Q. What is the major difference from Cash
Discount and Trade Discount? We are giving discount to our customers for making
payment prior to agree due date / credit periods. Discount is not worked on the
basis of any percentage on the basic selling price. It is based on the number
of days of payment made prior to the due dates. Whether we have to charge GST
on the Discount amount. Whether we have to give Credit Note or we can get Debit
Note from party or any one of the both can be used. Whether, the issuance of
Credit Note without GST is a mistake and leviable penalty under GST act.
Because, some of our clients are asking Credit Note without GST and some of our
clients are asking Credit Note with GST. The parties asking Credit Note with
GST is giving their Debit Note also for the same transaction (i.e.) the
discount allowed by us. We are taking credit of ITC by using their Debit Note.
Is it correct or not? (Or) shall we have to reduce our GST liability by using
our Credit Note declared in GSTR-1. Accounting wise, amount wise both are
correct. But, as per GST act, which one is to be used. Whether, the GST on
Discount amount should be mentioned in Credit Note?? Is it mandatory?
A. GST doesn’t differentiate between trade
and cash discounts. Rather, GST segregates the discounts allowed into two
categories:
those given before or at the time of supply
those given after the time of supply
If a discount has been allowed before or
at the time of supply, and it has been mentioned in the
invoice separately, it will not be added in the value of supply.
If discount is allowed after the supply, it
may or may not be added in the value of the supply, depending on the following
factors:
whether the discount can be linked directly
to the relevant invoice of supply,
whether the discount has been allowed as per
the terms already agreed upon before or at the time of supply, or
whether the input tax credit related to the
amount of the discount allowed has been reversed by the recipient of the
supply.
If you have a policy of allowing a cash
discount if a customer pays a particular invoice within specified days. The
discount amount will not be added to the value of taxable supply. The customer
must reverse the input tax credit (the amount of the discount allowed).
If you don't have pre decided policy of
offering cash discounts to the customers at the time of payment, however, you
supply to a customer who didn’t pay his debts. If now you offers the customer a
discount in order to encourage the customer to clear all his debts, but the
discount wasn’t agreed before or at the time of supply, and can’t be linked to
a particular invoice, this discount will be added in the value of the taxable
supply.
In case of discount where value shall stand reduced,
a credit note can be issued by supplier not later that September 2018 or date
of filing of return whichever is earlier (Sec 34 (2) of CGST Act) Credit note should have details i.e. Taxable value,
Rate of tax and amount of tax credited. Clients (Recipient) cannot issue debit
note.
Q. We have supplied goods during Pre-GST
regime which got rejected and needs to be replaced free of charge before
lifting back the rejected goods. The customer needs Invoice copy for free
replacement to issue way bill.
A. If the amount of invoice
exceeds ₹ 200 only then it is mandatory to prepare ‘Tax invoice’. Section 31 of
the. CGST Act, 2017. And as far as way bill is concerned, Way bill need to
issue for value for more than ₹ 5000. Delivery challan is required for Free
Replacement as the same is not covered under SUPPLY in GST. The goods can be replaced free of cost
without paying the GST. Even there is no need to reverse the credit on the free
supply.it has been clarified in the FAQ. This also applicable to the pre GST
supplies. "Invoice" and
"Free replacement" cannot go simultaneously in this situation. Delivery
challan will serve the purpose. Delivery challan can be correlated with the
invoice issued initially.
Q. What is the procedure to get refund of
excess/accumulated ITC? Every month, the closing balance of ITC is gradually
increasing in Electronic Credit Ledger. We want refund since our fund is
unnecessarily blocked and we need for the same for working capital. Any time
frame is there?
A. As per law, refund of accumulated credit
can be claimed at end of financial year. Please read the provisions as stated
in Section 18 of CGST Act along with Rule 89.
Q. We are receiving bills for Raw Materials
supply from GST registered persons with GST charged bills. After receipt at our
end, we found some discrepancies in their GST bill such as Insurance, Freight
and Price difference and short supply etc. Shall we raise Debit Note to our
suppliers for the taxable value to be deducted + GST? We were informed that we
do not have rights to raise Debit Note for the goods purchased by us and only
the supplier of goods (seller) has to give Credit Note only. Kindly clarify
whether we can raise Debit Note or only seller has to give Credit Note or both
are allowed for our debits to be made. Likewise, against our supplies (sales)
made, we want to raise Credit Note on Trade Discount to our customers for
prompt payments or early payments. This is after sales only and we have not
mentioned any Trade Discount in our Tax Invoices. If we raise Credit Note,
where GST to be added with Discount amount. If we add GST, party will make
payment after deducting Discount + GST amount (that is Credit Note Value). If
so, what we have to do in GST portal for GST on discount amount in GSTR-3B.
