GST Compliances Checklist for FY 2023-24: The Goods and Services Tax (GST) system in India continues to evolve, with regular updates to laws, judicial pronouncements, and return filing procedures. Keeping pace with these changes is crucial for businesses to ensure seamless GST Compliances Checklist for FY 2023-24 and avoid penalties, interest on taxes, and departmental interventions.
We’ll sharing the 70 key Checklist to consider for the financial year (FY) 2023-24, helping you navigate GST compliance effectively.
Compliances on the GST Portal
- LUT Application/Renewal: Don’t forget to file an application for renewal of Letter of Undertaking (LUT) for FY 2024-25 if you make supplies to Special Economic Zones (SEZs) or undertake export transactions. The deadline is typically March 31st.
- Composition Scheme Opt-in: Businesses opting for the composition scheme for FY 2024-25 need to file form CMP-02 on the GST portal by March 31, 2024.
- GSTR-4 Filing: Businesses registered under the composition scheme for FY 2023-24 must file Form GSTR-4 by April 30, 2024.
- QRMP Scheme: The time limit to opt-in or opt-out of the QRMP scheme (Quarterly Return Monthly Payment) is April 30, 2024.
- Annexure V & VI for FCM/RCM: If you supply goods for transportation (GTA), ensure you file Annexure V & VI to opt for Forward Charge Mechanism (FCM) or Reverse Charge Mechanism (RCM) for FY 2024-25 by March 31, 2024.
Reconciliations for FY 2023-24
Thorough reconciliation is essential for identifying discrepancies and ensuring accurate GST filing. Here’s what to reconcile:
- Outward Supplies: Match outward supplies reflected in your books of accounts with GSTR-1 and GSTR-3B. This helps identify any amendments required in GST returns. Consider the formula: Turnover + Taxes (including RCM).
- Rate-wise Reconciliation: Reconcile tax rates between your books and GSTR-1 (including tax ledgers vs. 3B for RCM).
- Credit and Cash Balance: Ensure the balance of credit and cash reflected on the GST portal matches the balance in your books. Discrepancies indicate potential monthly entry errors or missed/excess ITC claims.
- GSTR 2B vs. ITC Register: Perform invoice-level tracking of eligible and ineligible ITC in your books and reconcile it with ITC disclosures in GSTR-3B for the entire FY. Pay close attention to spillover transactions.
- Pending ITC: Identify any pending ITC (as per books and GSTR 2B) to optimize ITC claims. Follow up with vendors if required to update or amend their GSTR-1.
Outward Tax Liability Checkpoints
- GST Debit/Credit Notes: Verify the need to issue GST debit notes (DNs) or credit notes (CNs) for any value short/excess charged or customer returns. Remember, there’s a deadline of October 31st for issuing credit notes. Review your agreements to understand clauses on discounts and CN requirements.
- Plant & Machinery Transfer: Comply with section 18(6) for transfers or sales of Plant & Machinery (P&M). Consider valuation checks, especially for related party transactions.
- Old Vehicle Supply: Review the supply of old vehicles, including the possibility of paying GST only on the profit margin as per notification no. 8/2018-CT (if applicable).
- Tax Utilization Entries: Verify that tax utilization entries passed in your books of accounts match the electronic liability ledger.
- Debtors Ageing Report: Review your debtors ageing report to understand the tax implication on your customers. Their ITC eligibility is linked to payment, and non-payment by MSMEs can lead to non-compliance for you.
- Outstanding Amounts: Review outstanding amounts towards export of services and goods where you intend to claim refunds.
- GSTR-1 Amendments: You can amend GSTR-1 to change outward supplies from B2C to B2B or the type of tax, provided you pass on the credit to customers before the FY deadline. Consider issuing a standard instruction to avoid post-year-end amendments.
- Recipient/ECO Liability: Ensure you correctly update details where the recipient or Electronic Commerce Operator (ECO) is liable to pay tax. Accurate disclosures are key to avoiding disputes with the department.
- Advance Receipts: Verify tax liability against advance receipts (services) and their adjustment to derive the unadjusted advance amount. Refer to recent clarifications regarding refund vouchers in GSTR-1 Adv Adj.
- Cross-charge: Consider cross-charging distinct persons and related parties for supplying common services.
- Tax Rate Errors: Verify that CGST/SGST haven’t been paid instead of IGST, and vice versa. Understand if section 77 (CGST Act) or section 19 (IGST Act) applies (which avoids interest implications).
- Income from Other Sources: Classify income from other sources as taxable or non-taxable under GST. Ensure clarity on the tax position. Recent clarifications include employee recoveries not being payable, differentiating incentives from discounts, and charging GST on interest for delayed receipts.
- Expense Accounts: Verify if any expenses credited in your books could indicate income wrongly accounted for as expenditure. Ensure you apply the applicable GST on such income.
- GSTR 1 vs. GSTR 3B: Ensure GSTR-1 matches GSTR-3B. In case of mismatches, respond to DRC-01B notices within seven days. Regularly check the portal for such notices.
Inward (ITC) Checkpoints
Optimizing Input Tax Credit (ITC) claims is crucial for reducing your GST liability. Here’s what to watch out for:
- Timing of ITC Availment: Avail ITC only upon receipt of goods/services, considering Section 16, RCM credits, and ineligibility of credit on advances.
