GST chargeability and compliance


The government has amended CGST Act 2017 vide CGST Amendment Act 2018 with various changes w.e.f and one of the important amendment was made in Section 49 of CGST Act by introducing new section 49A after the section 49, which is as under:

*49A. Notwithstanding anything contained in section 49, the input tax credit on account of central tax, State tax or Union territory tax shall be utilized towards payment of integrated tax, central tax, State tax or Union territory tax, as the case may be, only after the input tax credit available on account of integrated tax has first been utilized fully towards such payment*

Section 49 (5) of CGST Act 2017 speaks about manner of utilising Input Tax Credit (ITC) for payment of GST output Tax liability, e.g IGST can be Set off against IGST and then CGST and SGST, CGST cane be set off against CGST and then against IGST, and SGST can be set off against SGST and then against IGST.

*Impact of amendment* 

But now Government has changed the order of setoff by introducing section 49A w.e.f and now IGST Credit should be set off fully before taking any setoff of CGST or SGST. Which means earlier CGST/SGST ITC was used to set-off CGST /SGST liability, as the case may be, but now IGST Credit has to be 1st utilised fully for payment of IGST then for CGST and then for SGST liability as the case may be, even before utilisation of ITC of CGST or SGST.

*For e.g.*

Say supplier for February 2019 has following data for filing GST 3B

*Output tax liability*
IGST- Rs 200
CGST-Rs 200
SGST- Rs 200
Total- Rs 600
*ITC Available*
IGST- Rs 300
CGST-Rs 200
SGST- Rs 100
Total- Rs 600
*Before 01.02.2019 set off was as under*


IGST liability of Rs 200 set off from IGST ITC

CGST liability of Rs 200 set off from CGST ITC

SGST liability of Rs 200 set off from remaining IGST ITC of Rs 100 and SGST ITC of Rs 100

*After 01.02.2019 (Section 49A) set off was as under*

*Supplier need to Pay Rs 100 from its pocket despite of having ITC available*

IGST liability of Rs 200 set off from IGST ITC 

CGST liability of Rs 200 set off from remaining IGST ITC of Rs 100 and CGST ITC of Rs 100

SGST liability of Rs 200 set off from SGST ITC of Rs 100 and rest liability of Rs 100 will be paid in cash


*IGST credit 1st used against IGST, and also IGST 1st need to be set off against CGST and then only CGST credit can be set off against CGST, by amending the section 49A supplier need to pay Tax of Rs 100 from his pocket*

Illustration before Sec 49A is introduced


GST on Residenial Property from 1st April 2019

Composite Supply

Reverse Charge Mechanism

Service Tax on reimbursable expenses - Pure Agent basis exempt

In the case of Intercontinental Consultants And Technocrats Pvt Ltd Vs Union of India & Anr,2012-TIOL-966-HC-DEL-ST the Hon'ble Delhi High Court has declared that Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006 as ultra vires since it travels much beyond the scope of Sections 66 and 67 of the Finance Act 1994.

In those Sections, there is no provision to include the expenditure in the consideration, which are incurred by the service provider in the course of providing the taxable service. However rule 5(1) was insisting the service provider to include the expenditure. Therefore the Hon'ble High Court has quashed the said rule.

In the Budget 2015 amendment is brought in to include reimbursables under taxable net

However , Rule 5(2) which gives exemption for expenses incurred as a pure agent is still available.

Export of Services - Output is exempt and hence input Credit is refunded

Refund of Input Credit

Duty drawback and refund of input taxes are allowed on input taxes paid in india for goods expoted out of india and hence expempt from output tax. However in this context one needs to note input credit can be taken only for goods taxable ( including expempt) but not goods which are not taxable that is outside the purview of taxation.



Audit under GST (Goods and Service Tax) and certification of reconciliation statement GSTR 9C

Audit under GST 

audit under GST
Types of audit under GST

Audit under GST is the process of examination of records, returns and other documents maintained by a taxable person. The purpose is to verify the correctness of turnover declared, taxes paid, refund claimed and input tax credit availed, and to assess the compliance with the provisions of GST.

 Threshold for Audit

Every registered taxable person whose turnover during a financial year exceeds the prescribed limit [as per the latest GST Rules, the turnover limit is above Rs 2 crore] shall get his accounts audited by a chartered accountant or a cost accountant. He shall electronically file:
  1. an annual return using the Form GSTR 9B along with the reconciliation statement by 31st December of the next Financial Year,
  2. the audited copy of the annual accounts,
  3. a reconciliation statement, reconciling the value of supplies declared in the return with the audited annual financial statement,
  4. and other particulars as prescribed.

Rectifications after Return Based on Results of Audit under GST

If any taxable person, after furnishing a return discovers any omission/incorrect details (from results of audit), he can rectify subject to payment of interest. However, no rectification will be allowed after the due date for filing of return for the month of September or second quarter, (as the case may be), following the end of the financial year, or the actual date of filing o the relevant annual return, whichever is earlier.
For example, X found during audit that he has made a mistake in Oct 2017 return. X submitted annual return for FY 2017-18 on 31st August 2018 along with audited accounts. He can rectify the Oct 2017 mistake within-
20th Oct 2018 (last date for filing Sep return)
31st August 2018 ( the actual date of filing of relevant annual return)
-earlier, ie., his last date for rectifying is 31st August 2018.
This rectification will not be allowed where results are from scrutiny/audit by the tax authorities.

Audit by Tax Authorities audit under GST

  • The Commissioner of CGST/SGST (or any officer authorized by him) may conduct audit of a taxpayer. The frequency and manner of audit will be prescribed later.
  • A notice will be sent to the auditee at least 15 days before.
  • The audit will be completed within 3 months from date of commencement of the audit.
  • The Commissioner can extend the audit period for a further six months with reasons recorded in writing.

Obligations of the Auditee

The taxable person will be required to:
  1. provide the necessary facility to verify the books of account/other documents as required
  2. to give information and assistance for timely completion of the audit.

Findings of Audit

On conclusion of an audit, the officer will inform the taxable person within 30 days of:
  • the findings,
  • their reasons, and
  • the taxable person’s rights and obligations
If the audit results in detection of unpaid/shortpaid tax or wrong refund or wrong input tax credit availed, then demand and recovery actions will be initiated.

Special Audit 

When can a special audit be initiated?
The Assistant Commissioner may initiate special audit, considering the nature and complexity of the case and interest of revenue. If he is of the opinion during any stage of scrutiny/enquiry/investigation that the value has not been correctly declared or the wrong credit has been availed then special audit can be initiated.
Special audit can be conducted even if the tax payers books have already been audited before.
 Who will order and conduct special audit?
The Assistant Commissioner (with the prior approval of the Commissioner) can order for special audit (in writing). The special audit will be carried out by a chartered accountant or a cost accountant nominated by the Commissioner.
 Time limit for special audit
The auditor will have to submit the report within 90 days. This may be further extended by the tax officer for 90 days on an application made by the taxable person or the auditor.
The expenses for examination and audit including the auditor’s remuneration will be determined and paid by the Commissioner.
Findings of special audit
The taxable person will be given an opportunity of being heard in findings of the special audit.
If the audit results in detection of unpaid/shortpaid tax or wrong refund or input tax credit wrongly availed then demand and recovery actions will be initiated.