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Corporate News *  Service tax penalty can’t survive when assessee acted on dept.’s own view of non-taxability: Delhi High Court. *  GST section 74 extended limitation questionable when form 26AS mismatch was already known: Karnataka High Court grants interim relief. *  CGST demand prima facie impermissible after state GST settlement under section 128A: Bombay High Court. *  Supreme Court asks GSTAT to sympathetically consider delay as taxpayers pursued remedy before wrong forum. *  Supreme Court stays Tripura High Court ruling protecting genuine buyers from ITC denial over supplier’s GST default. *  Diary entries alone can’t prove clandestine removal of goods: CESTAT quashes excise penalty on steel trader. *  Customs could investigate preferential tariff claims even before sec. 28DA: Delhi High Court. *  Customs dept. relied on fake AI generated case laws: supreme court quashes Rs. 425.28 crore penalty. *  No GST exemption in affiliation and annual registration charges for admission or conduct Of examinations: GSTAT. *  Mere invoices, cheque payments insufficient to establish genuine movement of goods: GSTAT restores Rs. 43.44 lakh ITC demand. *  Consolidated GST show cause notice covering multiple financial years is not without jurisdiction: Delhi High Court. *  Construction of independent houses on separate plots not taxable as ‘Residential Complex’ without common facilities: CESTAT. *  GST penalty exceeding statutory maximum unsustainable; Allahabad High Court quashes ? 50,000/- penalty after taxpayer filed return and paid late fee. *  GST order against standard chartered bank passed without hearing set aside by Bombay High Court. *  Retracted statements can’t be relied upon without cross-examination: CESTAT quashes gold confiscation. *  Burden to prove misclassification lies on customs department: CESTAT. *  CESTAT quashes Rs. 98 lakh excise demand on clearance of used refractory brick scrap. *  Service tax demand on irrigation works quashed: Karnataka High Court rules sale of goods component not taxable as service. *  GSTAT restores tax and penalty for transporting iron scrap without E-way bill citing intent to evade tax. *  Madras High Court stays GST recovery from directors without opportunity to show cause under section 89. *  Madras high court stays GST recovery notice against directors; finds prima facie case on applicability of section 79(1)(c). *  Procedural lapses can’t justify harsh punishment without serious customs breach: CESTAT quashes customs broker licence revocation. *  Service tax payable on land leasing and sports complex charges: CESTAT. *  Settled customs dispute can’t be reopened through Article 226 challenge to interest liability: Delhi High Court. *  Mere facilitation of customs clearance can’t establish knowledge of smuggling: Madras High Court. *  GST registration cancellation stayed: Allahabad High Court questions 99% ITC utilisation cap under rule 86B. *  Composition scheme lapses automatically on crossing Rs. 1.5 crore turnover: GSTAT. *  Gujarat High Court quashes GST cancellation orders after officer relied on non-existent AI-generated case laws. *  Importers liable for customs duty benefits availed through manipulated scrips: Delhi High Court. *  Procedural E-way bill lapse alone can’t justify penalty where genuine transaction and absence of tax evasion are established: GSTAT.
Subject News *  Documentary evidence dominates probe, further custody unwarranted: mumbai court grants bail in Rs. 22.44 crore customs duty evasion case. *  Business premises can’t remain sealed for non-participation in GST search: Allahabad High Court. *  GST pre-deposit must be refunded proportionately when taxpayer partly succeeds in appeal: Bombay High Court. *  Supreme Court grants 30 days to file GST appeal; keeps pre-deposit issue open due to deposit in parallel CGST proceedings. *  GST demand can’t exceed amount proposed in SCN: Allahabad High Court quashes Rs. 20.47 Crore order. *  Hundreds-of-crores GST demand and heavy 10% pre-deposit no ground to bypass statutory appeal: Punjab & Haryana High Court. *  Delhi High Court refuses to entertain challenge to gold confiscation due to statutory appeal remedy and unexplained delay. *  Procedural error in customs broker licence inquiry can be rectified through remand: Delhi High Court. *  GSTR-2A mismatch alone can’t justify ITC denial without invoice-wise verification; personal hearing mandatory: GSTAT. *  GST order passed without uploading personal hearing notices violates sec. 75(4): Allahabad High Court. *  TAX EVASION - Sec. 74 GST SCN quashed for not spelling out fraud, wilful misstatement or suppression: Allahabad High Court. *  STPI’s SOFTEX certification and NoC charges taxable as business support services: CESTAT. *  Suspicion can’t replace proof: CESTAT quashes penalty in alleged gold-smuggling operation. *   Limitation runs from communication of order: Madras High Court upholds rejection of delayed GST Appeals. *  Rajasthan High Court quashes GST demand over unsigned show cause notice. *  ITC recovery upheld where supplier failed to deposit GST: Rajasthan High Court. *  Customs commissioner’s empowered to make port trust liable for duty on pilfered goods: Supreme Court. *  Rectification proceedings can’t be used to challenge an uncontested GST assessment through a writ petition: Andhra Pradesh HC. *  GST proceedings against deceased proprietor unsustainable without notice to legal heir: GSTAT. *  Mere availment of ineligible self-assessed ITC doesn’t amount to suppression without evidence of fraud or wilful misstatement: GSTAT. *  Disposal of mining overburden by entity authorised by mining lease holder constitutes taxable service: CESTAT. *  Toll plaza data not mandatory for ITC refund: GSTAT. *  Disputed GST fraud allegations require investigation: Punjab and Haryana High Court makes interim bail absolute in alleged fraud and GST fraud case. *  Non-manufacturer contractor liable to deposit excess excise duty collected from buyer: CESTAT. *  GST order can’t reject taxpayer’s reply as “not satisfactory” without reasons: Madhya Pradesh High Court. *  Uncorroborated statements can’t establish alleged diversion of duty-free goods: CESTAT. *  Erection services were not liable to service tax prior to 10th september 2004: CESTAT. *  Sec. 74 GST notice must spell out statutory ingredients for invoking extended tax demand proceedings: Allahabad High Court. *  No jurisdictional bar under section 6(2)(b) in parallel CGST SGST proceedings: Delhi High Court refuses to bypass GST appeal remedy. *  Madras High Court remits GST demand for fresh adjudication after taxpayer claims it was unaware of SCN following business closure.  

