Impact of gst on banking

GOODS AND SERVICES TAX - BANKING SECTOR
[AJAY AGARWAL
CHARTERED ACCOUNTANT
1

INDEX
CONTENT SLIDE NO.
Comparison of provision under ST and GST, Value of taxable supply, place of
supply
3-5
Place of Supply _ GST 6
Taxable supplies 7
Bullion business vertical 8
Exempt services and supply 9-10
Analysis of Head wise Incomes earned by banks 11-17
Service Accounting Code 18
INPUT TAX CREDIT 19-25
List of common expenses & credit availability 26-28
How to Correct errors as Revision is not permissible 29-68
STOCKTRANSFEROF SERVICES_ISD VS CROSSCHARGE 69-74
Some of the Grey areas 75-76
2

BANKING SERVICES – SERVICE TAX / GST
Basis Service Tax Goods and Services Tax (GST)
Date of
Applicability
July 16, 2001 till 30.06.2017 July 1, 2017.
(Effective in Jammu and Kashmir since July
7, 2017)
Area of
applicability
Applicable in entire India including Jammu
and Kashmir.
Applicable in entire India including 12
nautical miles in the sea and Jammu and
Kashmir.
Collection levied and collected by the Central
Government
CGST and IGST (for inter state supply) is
levied by Central government.
SGST is levied by the state government.
Rate of Tax 15% 18%
ITC Available for Input Service & Capital Goods ITC available for Inputs, Input Service &
Capital Goods 3

DETERMINATION OF VALUE OF TAXABLE SUPPLY
Service Tax GST
(a) When consideration is in terms of money, the
gross amount charged by service provider.
(b) When consideration not wholly or partly in terms
of money, the value was be money with the
addition of service tax charged.
(c) in case gross amount charged is inclusive of
service tax, the value was such amount as, with
the addition of tax payable, is equal to the gross
amount charged.
There was no provision of service tax for services
between distinct and related persons.
The value of taxable supply is the price actually paid
or payable where the supplier and the recipient of
the supply are not related and the price is the sole
consideration for the supply.
Explanation to Section 15 of CGST Act states the
following to be related persons: (a) officers or
directors of one another’s business; (b) partners in
business; (c) employer and employee; (d) a person
directly or indirectly owns or controls or holds 25%
shares of both the persons; (e) one directly or
indirectly controls the other; (f) both are directly or
indirectly controlled by a third person; (g) together,
they directly or indirectly control a third person; (h)
members of the same family; (i) sole agent or
distributor or concessionaire of the other.
4

PLACE OF PROVISION VERSUS PLACE OF SUPPLY
Basis Service Tax GST
General Rule
for domestic
supply
location of service receiver (if not available,
then location of service provider).
Further, some other specified services had
their place of provision of service under
Place of Provision of Service Rules, 2012
(a)For B2B transactions, location of such
registered persons;
(b) For B2C transactions, location of the
recipient where the address on record
exists, otherwise location of the supplier of
services.
General Rule
for Cross
Border Supply
NA Location of the recipient of service
If not available in the ordinary course of
business, then the location of the supplier of
service.
This is applicable for services other than 9
specified services.
5

PLACE OF SUPPLY FOR BANKING SERVICES - GST
Where the location of the banks or location of
the recipient of service is in India
Where the location of the banks or location of
the recipient of service is outside India
As per Section 12(12) of the IGST Act, 2017, the
place of supply of banking and other financial
services, including stock broking services to any
person is the location of the recipient of services on
the records of the supplier of services. If the location
of recipient of services is not on the records of the
supplier, the place of supply is the location of the
supplier of services.
The place of supply of the following services is the
location of the supplier of services:
a) services supplied by a bank, or a financial
institution, or a non-banking financial company,
to account holders;
b) intermediary services;
c) services consisting of hiring of means of
transport, including yachts but excluding aircrafts
and vessels, up to a period of one month
6

