GST UPDATE ON ANNUAL RETURN COMPLIANCE-PART-3

GST UPDATE ON ANNUAL RETURN COMPLIANCE-PART-3

In earlier update, we discussed about the details to be filled in serial no. 4B “Supplies made to registered persons (B2B)” of Part-II of the Annual Return requiring the details of advance, inward and outward supplies on which tax is payable as declared in returns filed during the financial year. In the present update, we seek to discuss on the details required to be filed with respect to Inward Supplies on which tax is to be paid on reverse charge under serial no. 4G of the Annual Return.

As we all know that under GST regime, the assessee is required to pay GST under reverse charge mechanism under two sections, section 9(3) specifying goods or services under on which reverse charge is applicable and section 9(4) pertaining to supplies from un-registered persons. It is worth noting that the reverse charge mechanism under section 9(4) of the CGST Act, 2017 was deferred vide notification no. 38/2017-Central Tax (Rate) dated 13.10.2017 and so the reverse charge on account of inward supplies from un-registered persons was in operation from 1.7.2017 to 12.10.2017 subject to limit of Rs. 5,000/- per day. Therefore, while filing annual return, the assessee is required to compute their liability properly under both the sections and if GST has not been paid on the transactions attracting reverse charge mechanism, the said GST is required to be paid vide DRC-03 in cash. It is also pertinent to mention that the GST paid vide DRC-03 with respect to reverse charge mechanism would become cost to assessee as the input tax credit would not be admissible to the assessee for the same.

The reporting of transactions relating to reverse charge mechanism would effect liability and input tax credit simultaneously which point needs to be taken care of particularly. We hereby discuss different situations and their reporting from the perspective of filing annual return:-

Situation No. 1:-

RCM Liability for the month of	Discharged in GSTR-3B for the month of	Whether input tax credit admissible?	Input Tax Credit availed in the GSTR-3B for the month of
October, 2017 Amount-Rs. 1,75,000/-	March, 2018	Yes	March, 2018 Amount-Rs. 1,75,000/-

The reporting of the above transaction in annual return will be as follows:-
The RCM liability will be reported in Table 4G as Rs. 1,75,000/-
The input tax credit availed will be reported in Table 6C/6D as Rs. 1,75,000/-.
Situation No. 2

RCM Liability for the month of	Discharged in GSTR-3B for the month of	Whether input tax credit admissible?	Input Tax Credit availed in the GSTR-3B for the month of
October, 2017 Amount-Rs. 1,75,000/-	Rs. 1,00,000/- was discharged in March, 2018. Balance liability of Rs. 75,000/- was discharged in May, 2018.	Yes	ITC of Rs. 1,00,000 taken in March, 2018 Balance ITC of Rs. 75,000/- taken in May, 2018

In the annual return, we are suppose to reflect transactions pertaining to financial year 2017-18 given effect for in returns filed during 2018-19 separately. Therefore, the reporting under the above situation will be as follows:-
The RCM liability of Rs. 1,00,000/- will be reported in table 4G while the balance liability of Rs. 75,000/- will be reported in table 10 of the annual return.
Similarly, the ITC availment of Rs. 1,00,000/- will be reported in table 6C/6D while the balance ITC availment will be reported in table 13 of the annual return.

Situation No. 3

RCM Liability for the month of	Discharged in GSTR-3B for the month of	Whether input tax credit admissible?	Input Tax Credit availed in the GSTR-3B for the month of
October, 2017 Amount-Rs. 1,75,000/-	Not discharged till date	Yes	Not availed till date

The amount of Rs. 1,75,000/- required to be discharged under reverse charge mechanism but not paid till date by the assessee will have to be reflected in table 4G of annual return and will have to be paid vide DRC-03. It is to be noted that the assessee will not be able to take input tax credit even if the same is admissible as no claim for input tax credit can be made through filing of annual return.

It is submitted that during the initial stages of implementation of GST regime, there was confusion as regards availability of input tax credit paid under reverse charge mechanism in the same month and consequently, there are cases wherein GST was paid under reverse charge mechanism but the input tax credit was claimed in subsequent months. In such cases, there will be change in the reporting mechanism as discussed in the above situations. For the sake of clarity, we explain the scenario by way of following situation:-

RCM Liability for the month of	Discharged in GSTR-3B for the month of	Whether input tax credit admissible?	Input Tax Credit availed in the GSTR-3B for the month of
October, 2017 Amount-Rs. 1,75,000/-	Rs. 1,75,000/- was discharged in November, 2018.	Yes	ITC of Rs. 1,00,000 taken in January, 2018 Balance ITC of Rs. 75,000/- taken in April, 2018

The RCM liability will be reported in Table 4G as Rs. 1,75,000/-
The input tax credit availed will be reported in Table 6C/6D as Rs. 1,00,000/- whereas the balance input tax credit availed in April, 2018 (next financial year) will be reported in table 13 of the annual return.

The points as regards other aspects in filing annual return will be discussed in our next update.
This is solely for the educational purpose.
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