Indirect Tax Planning and Management
Planning for Indirect Taxes is an effective way to reduce Cash Payouts for taxes, avoid outflow for Penalties and Interests and to Prevent Litigations and its related expenditure. Given below are few aspects to foster a robust Indirect Tax Planning and thereby benefiting the organization in terms of cost-saving and timely adherence to compliances.
(1.) Reducing Cash Payout for Tax:
(i.) Tax payment at the correct tax rates:
The goods / service should be classified under the appropriate HSN code and accordingly the correct rate of tax to be applied and paid.
Example: Classification of Sanitizers under Chapter 87 or Chapter 63 attracting GST rate of 18% or 12% respectively.
(ii.) Erroneous calculation of tax amount:
A maker-checker policy would definitely prove useful to prevent such avoidable errors.
Example: Omitting to consider invoices for availment of input tax credit.
(iii.) Incorrect GSTIN:
Organizations having multiple GSTIN’s under one PAN can erroneously enter incorrect GSTIN while paying taxes.
(iv.) Timely reconciliation of Inward supply invoices:
(a) There may be invoices appearing in GSTR 2B uploaded by the supplier but the same are not booked in the accounts because of various reasons. A vendor-wise reconciliation would benefit to understand availment of pending credits.
(b) Delay in booking of invoices especially where credit is lost due to lapse of time limit to avail credit.
(2.) Penalties and Interests:
(i.) Late filing of GST Returns (GSTR-1 / GSTR-3B/GSTR-9/GSTR-9C):
Non – filing of return attracts a penalty of Rs. 200 (CGST+SGST) per day during which the failure continues, subject to a maximum of INR 5,000 (other than annual return) and maximum of quarter percent of the state level turnover (for annual return). Example: Inadvertent missing to file return of newly added state or delay in filing Annual return. Additionally, interest at the appropriate rate is payable on delayed filing of returns.
(ii.) E-way Bill Compliance:
Treating the e-way bill as merely a ‘procedural’ requirement can have perilous consequences. Non-filing of E-way Bill attracts a penalty of Rs.10, 000/- or tax sought to be evaded (whichever is greater). Example is the penalty (of ~Rs. 1.32 crore) levied for noncompliance in the case of Gati Kintetsu Express Private Ltd (Madhya Pradesh High Court).
(iii.) E-Invoicing:
If an invoice is not registered on the IRP (Invoice Reference Portal), then such an invoice would not be treated as a valid tax invoice for all GST related matters and would attract a penalty of ₹10,000 for each instance of non-compliance.
(3.) Prevent Litigations:
(i.) Obtaining Advance Ruling:
Attaining an Advance Ruling provides certainty in tax liability for an activity undertaken or proposed to be undertaken and hence avoids litigation as the same is binding on the assessee and the Government authorities.
(ii.) Being updated on Case Laws:
Staying updated on case laws will help confirm on the organizations tax position.
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The author is CA Riddhi Dalal and she can be reached at dalalriddhi91@gmail.com
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