LISTING OF TAXABLE SUPPLIES - BANKING UNDER GST
Charges for Issue of FIRC, DD,PO or Banker's
Cheque, Cheque Books, Bank Statement, Duplicate
Statements, RTGS, minimum balance charges etc
LC/Bill/Cheque Discounting Charges
LC issuance or realisation Charges, Charges for
Collection of Bills
Outstanding Balance transfer Charges
Loan Processing/ Renewal Fees
Charges levied by SBI to its customers ( Importers/
Exporters) for facilitating Overseas trade and
transactions
Interest charged on or Issuance fees of Credit Card
Income from Finance lease Transaction
Any Service Fees, Charges etc recovered from
customer for CP or CD.
Future contracts in FC or Commodities where the
transaction is settled by delivery of the underlying
Sale or transfer of Repossessed Assets
Charges Levied by Overseas Correspondent Bank to
SBI for facilitating trade and transactions
Purchase or Sale of Foreign Currency to Customers
Prepayment charges for early repayment of loans
Intermediary Services provided to Offshore Clients or
account holders
Services Provided to RBI
Inter state branch transfer of capital goods or services
Services provided to UN or Specified International
Organisation or a Foreign Diplomatic mission
7

BULLION BUSINESS VERTICAL
Gold received by SBI as Nominated Bank on
consignment basis from Overseas Suppliers
Liable to IGST on such gold at the time of clearance
from Customs, since it is a deemed SS in terms of
Para 3 of Sch I - CGST Act at the rate prevalent on
date of Import
Supply to Jewellers on Metal Loan Account
Raise Invoice on date of delivery of Gold at rate
prevailing on such date. Further Interest also
Taxable. Debit or credit note can be issued for
difference in rate on date of delivery and date on
which rate fixed by the Jeweller
Whether requirement of reversal of 50 % applies to
ITC on Bullion Purchased when you have separate
Business Vertical Registration
No. Sec 17(4) is applicable qua each regn and not
for bank as a whole
8

EXEMPT SERVICES - BANKING SECTOR UNDER GST LAW
Basis Entry No. Description of Service
NN 12/2017
Central Tax
as
amended
from time to
time
Integrated
tax (Rate)
NN 09/2017
NN 18/2017
(a) 26
(b) 27(a)
(c) 27(b)
(d) 34
(e) 37 & 38
(f) 39
(g) 40
(h) 39A
(g) 42
(j) -
(a) Services by Reserve Bank of India (RBI);
(b) extending deposits, loans or advances where consideration is interest or discount
(other than interest involved in credit card services);
(c) sale or purchase of foreign currency amongst banks or authorised dealers.
(d) Settlement of an amount upto INR 2,000 in a single transaction through payment
cards by acquiring banks.
(e) Services by collection of contribution under (i) Atal Pension Yojana; and (ii) any
pension scheme of the State Governments.
(f) Services by business facilitator or its intermediary to a bank or insurance
company wrt to account in its rural area branch.
(g) Services provided to the government under any insurance scheme for which
premium is paid by them.
(h) Services by an intermediary of financial services located in a multi services SEZ
with International Financial Services Centre (IFSC) status to a customer located
outside India for international financial services in currencies other than INR.
(exempted from intra-state supply of services).
(i) Services received by RBI from outside India for management of foreign reserves.
(j) Services imported in SEZ for authorized operations by a unit or a developer.
9

EXEMPT SUPPLIES
Interest on Term Loans, OD, CC,Working
Capital Loan, Packing Credit etc
Discount on Bills, Cheques, Debtors purchase,
LC Discounting
Income from REPOS (Issued by borrowing
bank)
& REVERSE REPO (issued by Lending bank)
transactions
Income from Sale, purchase, assignment or
acquisition of Secured or unsecured debt or
portfolio thereof
Income from Future Contracts without delivery Interest on Debt Instrument
Income from CP or CD Purchase or Sale of FC with AD or AMC
CLBO Transaction Income Interest on Home or Vehicle or Asset loan
Fine or Penalty for violation of law Purchase or Sale of Derivatives
10

