Clarification on various doubts related to treatment of secondary or post-sales discounts under GST.

CBIC has issued circular no. 105/2019 for Clarification on various doubts related to the treatment of secondary or post-sales discounts under GST.

In most of the cases of supplier and distributor channel, there are post sales discounts which are passed through the Credit notes. Taxability of discounts has always been under scanner. CBIC has grilled further in the issue and clarified following:

1. The post-sale discount has been bifurcated into two categories.

    

a. Post sales discount without any activity on the part of dealer: Not taxable

b. Post sales discount for activities such as Special Sales drive, AD Campaign, Exhibition - Taxable in the hands of the dealer.

It is further clarified that in case of discount being non taxable, The dealer would not be required to reverse the credit.

Clarification Regarding GST on Penal Interest for delayed payment on EMIs.

GST on Penal Interest of EMIs

CBIC has issued Circular No. 102/2019 to clarify the taxability of Penal Interest on delayed EMIs.

Generally, following two transaction options involving EMI are prevalent in the trade:-

Case – 1: Where the Seller himself extends the benefits of EMI to the buyer: 

Seller ---> EMI ---> Buyer

X sells a mobile phone to Y. The cost of a mobile phone is Rs 40,000/-. However, X gives Y an option to pay in installments, Rs 11,000/- every month before the 10th day of the following month, over next four months (Rs 11,000/- *4 = Rs. 44,000/- ). Further, as per the contract, if there is any delay in payment by Y beyond the scheduled date, Y would be liable to pay additional/penal interest amounting to Rs. 500/- per month for the delay. In some instances, X is charging Y Rs. 40,000/- for the mobile and is separately issuing another invoice for providing the services of extending loans to Y, the consideration for which is the interest of 2.5% per month and an additional/penal interest amounting to Rs. 500/- per month for each delay in payment.

Case – 2: Where the third party (Such as Bajaj Finserve) extends the benefits of EMI to the buyer:

Seller ---> Sale ---> Buyer,  Third Party ---> EMI ---> Buyer

X sells a mobile phone to Y. The cost of a mobile phone is Rs 40,000/-. Y has the option to avail a loan at interest of 2.5% per month for purchasing the mobile from M/s ABC Ltd. The terms of the loan from M/s ABC Ltd. allows Y a period of four months to repay the loan and an additional/penal interest @ 1.25% per month for any delay in payment.

In case 1: Penal Interest will be part of Taxable value for GST.

In case 2: Penal Interest will not be part of Taxable value for GST.

Note: Any Service fees or service charge by the Third Party (Such as Bajaj Finserve) shall not be exempt from GST.

Notifications issued to give effect to Decisions taken in 35th GST Council Meeting.

To give effect to the GST 35th Council Meeting following notifications have been issued:

1. Notification No. 26/2019: 

The due date for Filling GSTR 7 (To be filed by TDS Deductor) for Oct-18 to Jul-19 has been extended to 31st August 2019.

2. Notification No. 27/2019

The due date for filling GSTR 1 for the person having a turnover of up to Rs. 1.5 crore for the period of Jul 2019 to Sep 2019 has been prescribed to be as follows:

Quarterly Jul 2019 - Sep 2019: 31st October 2019.

3. Notification No. 28/2019

The due date for filling GSTR 1 for the person having a turnover of more than Rs. 1.5 crore for the period of Jul 2019 to Sep 2019 has been prescribed to be as follows:

Monthly Jul 2019 - Sep 2019: 11th of the following Month.

4. Notification No. 29/2019

The due date for filling GSTR 3B for the period of Jul 2019 to Sep 2019 has been prescribed to be as follows:

Monthly Jul 2019 - Sep 2019: 20th of the following Month.

5. Notification No. 30/2019

The notification provides an exemption to the supplier of Online Information Database Access and Retrieval Services(“OIDAR services”) from filling Annual Return (GSTR 9)/ Reconciliation Statement (GSTR 9C)

6. Notification No. 31/2019

The notification seeks to carry out changes in CGST Rules,2017.

7. Notification No. 32/2019

The notification seeks to Extend the due date of filling GST ITC-04 (to be filed for goods sent for job work) for the period of Jul-2017 to Jun-2019 till 31st August 2019.

8. Removal of Difficulty Order No. 6/2019

The Due date for filing Annual Return and Reconciliation Statement has been extended from 30th Jun 2019 to 31st August 2019 for FY 2017-18.

Format For GST Audit Appointment Letter

To,

CA Firm Name

Chartered Accountants

Address

Sub: Appointment of GST Auditors under section 35(5) and section 44(2) of the CGST Act read with Rule 80(3) of the CGST Rules [read with the corresponding provisions of the State / Union Territory Goods and Services Tax Acts] for the Financial year ending on 31st March 2018.

Dear Sir,

We are pleased to inform you that vide Resolution of the Board of Directors dated ….. * your firm has been appointed as GST Auditors of our The company carrying the business under the name and style as (Name of the client and address and GSTIN) for conducting the audit under section 35(5) and section 44(2) of the CGST Act read with Rule 80(3) of the CGST Rules [read with the corresponding provisions of the State / Union Territory Goods and Services Tax Acts] for the previous year ending on 31st March 2018

The remuneration for conducting the said audit is fixed at Rs .......... inclusive of all applicable taxes, out of pocket expenses such as traveling, conveyance, etc.,

Kindly confirm your acceptance for the above appointment.

For ……………………

Authorised Signatory

Name and Signature

GST Portal to implement the new ITC set off rule from 11th Jun 2019.

Background

CBIC has amended sec. 88A to alter the mechanism of ITC setoff. i.e. IGST credit has to be completely utilized before utilizing the CGST and SGST Credit. However the same was not implemented on the GST Portal due to some technical reasons.

Update

Now GSTN shall enable the utilization of ITC as per the newly inserted rule 88A of CGST Rules from 11th June 2019 which is likely to be used for payment of taxes of May 2019 GSTR 3B return.

So at the time of setoff of liability, the portal first utilize IGST ITC for payment of IGST liability. then IGST ITC for payment of SGST or CGST liability in any order. 

			Set off
Particular	Liab	Credit	IGST ITC	CGST ITC	SGST ITC
IGST	100	200	100
CGST	100	60	50	50
SGST	100	60	50		50

Carry forward SGST ITC 10 and CGST ITC 10.

Note: It IGST Credit could have been used as 60 against CGST and 40 against SGST as well.