Dear All,

As we are approaching the closure of the books of accounts for the Financial Year 2020-21, it becomes imperative for the businesses to review any adjustments required from GST Law perspective for that financial year (‘FY’) viz. Input Tax Credit (‘ITC’) claims, issuance of debit/credit notes, etc. For such adjustments, the prescribed timeline as per GST Law is upto the due date for furnishing the return for the month of September following the end of relevant financial year (i.e., due date for the September 2021 return) or furnishing of relevant annual return.

In this regard, we have enumerated some key points from GST Law perspective which should be looked into before filing the GST returns for the month of September 2021:

The key aspects of the Circular are summarised hereinbelow:

1. Points related to Input Tax Credit

•  Avail any unclaimed ITC pertaining to FY 2020-21: Eligible ITC for FY 2020-21 can be claimed upto the due date of filing of return for the month of September 2021. Thus, the businesses should ensure that all eligible ITC of FY 2020-21 which were not claimed earlier for any reason whatsoever like improper tax invoice, absence of GSTIN of the supplier on the tax invoice, non-availability of invoice in GSTR-2A/GSTR-2b, etc. should be claimed on or before the due date of filing of return for the month of September 2021. Beyond the prescribed timeline, the eligible ITC shall lapse statutorily and this in turn would become cost in the hands of businesses. (Section 16 of the CGST Act)
•  Reversal of ITC: Every business entity having a taxable and exempt supply is required to reverse ITC pertaining to exempt supplies on a provisional basis for each month. The businesses need to perform a final calculation of reversals for the entire financial year and accordingly tax paid/recovered should be adjusted before the due date for furnishing the return for the month of September 2021. It is to be noted that delay in reversal of ITC may trigger interest liability. (Rule 42 of the CGST Rules)
• Review of reversal of ITC claimed if payment to vendor is not made within 180 days and reclaim once paid: The businesses are required to reverse ITC claimed along with applicable interest provided that the payment to vendors is not made within 180 days from the date of invoice. Further, such ITC can be re-claimed once payment is made to the vendor. Accordingly, the business should review if such reversals and re-claim of ITC are done appropriately. (Section 16 of the CGST Act)
• Identify mismatch of ITC: The businesses should ensure to identify any mismatch between the ITC claimed for the FY 2020-21 in their returns and the GST liability declared by the vendors (as reflected in GSTR-2A/GSTR-2B). Further, the businesses should take corrective measures in order to reconcile these differences.

2.Other Points

• Adjustment through credit note: The credit notes for any supply made in FY 2020-21 are required to be issued and disclosed in the return for the month of September 2021. Accordingly, the businesses should ensure that all adjustment of credit notes for any supply pertaining to FY 2020-21 should be made on or before 30 September 2021 and disclosed in the return for the month of September 2021. (Section 34 of the CGST Act)
• Rectification of error or omission in outward supply return: The businesses should ensure that any error or omission in respect of the outward supply details furnished in the Form GSTR-1, for the FY 2020-21 should be rectified not later than due date for filing of the return for the month of September 2021. (Section 37 of the CGST Act)