ANALYSIS OF HEAD WISE INCOMES EARNED BY BANKS
A. INTEREST OR DISCOUNT
Definition Taxability Ref No. Place of
Supply
Analysis
Interest means
consideration
payable in any
manner in
respect of any
moneys
borrowed or debt
incurred but does
not include any
service fee or
other charges in
respect of the
moneys
borrowed or debt
incurred or in
respect of any
credit facility
which has not
Exempt,
Such Notification
covers that service
by way of Extending
Deposits, loans and
Advances in so far
as the consideration
is represented by
way of interest or
discount(Other than
interest involved in
credit card
services).
Entry no.28
of
Notification
No. 9/2017.
a)Location of
recipient of
service on the
records of
supplier of
service, place of
supply shall be
the location of
recipient.
b)Location of
recipient of
service is not on
records, place of
supply shall be
the location of
the supplier of
service.
a)Any kind of interest, whether it is on CBLO, Waiver
of loan, or extending any loans and advances or on
inter corporate deposit.
b)But interest levied on credit card service will remain
taxable.
c)Even there is pre payment of loan charges levied by
bank would also brought in GST regime.
d)In case of finance lease ownership of assets is with
the bank. So neither the services are purely in the
nature of extending loans and interest representing
consideration. Interest on finance lease transactions
will be taxable under GST.
e)Additional Interest charged for default in payment of
installment will by subject to GST (FAQ).
f) In case of CP or CD consideration is represented by
way of discount. And CP or CD are in nature of
promissory note and covered in definition of money.
So discount or interest thereon is not liable to GST.
11

B. SERVICE FEE AND OTHER CHARGES
Definition Taxability Ref No. Place of Supply Analysis
Service Fees
Processing
Fees and
Other Charges
Taxable Entry
no.28 of
Notificatio
n No.
9/2017.
a)Location of recipient
of service on the
records of supplier of
service, place of
supply shall be the
location of recipient.
b)Location of recipient
of service is not on
records, place of
supply shall be the
location of the
supplier of service.
"interest" does not include Service Fee
and other charges recovered by banks
from the borrower.
12

C. COMMISSION AND BROKERAGE INCOME
Income Description Taxability Place of Supply Analysis
Commission Bank earns
commission
income from its
various
contractual
arrangement.
Taxable a)Location of recipient of service on the
records of supplier of service, place of
supply shall be the location of
recipient.
b)Location of recipient of service is not
on records, place of supply shall be
the location of the supplier of service.
AXB bank gets 1%
commission from
companies for
providing them
investment exposure
in foreign market.
Same would be liable
for GST.
Brokerage
Income
A brokerage
fee is charged
to facilitate
trading or to
administer
investment.
recipient.
on records, place of supply shall be the 13

D. AGENCY CHARGES AND ACCOUNT MAINTENANCE
CHARGES, LOCKER CHARGES & DEMAND DRAFT CHARGES
Income Description Taxability Place of Supply Analysis
Agency
charges
Banks also
perform
certain agency
function like as
a facilitator,
collection
agent for bills
for collection
etc.
recipient.
b) Location of recipient of service is not
on records, place of supply shall be
the location of the supplier of service.
A person can be called
as agent when he
carries on the
business of supply or
receipt of goods or
service. So in case of
securities service
person may not be
treated as agent.
Account
maintenance
charges, locker
charges &
Demand Draft
Generally
bank charges
in case failure
of maintain
minimum
recipient.
14

E. DIGITAL PAYMENT FACILITY
Income Taxability Ref No. Place of Supply Analysis
Convenience
fees from the
person who
accepts
payment
through debit
card for
providing POS
gateway
Taxable Entry No.
34 Of
12/2017
Of
Central
Tax Rate
And 35
Of 9/2017
Of
Integrate
d Tax
Rate
of service on the
service, place of
supply shall be the
records, place of
supply shall be the
location of the
supplier of service.
GST will not be applicable on any
person transacting in relation to
settlement of an amount up to INR
2000 in a single transaction through
credit card or debit card.
15

F. SALE AND PURCHASE OF FOREIGN CURRENCY
Income Taxability Ref No. Place of Supply Analysis
Consideration
for providing
purchase or
sale of foreign
currency
Taxable entry no.
27(b) of
notificatio
n no.
12/2017
central
tax rate
and entry
28(b) of
notificatio
n no.
09/2017
integrate
d tax rate
of service on the
service, place of
supply shall be the
records, place of
supply shall be the
location of the
supplier of service."
No GST will be leviable when
(a) bank does inter bank transaction of
sale or purchase of foreign currency or
transaction with authorized dealers of
money changing.
(b) On Foreign exchange gain loss as
it only consider with exchange rate on
the date of time of supply
16

