissioner can extend the said period by a
further period of ninety days.

• The provisions of special audit shall have effect even if the accounts of the registered person have been audited under any other provisions of the GST Act or any other law for the time being in force.

• The registered person shall be given an opportunity of being heard in respect of any material gathered on the basis of special audit and which is proposed to be used in any proceedings against him under this Act or the rules made thereunder.

• The expenses of the examination and audit of records, including the remuneration of such chartered accountant or cost accountant, shall be determined and paid by the Commissioner.

• On conclusion of the special audit, the registered person shall be informed of the findings of the special audit in FORM GST ADT-04.

• Where the special audit results in detection of tax not paid or short paid or erroneously refunded, or input tax credit wrongly availed or utilised, the process of demand and recovery will be initiated
against the registered person.

Conclusion

Special audit provides a lawful and legal way for the GST officers to take the assistance of a chartered accountant or cost accountant to determine tax liabilities in complex cases. The professional expertise of a chartered accountant or cost accountant will be of great significance in ensuring that the interest of revenue is safeguarded at all times.

GST - FAQ

GST - CIRCULAR

Circular No 16/16/2017 GST

F. No. 354/173/2017-TRU  15th November 2017

Subject: Clarifications regarding applicability of GST and availability of ITC in respect of certain services

Sr No 1.

Issue : Is GST applicable on warehousing of agricultural produce such as tea (i.e. black tea, white tea etc.), processed coffee beans or powder, pulses (de-husked or split), jaggery, processed spices, processed dry fruits, processed cashew nuts etc.?

Comment 

1. As per GST notification No. 11/2017-Central Tax (Rate), S.No. 24 and notification No. 12/2017- Central Tax (Rate), S.No. 54, dated 28thJune 2017, the GST rate on loading, unloading packing, storage or warehousing of agricultural produce is Nil.

2. Agricultural produce in the notification has been defined to mean “any produce out of cultivation of plants and rearing of all life forms of animals, except the rearing of horses, for food, fiber, fuel, raw material or other similar products, on which either no further processing is done or such processing is done as is usually done by a cultivator or producer which does not alter its essential characteristics but makes it marketable for primary market”
3. Tea used for making the beverage, such as black tea, green tea, white tea is a processed product made in tea factories after carrying out several processes, such as drying, rolling, shaping, refining, oxidation, packing etc. on green leaf and is the processed output of the same.
4. Thus, green tea leaves and not tea is the “agricultural produce” eligible for exemption available for loading, unloading, packing, storage or warehousing of agricultural produce. Same is the case with coffee obtained after processing of coffee beans.
5. Similarly, processing of sugarcane into jaggery changes its essential characteristics. Thus, jaggery is also not an agricultural produce.

6. Pulses commonly known as dal are obtained after DE husking or splitting or both. The process of DE husking or splitting is usually not carried out by farmers or at farm level but by the pulse millers. Therefore pulses (DE husked or split) are also not agricultural produce. However whole pulse grains such as whole gram, rajma etc. are covered in the definition of agricultural produce.
7. In view of the above, it is hereby clarified that processed products such as tea (i.e. black tea, white tea etc.), processed coffee beans or powder, pulses (DE husked or split), jaggery, processed spices, processed dry fruits, processed cashew nuts etc. fall outside the definition of agricultural produce given in notification No. 11/2017-CT(Rate) and 12/2017-CT(Rate) and corresponding notifications issued under IGST and UGST Acts and therefore the exemption from GST is not available to their loading, packing, warehousing etc. and that any clarification issued in the past to the contrary in the context of Service Tax or VAT/ Sales Tax is no more relevant.

Sr No 2.

Issue : Is GST leviable on inter-state transfer of aircraft engines, parts and accessories for use by their own airlines?

Comment

1. Under Schedule I of the CGST Act, supply of goods or services or both between related persons or between distinct persons as specified in Section 25, when made in the course or furtherance of business, even if, without consideration, attracts GST.

2. It is hereby clarified that credit of GST paid on aircraft engines, parts & accessories will be available for discharging GST on inter–state supply of such aircraft engines, parts & accessories by way of inter-state stock transfers between distinct persons as specified in section 25 of the CGST Act, notwithstanding that credit of input tax charged on consumption of such goods is not allowed for supply of service of transport of passengers by air in economy class at GST rate of 5%.

Sr No 3.

Is GST leviable on General Insurance policies provided by a State Government to employees of the State government/ Police personnel, employees of Electricity Department or students of colleges/ private schools etc.