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GST Update on Issues in Reconciliation Statement- Part 10

GST Update on Issues in Reconciliation Statement- Part 10
In our today’s update we are discussing on the serial no. 5N pertaining to adjustments in turnover due to foreign exchange fluctuations. We submit that it is possible that there are differences due to foreign exchange fluctuations in the turnover recorded in the books of accounts and that reflected in the return filed by the assessee. This is for the reason that while recording export sales in the annual financial statements, the guidelines prescribed in AS-11 are followed and the rate of exchange prescribed by RBI is considered whereas while issuing GST invoice and in the export documents like shipping bill, the exchange rate prescribed by the CBIC from time to time is being considered. Consequently, for recording export sales, there are two invoices maintained by assessees, one issued under GST laws being GST invoice wherein CBIC exchange rate is used and the other issued for accounting purpose which considers the rate of exchange prescribed by RBI on the date of bill of lading. Consequently, there is difference in the turnover of export sales as per annual financial statements and as per GST returns due to difference in the rate of exchange used for recording the transaction. It is also worth noting that certain assessees use only one rate of exchange for booking export sales being the rate prescribed by CBIC and in such cases, this difference may not be there. 
Continuing further, since the export sales are booked at a different rate than the date of realisation of export proceeds, there will again be a difference on account of foreign exchange fluctuation on the date of realisation of export proceeds. The gain or loss arising on account of realisation of export proceeds will be transferred to Profit and Loss Account. Now, additional adjustment on account of profit or loss on account of foreign exchange fluctuation will be required to be done if the Turnover as per audited financial statements as stated in 5A of the Reconciliation includes gain on account of foreign exchange fluctuation. In this regard, it is worth mentioning that there are two opinions as regards turnover to be taken in 5A of the Reconciliation Statement. One view (also suggested by Technical Guide issued by ICAI) is that turnover of 5A will include all indirect incomes such as gain on account of foreign exchange, gain on sale of asset etc. Consequently, if the turnover of 5A includes forex gain, adjustment on account of profit on foreign exchange fluctuation will be additionally done in 5N. However, if the another view is followed, which says that the turnover of 5A should be taken as stated in audited financial statements without adjusting indirect incomes, then no additional adjustment would be required to be made in 5N by the assessee. The complete analysis of adjustment on account of foreign exchange fluctuation is explained as follows:-
Exchange rate of CBIC on date of booking sales = 65
Exchange rate of RBI on date of booking sales = 68
Exchange rate of RBI on date of realisation of sales = 70
Sales made to US= 1,00,000 US $
Turnover of annual audited financial statements= Rs. 5,00,00,000/-
Gain on account of foreign exchange fluctuation= Rs. 10,00,000/-
If the assessee uses two types of exchange rates i.e. custom exchange rate for GST and other RBI rate for accounting as discussed above, then in that case, the adjustment on account of foreign exchange fluctuation in 5M would be Rs. 3,00,000/- [1,00,000* (68-65)] to be reduced from the turnover of audited financial statements on the assumption that the turnover of annual audited financial statements without adding gain has been taken under 5A. However, if the turnover of annual audited financial taken as base is including the gain on account of foreign exchange, then the total adjustment of the transaction on account of foreign exchange fluctuation shall be Rs. 5,00,000/- reduction in serial no. 5M. [3,00,000 + {1,00,000 *(70-68)}]. 
In our opinion, the turnover without any adjustment of indirect income should be taken in 5A so that less adjustments are to be done for arriving at the turnover of GSTR-9. 
This is solely for the educational purpose.
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