G. SERVICES SUPPLIED TO THE BRANCH OFFICE OUTSIDE
INDIA AND RENT ON IMMOVABLE COMMERCIAL PROPERTY
Income Taxability Place of Supply Analysis
Service supplied by
a bank to its branch/
head office outside
India.
Taxable, as supply of service
between distinct person.
Service between such
banks will be treated as
inter state supply.
Rent on immovable
commercial
property.
Taxable, as supply of service
between distinct person
Location at which the
immovable property is
located
17

SERVICE ACCOUNTING CODE – BANKING SERVICES
Group Financial and Related Services
997111 Central Banking Service
997112 Deposit Service
997114 Financial Leasing Service
997120 Investment Banking Service
997152 Brokerage and related securities and commodities service including commodity
exchange service
997153 Portfolio management service
997157 Foreign exchange service
18

INPUT TAX CREDIT
A. ELIGIBILITY (SECTION 16(1))
 Input tax means tax charged on any supply of goods or services.
 It includes tax paid under reverse charge.
 It does not include tax charged under composition scheme.
 Every registered taxable person is eligible to claim credit of input tax, if:
a) The person has possession of taxpaying docs such as invoice & debit note & others.
b) The person has received or deemed to received the goods or services.
c) Tax charged for such supply has been actually paid.
d) The person has furnished return as per Section 34.
 GST Charged on any supply of goods/ services to him which is used or intended to be used in the course or
furtherance of his business.
 The amount so charged shall be credited to electronic credit ledger of such person.
19

B. BLOCKED ITC- SECTION 17(5) CGST ACT
 Motor vehicles except when used for making taxable supplies:
a) Further supply of such vehicles
b) Transportation of goods/passengers
c) Imparting training or motor driving skills
 Supply of goods/ services, namely:
a) Food & beverages, outdoor catering, beauty treatment, health services, cosmetic and
plastic surgery except for supply of the same category of goods/services
b) Membership of a club & fitness center
c) Rent a cab, life insurance & health insurance
d) Travel benefits extended to employee on vacation such as leave or home travel
concession
20

B. BLOCKED ITC- SECTION 17(5) CGST ACT
 Work contract services for construction of immovable property other than P&M (ITC allowed if further
supply of WC Service).
 Goods & services received for Construction of IP other than P&M.
 Supplies on which tax has been paid under Composition Scheme.
 Supplies used for personal consumption.
 Goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples.
 Any tax paid in relation to or after issuance of SCN.
 No ITC is allowable on the tax component of capital goods on which dep. has been claimed under
Income tax.
 No ITC is allowed for any invoice/ debit note after furnishing return u/s 34 for September of next F/Y
or furnishing of annual return, whichever is earlier.
 In case of service, if payment is not made to supplier within 3 months, then credit availed by the
21

C. STEPS TO CLAIM INPUT TAX CREDIT
I. a. Determine whether the credit is available or not
I.b. If available, whether eligible or not
I.c. If eligible whether used for business or not
 Goods and/or Services used for Business purpose- Credit Claimable
 Goods and/or Services used for Non-Business Purposes- Credit Non-Claimable
I.d. ITC eligible & used for business needs to be further classified into
 whether used exclusively for supply of taxable service
 Whether used exclusively for supply of exempt service
 Whether common input tax credit example ITC on Statutory Audit Fees etc, the same needs
to be apportioned between taxable and exempt turnover. 22

C. PROPORTIONATE CREDIT OF INPUT TAX
Optional Scheme for Banking Company or Financial Institution or NBFC engaged in
accepting loans or advances
 1st option - claim 50% of eligible input tax; or
 2nd option- Claim credit of Eligible input on Goods and/or Services used for effective taxable
supplies (Including Zero Rated Supplies) but excluding exempted supplies & RCM Supplies.
 Option not to be withdrawn during the financial year.
23

ITC – SOME ISSUES & RESOLUTION THEREOF
How ITC for the period Jul to Sep 17 for ISD registration needs
to be distributed
to be distributed on the basis of Turnover of July 17 of the re -
Explanation to Section 20
ITC needs to be reversed in case of non payment of Invoice
received from Distinct person within 180 days from Due date
No
Interstate branch Supply of G or S or both - Whether reversal
of 50 % applies No. 100 % is eligible
Import of Service from Related Peron or Distinct Person
outside India - GST paid under RCM 50 % reversal applicable
Whether provisions of Sec 18(6) for reversal of ITC on Capital
Goods will apply on ITC availed i.e. 50 % of ITC charged in
Invoice
To be applied only proportionately to the extent of ITC availed
Can GST paid on accrual basis on accounts which become Bad
be refunded or utilised against other taxable supply in future.
Generally No. However, If Bad Debts is on account of
deficiency in services or tax charged at rate more than actual
tax liablity or Goods Return, GST paid on accrual is refundable
( subject to fulfilment of prescribed conditions).
24