- Rule 37: Check for any ITC reversal required due to non-payment within 180 days or reclaiming ITC for supplies where payment has been made (refer to recent clarifications on ITC reversal in table 4B).
- Rule 37A: Verify (through GSTR 2A) if your vendors have filed their GSTR-3B. This helps satisfy Section 16(2)(c) of the CGST Act. If not filed, temporarily reverse the ITC and reclaim it once the vendor files GSTR-3B (irrespective of the time limit).
- Unaccounted Expenses/ITC: Identify any expenses and corresponding ITC not accounted for through GSTR-2B.
- Purchase Return Reversal: Ensure you reverse ITC against purchased goods rejected, returned, or other credits reflected in expense ledgers. Verify the impact is considered in GST returns. Check if vendor credit notes reflecting in GSTR 2B are correct.
- Deferred Input Account: For credits where details are not reflected in GSTR 2B, evaluate using a deferred input account. Re-evaluate before the next October and consider charging the vendor and passing it on as expenses.
- Rule 42: Analyze the impact of annualized ITC reversal on both exempt and taxable supplies (consider re-computation). Ensure “exempt supply” is taken correctly following Section 17(3), Explanation to Rule 43, and Explanation to Rule 45(4).
- Rule 43 Computation: For capital goods, verify the correctness of applying the Rule 43 computation formula. If performed like Rule 42, analyze the impact.
- Capital Asset Accounting: Verify the accounting treatment of capital assets before closing books to optimize input tax credits. Consider the distinction between building vs. plant & machinery (P&M), eligibility of motor vehicles, and civil works for P&M vs. other civil works (capital expenditure).
- Inventory/Asset Write-off: Ensure ITC reversal on entries for writing off inventories, assets, thefts, samples, destruction, obsolete items, etc.
Reverse Charge Mechanism (RCM)
- RCM Entries: Ensure proper accounting for transactions covered under reverse charge. Some accounting systems might not allow compound entry in direct expenses (e.g., freight RCM).
- RCM Liability: Analyze the need to make provisions for RCM liability on foreign associated enterprises based on entries in your books.
Other Important Checkpoints
- GST Provisions Analysis: Analyze GST applicability on various expenses, including freight & transportation payments (even if below 5% and ITC eligible), residential dwelling by commercial entities, advocate payments (legal expenses), security services (not applicable to body corporates), renting motor vehicles (only applicable when renting, not passenger transportation services), import of services (with or without consideration) – refer to Form 27Q & Form 15CA/CB for details, sponsorship/advertisement & marketing fees & licenses to various governments (central/state/local governments only, various exemptions available in Notification No. 12/2017-CTR).
- Section 9(4) Expenses: Analyze GST on Section 9(4) expenses, applicable only to the real estate sector.
You can amend GST returns for a financial year with corrections, deletions, or modifications until November 30, 2024 (i.e., October 2024 GST return filing deadline).
Remaining GST Compliances Checklist
- Refund Claim Applications: Ensure timely filing of refund claims.
- GST Portal Communication: Stay updated on the GST portal for notices and departmental communications. Ignoring these can lead to serious consequences.
- Mobile Number and Email ID: Maintain a functional and valid mobile number and email ID on the GST portal to avoid communication issues.
- Aadhaar Authentication: Complete Aadhaar authentication on the GST portal.
- Job Work and Goods Sent on Approval: Track the status of goods sent on job work or sent on approval. Ensure all goods are received back within the due time period (1 year for inputs, 3 years for capital goods). If not received on time, raise an invoice accordingly.
- Year-end Accrual/Provision Entries: Verify year-end accrual/provision entries for transactions with related parties and evaluate the GST implications (considering import of service possibilities).
- HSN Code: Ensure accurate use of the 6-digit HSN code (mandatory from April 1, 2021, for businesses with a turnover exceeding Rs. 5 crore) and display it in tax invoices.
- GST Registration in Other States: Obtain GST registration in other states where you make supplies. Ensure compliance with concepts like fixed establishment and supply.
- Interest on ITC Utilization: Be aware that interest is only payable on the utilization of ITC, at a rate of 18% per annum.
- Tax Paid Under Protest: If you’ve paid tax under protest (before receiving a notice or departmental visit) or reversed ITC under protest, ensure proper documentation with a letter of protest.
- Maintain Proper Records: Maintain data for inward supplies, outward supplies, RCM, e-way bills (EWBs), and documents (tax invoices, e-invoices, vouchers, etc.) for six years from the due date of the annual return for the financial year (e.g., for FY 2023-24, maintain records until December 31, 2030).
👉 Read more:
- File Your Income Tax Return for AY 2024-25 Quickly and Easily
- E-Invoicing Mandatory for Businesses Above INR 5 Crore Turnover w.e.f 1st April, 2024
Bottom Line
The burden of proof in GST compliance now falls directly on taxpayers. By following these 70 checkpoints, you can ensure a smoother and more efficient GST compliance process. Remember, better compliance translates to easier access to information, fewer disputes with departmental authorities, and the freedom to focus on growing your Business.
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