Indirect Tax updates
HSN requirement on invoices w.e.f. 1st April, 2021:
A major compliance obligation coming into effect from 1st April 2021 is mentioning of HSN codes on all the tax invoices:
The following 7 points are the important to be noted in this context:
- For Aggregate Turnover upto INR 5 Crores or INR 50 million:
4 digits to be mentioned if supplies are made to a registered person and NIL digits if supplies are made to an unregistered person. It is optional to show HSN codes in B2C invoices for turnover below INR 5 Crores or INR 50 million.
- For Aggregate Turnover above INR 5 Crores or INR 50 million:
6 digits to be mentioned for all supplies made to any person.
- For export of goods/services:
Full HSN code of 8 digits for goods and 6 digits for services to be mentioned in export invoices and is also a requirement as per Foreign Trade Policy.
- Full HSN code for 49 chemicals:
49 chemical products as mentioned in the Notification no. 90/2020 dated 01/12/2020 must be mandatorily supplied mentioned full 8 digits HSN code.
- Mandatory to report HSN codes while filing returns and in tax invoice:
It is mandatory to report minimum digits as given in the points above in Table 12 of GSTR 1 and Tax Invoice.
- Data mining initiatives by the Government:
The CBIC plans to implement data analytic tool through ADVAIT in the GST Regulatory Framework. This will be an extremely useful tool for the Department to track mismatches and mistakes in Tax Invoices, GSTR 1, GSTR 9, E Waybill, Shipping Bill and Bill of Entry especially based on HSN.
- Fine for non-compliance with the above:
There is a fine of INR 50,000 (INR 25,000 each under CGST & SGST Acts) for committing a mistake related to the above under section 125 of the GST Acts. All the tax invoices therefore should contain HSN digits, description of goods and tax rates specifically for better transparency and avoid any future litigations.
- The following 3 notifications are relevant in this regard:
- Notification 12/2017-Central Tax, dt:28/06/2017 – Erstwhile HSN codes notification valid upto 31st March, 2021
- Notification No. 78/2020 dated 15/10/2020 – New scheme of HSN codes from 1stApril, 2021
- Notification no. 90/2020 dated 01/12/2020 – 49 chemical products
UPDATE – GST on Directors’ Remuneration:
Circular No. 140/10/2020-GST dated 10.06.2020 by CBIC should clear the air on the controversy surrounding GST on directors’ remuneration.
To put it in simple words-
> GST not applicable – Director’s remuneration declared as Salaries in the books of a company and subjected to TDS under Section 192 of the IT Act
> GST applicable – Director’s remuneration declared separately in the Company’s accounts and subjected to TDS under Section 194J of the IT Act as Fees for professional or Technical services (GST applicable under reverse charge)
UPDATE – Refund of ITC on Mismatched Invoices:
Circular No. 140/10/2020-GST dated 10.06.2020 by CBIC has clarified on the issue relating to refund of accumulated ITC in respect of invoices whose details are not reflected in the FORM GSTR-2A of the applicant.
> ITC not available as refund – The details of invoices which are uploaded by applicant in GSTR 1 but are not reflected in the GSTR 2A of the applicant, the ITC on such unavailable invoices are not available as refund.
> ITC available as refund – The details of invoices which are uploaded by applicant in GSTR 1 and are also reflected in the GSTR 2A of the applicant, the ITC only and only these available invoices are available as refund.