E - UTILISATION OF ITC FOR PAYMENT
ITC
CGST SGST IGST
CGST IGST SGST IGST IGST CGST SGST
25

V. LIST OF COMMON EXPENSES & CREDIT AVAILABILITY IN
BANKING BUSINESS
Nature of Expense ITC Available
Salary, Wages & Bonus paid to employees No
Conveyance Expense – Non AC Taxi, Auto, Bus, Train, Radio Taxi like Uber Ola etc No
Remuneration to Directors No
Mineral Water/Tea Bags/ Coffee Powder Yes
Directors fees (RCM) Yes
Room Rent in Hotel Yes
Sales promotion / Business Promotion expense Yes
Advertisement Expenses Yes
AMC Charges Yes
Service by the member of overseeing committee to RBI Yes
26

Service by recovery agent to banking company( RCM) Yes
Bank charges Yes
House Keeping Services Yes
Insurance of Property, Plant & Equipments Yes
Payment to Advocates (RCM) Yes
Services supplied by individual DSA (RCM) Yes
Training Expenses Yes
Postage & Courier Charges Yes
Recruitment Expenses Yes
Sponsorship Expenses No
Rent paid for commercial premises, godowns yes
LIST OF COMMON EXPENSES & ITC ELIGIBILITY - CONTINUED
27

LIST OF COMMON EXPENSES AND ITC ELIGIBILITY - CONTINUED
Security Charges (RCM w.e.f.1.1.19) Yes
Repair & Maintenance - Vehicles No
Repair & Maintenance – others ( If not capitalized) Yes
Laptops, IT hardware System, Furniture & Fixtures, Office Equipment, Printers, Software
etc
Yes
Building, Motor Car No
Free gifts to staff upto INR 50,000 pa No
Free gifts to staff above INR 50,000 pa Yes
Diwali/ New Year Gift expense Yes
Expenses pertaining to exempt income No
Service by GTA (RCM) Yes
28

HOW TO
CORRECT
ERRORS AS
REVISION IS
NOT
PERMISSIBLE
Circular No.
26/2017 dated
29th Dec 2017

TYPE OF TRANSACTION SCENARI
O
PARTICULARS
Forward Charge Mechanism 1 Taxable Value and Corresponding Taxes was over reported
2 Only Taxes was over reported
3 Taxes paid under wrong head (CGST and SGSTinstead of IGST)
4 Taxable Value and Corresponding Taxes was over reported
5 Only Taxes was under reported
EXPORT SUPPLIES 6 Export supplies not reported inGSTR-3B
7 Export supplies under reported inGSTR-3B
8 Export supplies over reported inGSTR-3B
INPUT TAX CREDIT 9 Over reported ITC in GSTR-3B
10 Under reported ITC inGSTR-3B
B2B Supply reported as B2C 11 Rectification Steps
How to Correct errors as Revision is not permissible

SCENARIO-1: FCM-TAXABLE VALUE AND CORRESPONDING TAXES
WAS OVERREPORTED
Company X has ﬁled their return for the month of Apr’18 with over reported taxable value Rs.5,00,000/- and
corresponding taxes i.e CGST& SGST Rs.45,000/- each instead of taxable value Rs. 50,000/- and corresponding
taxes i.e CGST& SGST Rs.4,500/- each. What can they do in current period return or in next period return?
In this case
• Company X will adjust its difference taxable value and tax liability in the return of next month i. e May’18 or refund may
be claimed where adjustment is notfeasible.
• Taxable value will be reduced or adjusted by Rs.4,50,000/- and taxes i.e. CGST & SGSTwill be Reduced by Rs. 40,500/-
each.
3