Shall we take back that GST available in Credit Note as ITC. Whether we have to
add GST on Discount amount and we can give Credit Note for Discount value only
without GST?
A. In your first case, as per sec.
34(3), a debit note should be issued by a supplier in the following
circumstances:
(a) The taxable value shown in the invoice is
lesser than the taxable value of the supply; or
(b) The tax charged in the invoice is less
than the tax payable on the supply.
Also note that: A debit note has to be issued
by the supplier. A debit note issued by a recipient, say for accounting
purposes, is not a relevant document for GST purposes. The details of the debit
note have to be declared by the supplier in the return of the month of the
issue of debit note. And for the later case, where intend to give discount, you
have to issue Credit note with GST. GST can be reversed for the value of
discount and by mentioning it in GSTR 3B or GSTR-1 your
liability to that extent shall get reduced. Refer Sec.34 of CGST
Act for better understanding.
Q. Regarding the GST paid on Factory Building
repairing charges can be availed ITC. It is not a new construction, it is not a
contract and it is not an admin building construction. It is only repairing of
old existing Factory Building such as renovation, painting, debris removal. We
have done some repair works in Factory Building like painting, renovation,
debris removal. The work was carried out by GST registered supplier and given
bills to us with GST. Shall we take ITC of this?
A. As per Sec.17 (5) ITC of GST
paid on works contract services will be allowed only if the output is also
works contract service. In your case ITC is not admissible (you being
manufacturing unit having factory). ITC is admissible if the expense is debited
in P& L. it should be capitalize. So no need to show in p & l account. No
ITC if capitalized. Credit on repair of factory building is admissible.
Q. If service providers such as Advocates,
GTA etc. providing services to unregistered persons (business services not
personal). Who will be required to pay GST?
A. Where services are
provided by supplier which are covered under reverse charge then recipient is
liable to pay tax. The section 24 (iii) of the GST
Act requires a person to obtain registration on compulsory basis if he is
liable to pay tax under reverse charge. Thus such unregistered person is liable
to pay tax and he should obtain registration. Unregistered to unregistered not
attract GST.
Q. I want to understand the difference
between the local consumption and local sales under the GST regime if any?
A. Any commodity sold locally in the same
state after charging SGST and CGST not necessarily will be consumed in the same
state and can be sold further to any other state after charging IGST. The
problem may arise where the sales/clearances made by
the units availing the area based exemptions and after getting some benefits in
the SGST and CGST from the state Govt. on the local consumption and which in
return can be further sold to some other state after charging IGST and were
never actually consumed in the same state but were only sold. The term SALES
has been replaced with SUPPLY in GST regime. Your point can be explained with
the help of following example:-
Suppose Mr X (in Karnataka) sold an item to
Mr. Y in same state (Karnataka). He will charge SGST & CGST. If the same
good will be sold by Mr. Y to other state (say Maharashtra), Mr. Y will be charging
IGST, Mr. Y will avail ITC for CGST & SGST paid to X and the Maharashtra
will be the consumption point
Regarding Area Based Exemption: -
Due to introduction of GST all the manufacturing units are mandatorily required
to clear the manufactured goods including traded goods on payment of GST, Area
based exemption unit will be eligible for budgetary support.
The application for imbursement of budgetary
support shall be made by the eligible unit after the payment of CGST/IGST has
been made, for the quarter to which the claim relates, in cash, in respect of
specified goods after utilization of Input Tax credit, if any. Thus even for
area based exemptions, GST has to be paid and then budgetary support will be
provided.
Sales and consumption are two different
terms. The term sales has been replaced with Supply but consumption has its own
meaning. GST is destination (consumption) based tax means where the goods and
services supply will flow (consumed) whole tax revenue will go to that state.
Q. I have some doubts regarding the works
contracts of -
1. repair and maintenances of restaurants,
banquet hall, cafeteria, kitchen can I take ITC or not? 2.
electrical items and fittings above like restaurants, banquet hall, cafeteria,
kitchen etc. can I take ITC or not?
