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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 8

GST Update on Issues in Reconciliation Statement- Part 8

 

In our today’s update we are discussing on the adjustment pertaining to trade discounts that do not impact GST. Serial no. 5F of the reconciliation statement prescribes adjustment by way of addition of “Trade Discounts accounted for in the audited Annual Financial Statement but are not permissible under GST” while reconciling the turnover declared in the audited Annual Financial Statement with the turnover declared in the annual return. Another adjustment that is worth noting is that pertaining to credit notes under serial no. 5J of the reconciliation statement. The adjustment at serial no. 5J prescribes deduction of “Credit notes accounted for in the audited annual financial statement but are not permissible under GST.”
Now, as per accounting standard, sale price does not permit the inclusion of trade discount in sale price. Wherever any credit notes are to be issued for discount after issuing tax invoice, the registered person shall issue a credit note without disturbing the tax component on the price mentioned in the original tax invoice, so as to retain the quantum of input tax credit already claimed by the buyer as well as not to disturb the tax already paid by the seller.
Trade discounts can be issued in various ways and manners like special discounts, rebates, remissions, compensations, bonus etc. It is common for the assessee to issue credit notes even for trade discounts extended after issuance of invoice without effecting GST. For example, discount given on purchase of certain quantity of goods, compensation given to dealers for selling goods below market price which is not linked to any particular invoices. Practically, there is no difference in trade discounts accounted for in audited financial statement but not permissible under GST and credit notes accounted for in the audited financial statement but are not permissible under GST. However, the adjustment for trade discount is addition (+) whereas adjustment for credit note is deduction (-) which is opposite and contradictory. Although, the justification for the adjustment of credit note as deduction is being foreseen by many experts as correct on the grounds that the figure of credit notes should be negative and two negatives makes positive adjustment. However, the interpretation does not hold good for trade discounts. It is pertinent to mention that even discounts are negative figure that is to be deducted from sales but still positive adjustment is mentioned for the same in the reconciliation statement. Therefore, suitable clarification should be issued in this respect. 
Moreover, the adjustment of trade discount in 5F and credit notes in 5J are overlapping as trade discount is also given by way of issuing credit notes. Consequently, the separate adjustment, that too, having contradictory effect (one being addition and other being negative) is not at all understandable. 
Another point for discussion in this regard is that normally trade discounts, rebates are shown in debit side of Profit and loss account. This implies that it is not deducted from the turnover appearing in Annual financial statements. It is also not deducted from GST turnover in GSTR returns as GST is not effected on the same. Hence, it should not be shown in reconciliation of Annual financial statement turnover and GST turnover. 
However, if the trade discounts are deducted from the turnover in Annual financial statement then the same should be adjusted in reconciliation statement. 
This is solely for the educational purpose.
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This is solely for the educational purpose.
You can reach us at www.capradeepjain.com, at our facebook page on
https://www.facebook.com/GSTTODAYBYPRADEEPJAIN/ as well as follow us on Twitter at https://www.twitter.com/@capradeepjain21

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