REPORTED – APR’2018 Scenario-1
3

Actual – Apr’2018
SCENARIO-
1
3

REPORT IN MAY’18 CORRESPONDING TO
APR’18 (IF DATA AVAILABLE IN MAY’ 2018 OTHERWISE THERE WILL BE
NOADJUSTMENT)
May'18 Actual 7,50,000
Less for adjustment-
Apr'18
(4,50,000)
May'18 Reported 3,00,000
May'18 Actual 6,75,00 67500
Less for adjustment-Apr'18 40,500) 40,500)
May'18 Reported 27,000 27,000
Scenario-1
3

SCENARIO-2 : FCM-ONLY TAXES WAS OVER
REPORTED
Company X has ﬁled their return for the month of Apr’18 with taxes i.e CGST& SGST Rs. 45,000/- eachinstead of
taxes i.e CGST & SGST Rs. 30,000/- each. What can they do in current period return or in next period return?
In this case
• Company X will adjust its difference tax liability in the return of next month i.e. May’18 or refund may be claimed
where adjustment is not feasible.
• Taxes i.e. CGST& SGSTwill be Reduced by Rs. 15,000/-each.
3

3

ACTUAL – APR’2018 Scenario-2
3

n
APR’18 (IF DATA AVAILABLE I MAY’ 2018 OTHERWISE THERE WILL BE NO
ADJUSTMENT)
Scenario-2
May'18 Actual 27,000 27,000
Less for adjustment-Apr'18 (15,000
)
(15,000
)
May'18 Reported 12,000 12,000

SCENARIO-3 : FCM-PAID UNDER
WRONG HEAD
Company X has ﬁled their return for the month of Apr’18, After submission of the return the company realise that they had
shown intra state supply as inter state supply with taxes i.e CGST & SGST Rs. 45,000/- eachinstead of tax i.e IGST of
Rs. 90,000/- . What can they do in current period return or in next period return??
In this case
• Company’s IGST liability will be increased by Rs 90,000/- and amount wrongly entered in CGSTand SGST will either be
adjusted or claim as refund in the return of next month i. e May’18.
• CGSTand SGSTwill be claim asrefund.
• Such reported liability will be subject to interest u/s 50.

4

Actual – Apr’2018
SCENARIO-
3
4

APR’18 (IF SUﬃCIENT DATA AVAILABLE IN MAY’ 2018 OTHERWISE THERE
WILL BE NOADJUSTMENT)
Scenario-3
Taxable Value IGST CGST SGST
May'18 Actual 27000
0
24300 24300
Add liability -Apr'18 90000
May'18 Reported 27000
0
24300
24300
Wrongly reported CGSTand SGSTinApr’18
will be claimed asrefund.
Reported IGST will be subject to interest u/s 50

WAS UNDERREPORTED
Company X has ﬁled their return for the month of Apr’18 with under reported taxable value Rs. 4,00,000/- and
corresponding taxes i.e CGST& SGST Rs. 36,000/- eachinstead of taxable value Rs. 5,00,000/- and corresponding
taxes i.e CGST& SGST Rs. 45,000/- each. What can they do in current period return or in next period return?
In this case
• Company X will increased its taxable value and tax liability by under reported taxable value and tax liability in the return
of next monthi.e. May’18.
• Taxable value will be Increased by Rs.1,00,000/- and taxes i.e. CGST& SGST will be increased by Rs. 9000/- each.
• Such under reported liability will be subject to interest u/s 50.
4

4

Report in May’18 corresponding toApr’18
SCENARIO-
4
May'18 Actual 200000
Add Liability-Apr'18 100000
May'18 Reported 300000
May'18 Actual 18000 18000
Add Liability-Apr'18 9000 9000
May'18 Reported 27000 27000

4

SCENARIO-
5
May'18 Actual 27,000 27,000
Add Liability-Apr'18 1,000 1,000
May'18 Reported 28,000 28,000

5

SCENARIO-
6
May'18 Actual 1,42,000 May'18 Actual 2,55,60
Add -Apr'18 1,00,000 Add liability-Apr'18 1,80,00
May'18 Reported 2,42,000 May'18 Reported 43,560
5

