GST Return Check points – Detailed Check List for GST Returns

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As Professional’s, we may be called upon to scrutinize the GST Returns compiled by companies. Here is an attempt to give a check-list of the items a Professional should look at to verify correctness of company’s GST Returns. now check full GST Return Check points from below….

GST Return Check points

GST Return Check points

A. Supplies made for a consideration:

  1. Is the Sales Register complete and closed
  2. Have any assets or stocks been transferred to any person : If yes, has any invoice been raised for such transfer Yes/ No. Has tax been charged in the invoice.
  3. Have any assets or stocks been exchanged with any other person : If yes, what is the nature of such exchange? Confirm that proper tax has been paid on the value of the exchange.
  4. Has any licence been given to any person for the use of any assets of the company? If yes, check the arrangement with the licensee. Confirm that proper tax has been paid on the licence fees thus collected.
  5. Have any assets been given to any person on rent or lease: If yes, check the renting contract. Confirm that proper tax has been paid on the rent thus collected.
  6. Have any assets been disposed off otherwise than by way of sale. If yes, has tax invoice been raised for such disposal?
  7. Have any Services been imported. If yes, check the invoice of the overseas supplier. Tax will have to be paid on Reverse Charge Mechanism. (The Services should have been imported in the course or furtherance of business).

B. Supplies made without consideration:

  1. Have any assets been transferred permanently. If yes, reverse the input tax credit.
  2. Have any supplies been made to any related person or a distinct person. (Gifts not exceeding fifty thousand rupees in value in a financial year by an employer to an employee shall not be treated as supply of goods or services or both. Ensure that employee wise records of gifts made during the year are maintained by the client.
  3. Employees are deemed to be related persons under the GST laws. Ensure that records of all free supplies (other than the supplies on the perquisite value of which tax is payable under the Income Tax Act, 1961) are maintained by the client. Also see section D below for recommended treatment of certain expenses commonly incurred by employers.
  4. Agency arrangement: i. Have any supplies been made by the company to agents; ii. Has the company made any supplies to their principals (as the agent).
  5. Has the client imported services from a related person or from any of his other establishments outside India, in the course or furtherance of business? All the above supplies, although made without receiving any consideration, are liable for payment of GST.

C. Purchases liable to Reverse Charge (Tax to be paid by Receiver):

1. Declared supplies liable to reverse Charge: Have any inward supplies of the following goods/ services been received

a. Goods liable to Reverse Charge: Unpeeled cashew nuts, bide wrapper leaves, tobacco leaves, lottery tickets and silk yarn are the goods liable to reverse charge. Check if there are any purchases of these goods.

b. Services liable to Reverse Charge: The following services are liable to payment of tax through reverse Charge:

  • i. Services from Goods Transport Agency (GTA); (It is to be noted that at present GTA services are subject to payment under reverse charge @ 5% without any ITC benefit to the GTA operator. The GST Council has, in their meeting held on August 5, 2017, recommended option for GTA operators to take registration and charge GST @ 12% with full ITC. However, the governments have yet to issue Notification to give effect to this recommendation of the Council. Thus, till the time such notification is issued GTA services will continue to be subject to payment of GST through reverse charge @ 5%without any ITC benefit to the GTA operator.)
  • ii. Legal Services by advocates to any business entity;
  • iii. Services supplied by an arbitral tribunal to a business entity;
  • iv. Services provided by way of sponsorship to anybody corporate or partnership firm;
  • v. Services supplied by Government or local bodies (excluding renting of immovable property, speed post, parcel post, life insurance and agency services, services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport, transport of goods or passengers ):
  • vi. Services provided by Directors (other than as an employee);
  • vii. Services provided by insurance agent to insurance company;
  • viii.Service provided by a recovery agent to a bank, financial institution or a non-banking finance company;
  • ix. Supply of services by an author, music composer, photographer, artist or the like by way of transfer or permitting the use or enjoyment of a copyright. Check if the company has availed of any of the above mentioned services. Check if tax has been duly paid under reverse charge.

D. Services provided to employees:

Listed below are some of the common instances of reimbursements, payments or recoveries by an employer and the taxability of such transactions:

  • i. As a rule, any facilities provided by the employer to employees as part of employment contract and is considered for Income Tax calculation on salary, will be out of the purview of GST.
  • ii. Recovery of canteen expenses from contract workers- such recoveries will be considered supply of outward services and should be taxed @18%.
  • iii. Employee Training charges: a. If incurred by employee and reimbursed to employee by employer, it will amount to inward supply from unregistered person and tax will have to be paid under reverse charge @18%. b. If, however the trainer’s invoice is in the name of the employer, the employer can avail of ITC charged in the invoice. Thus, ideally invoice should be taken in the name of employer. This will avoid double taxation.
  • iv. Recovery of transport charges -If recovered from employees, this will be treated as supply of services to the employees and hence taxable. Also, since employee is deemed to be a’related person’ tax will have to be calculated on open market value. Applicable rate will be 5%. However, if transport charges are recovered from persons other than employees, the tax will be payable on the actual charges recovered (as against on open market value).
  • v. Reimbursement of education expenses to employees- The amount reimbursed to the employee will be deemed to be inward supply by unregistered person and tax will have to be paid by the employer under reverse charge @18%. If, however, such reimbursement is included as part of salary GST will not be applicable.
  • vi. Notice pay recovery upon full and final settlement of employee – This recovery will be deemed to be in the nature of outward supply of service. GST will be payable @ 18%.
  • vii. Reimbursement of internet expenses
    • a. If bill is in the name of the employee, GST will have to be paid by employer under reverse charge. No tax if included as part of salary.
    • b. If bill is in the name of the employer input tax credit will be available.
  • viii. Performance recognition awards
    • a. Such awards to employees are to be treated as ‘Gifts’. Gifts up to a value of Rs. 50,000/- per employee per annum are not liable to tax. However, If the total value of all gifts to an employee during the year is less than Rs. 50,000/-, it will be treated as a giftnpt liable to GST. However, input tax credit availed on such gifts by the employer, if any, on procurement such gifts will have to be reversed.
    • b. Will be liable to GST if value exceeds ` 50,000/-. Employee being deemed to be a related person, valuation will have to be at open market value. Tax will have to be paid @18% under reverse charge.
    • c. However, no GST if such award is treated as perquisite and subject to income tax.
  • ix. Reimbursement of Professional Membership Fees
    • a. Reimbursement of professional membership fees will be treated as ‘Gifts’. Subject to the overall limit of Rs. 50,000/- per employee, such reimbursements are liable to GST paid @18% under reverse charge.
    • b. However, no GST if such award is treated as perquisite and subject to income tax.
  • x. Health check-up expensesWhether health check-up expenses are incurred by the employer or incurred by employee and reimbursed by employer, these will be deemed to be ‘gift’. GST will be payable @18% on reverse charge.
  • xi. Recovery of value of assets lost/damaged by employeeLiable to GST @ 18% as outward supply.
  • xii. Personal accident/ group medical insurance cover to employees
    • a. If treated as perquisite and subjected to income tax, GST not applicable.
    • b. If not treated as perquisite, this will be treated as gift and GST will be payable as under:- if cumulative value of gifts to an employee during a year exceeds Rs. 50,000/- in a year liable to GST. Employee, being deemed to be related person, valuation will be at open market value. Taxable @ 18%. If cumulative value of gifts below Rs. 50,000/-, it will not be treated as a taxable supply. However, employer will have to reverse ITC on such purchase of insurance cover.
  • xiii. Provision of uniforms, etc. to employees for performing duties – This is not liable to GST. However, the procedures of the employer should clearly stipulate that employee is bound to wear the requisite uniform/ other gears in the discharge of his duties.

E. Inward supplies from unregistered persons:

All inward supplies from unregistered persons are liable to payment of tax by the receiver. Ensure that a record is kept of all supplies of goods and services received from unregistered persons. Tax invoice should be raised for each such supply calculating tax at appropriate rate and paid under reverse charge. Total purchases from unregistered persons up to Rs. 5,000/- in a day are not liable to GST. A single common invoice should be raised for all the purchases below Rs. 5,000/- in a day. Tax will have to be paid on purchases in excess of Rs. 5,000/- during a day.

F. Input Tax Credit not allowable

Ensure that ITC credits have not been claimed in respect of the following inward supplies:-

  • i. Purchase of motor vehicles and other conveyance. (ITC will be available to dealers in vehicles, transport operators providing taxable services and driving schools.)
  • ii. Food and beverages, outdoor catering;
  • iii. Beauty treatment;
  • iv. Health services;
  • v. Cosmetic and plastic surgery. (Please note, ITC in respect of the inward supply of services listed against ii to v above can be claimed if these are used for provision of further taxable supplies)
  • vi. Membership of a club, health and fitness centre.
  • vii. Rent-a-cab, life insurance and health insurance. (Please note, ITC inrespect of this head will be available if: a. The provision of such facility to employees is statutorily prescribed; or b. Such services are used for providing further taxable services.)
  • viii. Travel benefits extended to employees on vacation.
  • ix. Works contract services when supplied for construction of an immovable property other than plant and machinery. (Please note, ITC will be available if such works contract service is received for further supply of works contract service.)
  • x. Goods or services received by the receiver for construction on his own purpose any immovable property, other than plant or machinery.
  • xi. Goods or services used for personal consumption.
  • xii. Goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples.

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