GST UPDATE ON ANNUAL RETURN PART-3

In continuation to our earlier update on reporting of credit notes, we intend to discuss certain other issues with respect to disclosure requirement of credit notes in the annual return. We submit that it is being understood that financial credit/debit notes that do not impact GST are not to be considered while filing annual return and reconciliation statement. However, certain disclosure requirement in annual return leads to reflecting financial credit/debit notes too which is totally absurd.
The serial no. 5H of annual return requires disclosure of credit notes issued in respect of following supplies made by the assessee:-
• Zero rated supply (export) without payment of tax,
• Supply to SEZ without payment of tax
• Supplies on which tax is to be paid by the recipient on reverse charge basis
• Exempted
• Nil rated
• Non-GST supply
It is worth noting that serial no. 5 of Annual Return pertains to “Details of outward supplies on which tax is not payable as declared in returns filed during the financial year”. Hence, this serial pertains to outward supplies on which GST is not payable. Consequently, the adjustments made in such supplies on account of issuance of credit/debit notes will also not have any GST effect. In nutshell, we can say that credit/debit notes issued against such supplies are to be treated as ‘financial credit/debit notes’ that should not have any disclosure requirement. However, serial no. 5H and 5I of the Annual Return requires separate disclosure of such credit notes/debit notes.
At this juncture, it is also worth pointing that while filing GSTR-1, Nil rated supplies are to be disclosed in consolidated manner as inter-state registered, inter-state unregistered, intra-state registered, and intra-state unregistered. The assessees are not required to submit invoice wise details in GSTR-1 for nil rated/exempted/non GST supplies. Moreover, if there is any amendment in the value of such supplies, the same is adjusted in the consolidated amount in the GSTR-1 for the next month. Say for example, if the intra-state exempted supply to registered person was originally reported as Rs. 10,000/- in the month of July, 2017. Thereafter, cash discount of Rs. 2,000/- was given by way of issuing credit note. The said adjustment was made in the GSTR-1 filed for the month of September, 2017 which had exempted intra-state supplies to registered person as Rs. 20,000/-. Consequently, Rs. 2,000/- was deducted from the value of supplies and net amount of Rs. 18,000/- was reflected in the GSTR-1 for the month of September, 2017. This example implies that this adjustment in value of exempted supply by way of issuance of credit note does not impact GST and is to be considered as financial credit note. However, the annual return requires separate disclosure in 5H which will be difficult for the assessees as net amounts are reflected in GSTR-1. The government should seriously consider the amendment in the disclosure requirement specified in 5H of the annual return in the interests of assessees.
It is also pertinent to ponder upon another difficulty that will be faced by assessee exporting goods and issuing credit notes. It is worth noting that exports can be done either under LUT or on payment of IGST. However, in case of exports on payment of IGST, the assessee claims refund of IGST paid and the IGST has no impact on the foreign buyer as it is not charged from the foreign buyer. Consequently, even if credit note is issued, it partake the nature of financial credit note that should not be declared in the annual return. Moreover, if the credit note is issued after the assessee has received refund of IGST, the GST effect cannot be made in the credit note as if credit note along with GST effect is issued, it will lead to double benefit of claiming refund and availing credit which is not permissible. It may be noted that till date there is no mechanism for linking credit note issued with the custom portal as the option to provide credit note in case of exports on payment of tax does not require mention of shipping bill by assessee. Hence, the logic behind separate disclosure of credit notes issued with respect to exports made on payment of IGST is not understandable. It may be noted that while filing GSTR-1, unlike nil rated supplies, there is option to disclose credit notes issued for exports made without payment of tax and exports made with payment of tax. A suitable clarification as regards disclosure requirement of credit notes in serial no. 5H should be issued by the government at the earliest possible.
This is solely for the educational purpose.
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GST UPDATE ON ANNUAL RETURN PART-3

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