SCENARIO-7 : EXPORT SUPPLIES UNDER
REPORTED IN GSTR3B
Company X has ﬁled their return for the month of Apr’18,at the time of reconciliation with GSTR1 the company realise that
they had shown zero rated outward taxable supply as under reported taxable value Rs.10,000/- and corresponding taxes i.
. Whatcane IGST Rs.18,00/i-nstead of taxable value Rs. 100,000/- and corresponding taxes i.e IGST Rs.18,000/-
they do in current period return or in next period return?
In this case
• Company will increase its both taxable value and tax amount subsequent month i.e. May’18.
• Taxable value will be increased by Rs 90,000 and IGST amount by Rs 16,200.
• Interest payable on under reported liability shall be applicable.
5

SCENARIO-
7
May'18 Actual 1,52,000 May'18 Actual 27,360
Add -Apr'18 90,000 Add liability-Apr'18 16,200
May'18 Reported 2,42,000 May'18 Reported 43,560

SCENARIO-8 : EXPORT SUPPLIES OVER-
REPORTED IN GSTR 3B
Company X has ﬁled their return for the month of Apr’18, after the return the company realise that they had shown zero
rated outward taxable supply as over reported taxable value Rs.2,00,000/- and corresponding taxes i.e IGST Rs.36,000/-
instead of taxable value Rs. 100,000/- and corresponding taxes i.e IGST Rs.18,000/-. What can they do in current
period return or in next period return?
In this case
• Firstly, Company will adjust such over reported Taxable value and tax lability in the next month against export supplies.
• If there is no data of export supplies available in the next month, then company should be reduce that over reported
export amount from Domestic Taxable value & Tax amount i.e. IGST in subsequent month i.e. May’18.
• Taxable value of Domestic supply will be reduced by Rs 1,00,000 and IGST amount by Rs 18000.
• Interest payable on under reportedliability

5

APR’18 Scenario-8
May'18 Actual 1,50,000
Less for adjustment-
Apr'18
1,00,000
May'18 Reported 50,000
May'18 Actual 27,000
Less for adjustment -Apr'18 18,000
May'18 Reported 9,000
6

SCENARIO-9 : OVER REPORTEDITC IN
GSTR3B
Company X has ﬁled their return for the month of Apr’18. After the return the company realise that ITC claimed as over
reported taxes i.e IGST Rs.10,000/- ,CGST& SGSTRs,3,000/- eachinstead of taxes i.e IGST Rs.5,000/- ,CGST& SGST
Rs,2,000/- each . What can they do?
In this case
• Company will pay over reported liability which will be payable through debit in Electronic cash Ledger along with
interest.
• Over reported GST ITC should be reversed from its respective head, i.e. CGST ITC will only be reversed from CGSTITC.
• Interest payable on under reportedliability

ACTUAL – APR’ 2018 AND TO BE CLAIMED IN
MAY’ 2018
Scenario-10

WAS OVERREPORTED
Company X has ﬁled their return for the month of Apr’18 with over reported taxable value Rs.5,00,000/- and
corresponding taxes i.e CGST& SGST Rs.45,000/- each instead of taxable value Rs. 50,000/- and corresponding
taxes i.e CGST& SGST Rs.4,500/- each. What can they do in current period return or in next period return?
In this case
• Company X will adjust its difference taxable value and tax liability in the return of next month i. e May’18 or refund may
be claimed where adjustment is notfeasible.
• Taxable value will be reduced or adjusted by Rs.4,50,000/- and taxes i.e. CGST & SGSTwill be Reduced by Rs. 40,500/-
each.

SCENARIO 11 – B2B SUPPLY REPORTED AS B2C
1. Login to GST Portal https://gst.gov.in with your user name and password.
2. Go to Return Dashboard and then select GSTR1 for the month we are filing.
3. Under GSTR-1 you will see a option under Table 10 amended B2C(Others). Click on that
Option.
4. Select Financial Year, Month and State for which Amendment is Required then click on
Amend Details.
5. Once you click on Amend details below option will come. Here you have to reduce the
amount of the invoice and taxable value which needs to be shown as B2B. Now We need
to reduce 100000 from the Taxable value and 18000 from the Tax part.
6. Invoice and Taxable Amount Reduced from Table 10 needs to be added under Table 4
Along with Invoice Amount, Invoice date and GSTN details. Here we need to add mention
GSTN, Invoice Number, Invoice Date Total Invoice value i.e 118000 and Taxable Value
100000 and 18000 under the Tax part. After Adding all the details of the B2B invoice click
on Save. By this way B2C invoices can be amended to B2B invoice. Your total sale value
will same by doing this.
67