(a) where premium is paid by State Government and
(b) where premium is paid by employees, students etc.?

It is hereby clarified that services provided to the Central Government, State Government, Union territory under any insurance scheme for which total premium is paid by the Central Government, State Government, Union territory are exempt from GST under Sl. No. 40 of notification No. 12/2017-Central Tax (Rate). Further, services provided by State Government by way of general insurance (managed by government) to employees of the State government/ Police personnel, employees of Electricity Department or students are
exempt vide entry 6 of notification No. 12/2017- CT(R) which exempts Services by Central Government, State Government, Union territory or local authority to individuals.

GST - FAQs on ethical issues for Chartered Accountants by ICAI

FAQs on ethical issues relating to GST for Chartered Accountants by ICAI

Q1. Whether a member in practice can engage as GST practitioner?

A. Yes, a member in practice can engage as GST practitioner, as the activities to be performed by GST practitioner mentioned in CGST Act, 2017 read with CGST Rules, 2017 are within the purview of a member in practice as per the provisions of Chartered Accountants Act, 1949 and Regulations framed thereunder.

Q2. Whether a member who has enrolled as GST Practitioner can act as Tax Return Preparer for GST?

A. Yes, as per Rule 83(8) of CGST Rules, 2017, a GST practitioner can inter alia undertake the assignment of filing returns under the CGST Act, 2017.

Q3. Whether a member holding CoP, who is an employee in a CA Firm, can be enrolled as GST practitioner?

A. Yes, he can enroll as GST practitioner (as this is not an attest function), subject to contractual obligations, if any, with the employer

Q4. Whether a member holding CoP on part time basis, working as an employee in an entity other than a CA Firm, can be enrolled as GST practitioner?

A. A member holding CoP on part time basis and working as an employee in an entity other than a CA Firm can enroll as GST practitioner, subject to contractual obligations, if any, with the employer.

Q5. Can a member/Firm conduct training through seminars etc. on GST?

A. Yes, a member/Firm can conduct training through seminars etc. on GST. However, the member /Firm may only invite its existing clients to such training programs. Inviting individuals or entities other than existing clients may amount to solicitation, which is prohibited under Clause (6) of Part-I of First Schedule to The Chartered Accountants Act, 1949.

Q6. Whether a member can send presentation/write-up on GST, and include services provided in the same?

A. He can send presentation on GST /write-up on GST only to existing clients, and to a proposed client if an enquiry was received from the proposed client with regard to the same

Q7. Whether it is permissible for a member to mention himself as “GST Consultant”?

A. No, in terms of provisions of Clause (7) of Part-I of First Schedule to The Chartered Accountants Act, 1949, it is not permissible for a member to mention himself as GST Consultant.

Q8. Whether a member can share GST updates on modes like mass mail /social media?

A. A member can share GST updates, mentioning himself as “CA” with individual name, provided the communication is limited to providing updates. Mention of Firm name is not allowed.

Q9. Whether a member can publish testimonials /appreciation letters received by him with regard to GST Training assignments?

A. Such testimonials are allowed to be mentioned on CA Firm website, but not on social media like Facebook, LinkedIn etc.

Q10. Whether a member can provide GST Training?

A. GST training can be provided to the existing clients. In case of non-clients, training can be provided only if the member is invited to provide such training. As part of contribution towards initiatives taken by the Government, ICAI GST Sahayataa Desks have been made
operational on pro bono basis at all major cities for training / facilitating understanding of GST among small businessmen, traders, shopkeepers and public at large.

Q11. Whether it is permissible for a member to put a Notice for GST Registration/Return preparation along with mention of his name/name of CA Firm? Whether he can mention fees/charges for providing such services?                                                                        A. GST services are part of professional services provided by a chartered accountant, and accordingly, its advertisement has to be in terms with the ICAI Advertisement Guidelines, 2008 only. He cannot mention the fees/charges, as it is not allowed in the Advertisement Guidelines.

Q12. Whether a member in practice can give GST consultation to clients of another professional?

A. The member is not allowed to share fees with another professional; however, he can engage separately with the clients of such other professional to provide GST consultation.