3.
if they how to accounted for like value-100+gst-
4.What about treatment of capital assets like above example?
A. As per Sec. 2(119) of CGST
Act. “Works Contract” means a contract for building, construction, fabrication
,completion, erection, installation , fitting out, improvement, modification, repair ,maintenance,
renovation, alteration, or commissioning of any immovable property wherein
transfer of property in goods (whether as goods or in some other form) is involved in the
execution of such contract. input tax credit is not available
to any taxable person who constructs on his own account even if it is for
business use. Thus , you cannot take ITC for repairs & maintenance and
electrical fittings etc. Repair & maintenance pertain to immovable
property. Embedded into earth. Works contract under GST is limited to contracts
to do with Immovable property. (Ref sec.2 (119) where it is clearly
defined).
Sec.17(5) of CGST act mentions
clearly that " works contract services when supplied for construction of
immovable property is ineligible for credit except where it is for further
supply of works contract services.
In your example the output services like
restaurants, halls, cafeteria etc. are not works contract services and therefore you are not
entitled for credit on your repairs and maintenance, electrical works and
related. Refer definition of
WCT 2(119) and Sec.17 (5) for clear understanding.
Q. I was updated Aggregate Turnover in the preceding
financial year ₹ 131445297.00 in GSTR-1 July 2017. (T/O
F.Y 2016-17 + 2017-18 Q1=131445297.00). Actually Previous F.Y
2016-17 Turnover is ₹ 103631746.00. Kindly give suggestions and rectification
process?
A. You will have to
change GSTR 3 B for July, 17 also and facility for RESET of GSTR
3 B has been allowed. This will pave the way for amendments in the
remaining GSTR Returns.
Q. We have supplied medicine to Govt.
hospital, Maharashtra in the month of Sept. 17. But now we have to lift the
same item as it is supplied and party not giving any proper documents. Whether
we can show Dec.17 return as a sales return or any other return 3B of Dec. and
GSTR-1 of Sept.?
A. Show it as sales return in December month return
and issue a credit to this extent to the customer.
Q. In some cases we have received short
payment from customers due to short quantity/rate difference. These thing comes
to notice after received the payment. Customers are not giving us any debit
note. For accounting purpose shall we book the short payment under discount
head?
A. You have to book the difference under Credit
note head and reverse the GST liability to the extent of shortage/damaged
goods. It’s better to inform your customers to give you immediate intimation
about the details of such deductions so that you will get your GST liability
reduced in the same month.
Q. We wish to return part quantity of our
purchased materials as rejection. It is only purchase return. What documents to
be given to the supplier? Can we raise Debit Note to our Suppliers? We were
informed that we can raise Debit Note or Credit Note only to our customers only
and not to our suppliers.
A. Purchase return is also
supply as per the provisions of CGST Act, 2017. Therefore the same
may be supplied under taxable invoice. Credit note has to be issued by the
supplier. However, goods can be returned
on the basis of delivery challan.
Q. Section 17 (5)
(g) of CGST denies credit on goods and services or both used for
personal consumption. In the light of this when an employee travels on business
and avails hotel accommodation, whether GST on the hotel rent is eligible for
ITC, as the services is consumed by the employee for personal consumption Employee goes on tour for and behalf of the
company. He stays in the hotel for the purpose of company.
So if tour is for official purpose, ITC is allowed. If for personal use, ITC is
not allowed?
A. Section 17 (5) (g) of CGST Act,
2017 debars availment of ITC only when the goods or services or both when
supplied for personal consumption. However in your case the employee travels
and avails hotel accommodation if furtherance of the business. Hence GST paid
on hotel rent is available as ITC. Credit is eligible for hotel stay, ITC on
food is not allowed.
Q. Logistic Transporter was missing of
material from his custody, now we need to debit to Logistic Company Invoice
Amount (Material + GST) & poor service?
A. In this case you need not
raise any invoice, inform transporter about the loss caused and deduct the
amount to be paid from his bills. If your transporter is registered and opted
for forward charge he will raise Credit note and issue to you. And if the
transporter is unregistered who falls under RCM (most of the transporters falls under
this), you have to raise a credit note against the RCM invoice (consignment
note raised under sec.9 (3) of the Act with full value) with
applicable tax rate for the amount of deduction being made. The rate of tax is
5% on GTA services.