YEAR END ADJUSTMENT
 Taxable service provided in the month of say March 25, 2018, however the invoice for the same has
been issued to the party in the month of April 5, 2018.
• Provision for Expenses like Audit Fees
a) Section 31 of CGSTAct for issuance ofTax Invoice;
31(1) An invoice for supply of goods needs to be issued before or at the time of removal of goods
for supply to the recipient, where the supply involves movement of goods. However,in other cases,
an invoice needs to be issued before or at the time of delivery of goods or while making goods
available to the recipient.
31(2) Similarly an invoice for supply of services needs to be issued before or after the provision of
service but not later than thirty days ( 45 days for Banks) from the date of provision of service.
b) GST liablity arises on the basis of invoice, receipt of payment or provision of services.
68

STOCKTRANSFER OF SERVICES
ISD CROSS CHARGE
69

CROSS CHARGE
SECTION 2(61) OF CGSTACT DEfiNESINPUT SERVICE
DISTRIBUTOR
Input Service Distributor” means an office of the supplier of goods or services or both
which receives tax invoices issued under section 31 towards the receipt of input services
and issues a prescribed document for the purposes of distributing the credit of central tax,
state tax, integrated tax or union territory tax paid on the said services to a supplier of
taxable goods or services or both having the same Permanent Account Number as that of
the said office.
ISD will be applicable when:
 Services are received directly by the respectivebranch/unit
 Tax invoice is received by centerlisedoffice.
70

ISD &
Recipient in
Different States
Credit of
IGST
IGST
Credit of
CGST
Credit of
SGST
IGSTIGST
71

ISD &Recipient in
SameState
(Business vertical)
Credit of
IGST
IGST
Credit of
CGST
Credit of
SGST
SGST
CGST
72

CROSS CHARGE VS
ISD
 Cross charge-where HO/corporate oﬃce provides services to another unit/branch or
vice versa or from one unit provides services to another unit.
 Credit to be distruted through ISD where one oﬃce (like HO/Corporate) procurs
certain services,common for all/some of its branches.
 GSTlaw provides mechanism todistribute credit through ISD mechanism.
 In case of cross charge issues will be:
a)Valuation
b)What to cross charge?
73

DIFFERENT SCENARIO
 Common Services received by the HO and other units and invoice received by
HO – ISD.
 Services by Employee/Management like CEO/CFOto all units – CROSS
CHARGE.
 Services by one unit to another unit or HO to units – CROSS CHARGE.
74

SOME OF THE GREY AREAS
Interest charged for delay in repayment of loan/Penal Interest is exempt or taxable?
Ans : As per FAQ on Banking Services it is Taxable. FAQs are not binding.
Section 15(2) (d) reads as under : “ The value of Supply shall include (a) ……(b)…….(c)……..
(d) interest or late fees or penalty for delayed payment of consideration of any supply.
In our view it is possible to take the stand that such additional interest also forms part of Value of Supply by way of interest for Loan
given, which
is an exempt supply under GST law.
Whether same service provided at differential rates to customers needs to be revalued for discharge of GST ?
 Different Locker Rent charged to different customers for same type of locker based on amount of FDs or Customer Type.
 Certain services like free pick up of cheques, issue of DD provided free to preferred customers
Ans : No.
If a supply reported as B2C earlier for want of GSTIN of customer can it be reported subsequently as B2B supply
Ans : FAQ says No. In our view it is possible refer slide 69 & 70 re Scenerio 11. 75

GREY AREAS
Whether Management Oversight or steawardship activities performed in relation to
business operation by HO or branch in one state to branches in another state is
Supply when there is no consideration charged by HO/Branch nor expenditure
recorded in Books of accounts of branches?
Yes, Refer Sch - I CGST Act.
Value based on certificate to be provided by Branch or HO providing the service.
The same can be backed by a CA or ICWA Certificate.
Further TOS will be the date on which such cost is determined or certificate received.
Can be done before expiry of the quarter during which such SS is made. [ 2nd
proviso to Rule 47 of CGST Rules] Document to be issued by branch or HO
supplying such services
76

Ajay Agarwal
Chartered Accountant

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