GST - LATEST

No RCM on Procurements Made From Unregistered Person till March 31, 2018 (Explanation with Example)

The Central Government vide Notification No. 38/2017 – Central Tax (Rate) dated 13th October, 2017, has amended Notification No. 8/2017 – Central Tax (Rate) dated 28th June, 2017 by omitting proviso under Paragraph 1 which deals with the exemption limit of Rs. 5000 per day available to the registered person on procurement of goods or services from any or all unregistered suppliers. Now, exemption shall be available to all the registered persons till March 31, 2018 without any limit in case of supply procured from unregistered supplier.Therefore, any registered person procuring taxable goods/ services from unregistered suppliers, shall not be required to pay CGST under reverse charge mechanism U/s 9(4) of CGST Act, 2017 till March 31, 2018 with effect from 13th Oct, 2017.   In case of goods, where tax is payable on reverse charge basis, the time of supply shall be the earliest of the following:                                                                                                                         • Date of Receipt of Goods                                                                                                       • Date of payment to unregistered supplier                                                                             -• immediately following 30 days from the date of issue of invoice or any other document       Example: if good was received prior to 13th Oct, 2017 then liability to pay reverse charges u/s 9(4) arises.                                                                                                                         In case of services, where tax is payable on reverse charge basis, the time of supply shall be the earliest of the following:                                                                                                 - Date of payment to unregistered supplier                                                                              • immediately following 60 days from the date of issue of invoice or any other document     Example: if service was obtained in the month of September for which invoice was issued on 10th Sep, 2017 and payment to an unregistered supplier is not made till 13th Oct, 2017 then there would not be any reverse charge liability on such transactions.                             Similar notification is issued under the IGST Act vide Notification No. 32/2017 – Integrated tax (Rate) dated 13th October, 2017 and under the UTGST Act vide Notification No. 38/2017 – Union Territory tax (Rate) dated 13th October, 2017.

GST - CHANGE

13^th  October, 2017

THE CENTRAL GOODS AND SERVICES TAX (REMOVAL OF DIFFICULTIES) ORDER, 2017

Order No. 01/2017-Central Tax

S.O. (E). – Whereas, certain difficulties have arisen in giving effect to the provisions of the Central Goods and Services Tax Act, 2017 (12 of 2017), hereinafter in this order referred to as the said Act,  in so far as it relates to the provisions of section 10 of the said Act;   

Now, therefore, in exercise of the powers conferred by section 172 of the said Act, the Central Government, on recommendations of the Council, hereby makes the following Order, namely:- 

1.  This Order may be called the Central Goods and Services Tax (Removal of Difficulties) Order, 2017. 

2.  For the removal of difficulties,-

(i)              it is hereby clarified that if a person supplies goods and/or services referred to in clause (b) of paragraph 6 of Schedule II of the said Act and also supplies any exempt services including services by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount, the said person shall not be ineligible for the composition scheme under section 10 subject to the fulfilment of all other conditions specified therein. 

(ii)            it is further clarified that in computing his aggregate turnover in order to determine his eligibility for composition scheme, value of supply of any exempt services including services by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount, shall not be taken into account. 

GST - Q AND A

Q. Can composition dealer are liable for pay RCM on expenditure?

A. No

Q. I am planning to buy car in the name of my proprietor ship firm. Should I Get GST input?

A. No

Q. Sent goods via India Post Parcel service. 1. RCM applicable at what rate? & 2. Where to show in GSTR 2?

A. They have charge GST so no need to pay as RCM

Q. Can we buy goods from interstate URD, without RCM now?

A. Unregistered can't sale interstate,  only service provider can make interstate transaction

Q. Whether GTA from unregistered transporter comes under sec 9(3) or sec 9(4)?

A. U/s 9(3) of CGST

Q. When I issue a B2B invoice, should I care whether buyer is eligible to claim ITC or not?

A. No, It's recipient responsibility whether ITC is eligible or not for him.

Q. Travelling one state to another state for business purposes, expenses incurred towards the hotel and restaurant can we get ITC?

A.  Not available

Q. Aren't 1A AND 2A there for only reconciliation purpose? How do we file 1A OR 2A?

A. 2A is draft only and no need to file 1A

Q. I plan to purchase a bike for my business can I claim ITC?

A. As per our understanding, not allowed.

Q. I am a labour supplier, in GSTR2, which expenses saw in GSTR 2?

A. Your inward supply.

Q. How much late fee for per day of October GST-3B return?

A. 50 per day (CGST+SGST)

Q. Mobile phone purchased on my Firm GSTIN, is the input is available?

A. Yes

Q. Before 13th Oct URD Purchase for the period of 01.10.17 to 12.10.17 do we paid RCM tax paid against URD?

A. Yes