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Strategies for Monthly GST Compliance and Finalizing Your Books
Key Points for Filing Monthly GST Returns and Finalizing Books of Accounts
Reviewing Income for Outward Supply
Examine the credit side of your Trial Balance for any income that should be included in outward supplies, such as scrap sales or rental income.
Turnover Reconciliation
Ensure your turnover figures reconcile between GSTR 1, GSTR 3B, and your Books of Accounts. Investigate any discrepancies by scrutinizing invoice details.
Letter of Undertaking (LUT) for Exports
If you export goods or services without paying tax, make sure you have furnished a valid LUT for the financial year.
Purchase Reconciliation
Compare the purchases recorded in GSTR 2A and 2B with your Books of Accounts. Investigate any differences by verifying invoice details.
Reverse Charge Mechanism (RCM)
Confirm that RCM has been correctly recorded and paid in cash for services like Goods Transport Agency (GTA) fees, legal fees, and director remuneration. Ensure GST is discharged on a reverse charge basis for services capitalized as part of an asset’s cost, especially when rendered by foreign entities.
GST on Advances for Future Services
Account for GST liability on any advance received for future services on the date of receipt. Verify that this has been included in GSTR 1 and GSTR 3B.
Reversal of Input Tax Credit (ITC)
Ensure ITC is reversed for:
- Payments not made within 180 days
- Blocked credits (e.g., Motor Vehicles, Insurance)
- Invoices not received
- Goods/services not received
- Supplier’s return not filed
- Place of supply rules
- Time limitations (by 30th November)
- Irrelevant invoices
Unbilled Revenue
Adjust unbilled revenue for services rendered in March according to AS-9 and the time of supply rule in GSTR 9C. Note that if the invoice is issued within 30 days, the supply is considered in April but recorded as unbilled revenue in March.
Goods in Transit
Claim input tax credit only when the goods are received by your business, as stipulated by section 16.
Handling Taxable and Exempt Supplies
If you provide both exempt and taxable supplies, apply the provisions of Rules 42 and 43. Banking companies can opt to avail 50% of the eligible ITC.
Forward Charge for Goods Transport Agencies
Ensure Annexure V is filed before the due date if Goods Transport Agencies pay GST under the Forward Charge Mechanism (FCM).
Disposal of Assets
Verify that the registered person has paid an amount equal to the input tax credit availed on disposed capital goods or plant and machinery, adjusted as prescribed or based on transaction value under section 15, whichever is higher.
Trade Receivables
For export services, ensure receivables in foreign currency are received within the stipulated period to meet export criteria.
Trade Payables
For foreign creditors, especially service vendors, verify the impact of import services and ensure RCM is properly discharged. Reverse ITC if payment is not made within 180 days from the invoice date, providing necessary interest. Reclaim reversed ITC once payment is made.
Read More: Income Tax Filing (ITR) for AY 2024-25: Essential Documents Checklist
Disclosure of GST Liability/Asset
Disclose excess input credit over output payable as part of other current assets, and excess output liability over input credits as other current liabilities. Make separate disclosures for CGST input credit and SGST payable, as they cannot be set off under GST laws.
By following these strategies, you can ensure GST compliance and maintain accurate financial records for your business.
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