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My article on how GST protecting suppliers & Further suggestion to Govt

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CA PRADEEP GOYAL

Government introduce provisions to secure payment of suppliers but there is a scope of more improvement- my suggestion

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PRADEEP KUMAR GOYAL & ASSOCIATES Chartered Accountants pradeepgoyal@kcsassociates.in +91-11-9811777103 577, Agarwal Cyber Plaza-II, Netaji Subhash Place, Pitampura, Delhi-110034 (India) 1 MOST IMPORTANT FEATURE OF GOODS & SERVICE TAX LAWS REGARDING PROTECTION OF PAYMENT OF INWARD SUPPLY BY RECIPIENT RELATED TO SUPPLY AND A SUGGESTION TO GOVERNMENT BY WHICH SUPPLIERS PAYMENT CAN BE FULLY PROTECTED. Let us understand this with below example by making co-relation with various provisions of GST laws. ABC Pharma supplied medicines to XYZ Medicos on 01.07.2017 and raised below tax invoice:- Value of medicines Rs.100000 GST (CGST & SGST) Rs. 18000 Total Rs.118000 Now:- a) ABC Pharma deposit output GST of Rs.18000 on 18.08.2017 and file its monthly return for month of July on same day and XYZ Medicos got input credit of the same in its electronic credit ledger by complying provisions of chapter 7 of CGST Act, 2017. b) Till 31.12.2017 (180 days from date of invoice), XYZ Medicos do not make entire payment of Rs.118000 to ABC Pharma so its entire tax credit of Rs.18000 claimed earlier is added to its output GST liability on 01.01.2018 with interest. (As per second proviso of section 16(2) of CGST/SGST Act, 2017). c) XYZ Medicos is eligible to re-claim this tax credit of Rs.18000 if make entire payment to ABC Pharma under third proviso to section 16(2) but latest by 20.10.2018 (as section 16(4) set a time limit to claim ITC which is earliest of due date of furnishing return u/s 39 for the month of September following the end of the financial year to which such invoice pertains which is 20.10.2018 in present case or due date of filing annual return of relevant period which is 31st December 2018).
PRADEEP KUMAR GOYAL & ASSOCIATES Chartered Accountants pradeepgoyal@kcsassociates.in +91-11-9811777103 577, Agarwal Cyber Plaza-II, Netaji Subhash Place, Pitampura, Delhi-110034 (India) 2 So in this case even if XYZ Medicos do not make payment to ABC Pharma on or before 20.10.2018 or after that at all, there is a loss of Rs.18000 plus interest to them. It seems, the logic behind these provisions introduced by government of India, is to protect suppliers for their payments from buyers but practically this mechanism seems working only for interest of revenue not the business concerns. In present case, ABC Pharma had already deposited output GST of Rs.18000 on supply to XYZ Medicos & value of goods is Rs.100000. Hence ABC pharma is nowhere protected as there is loss of entire amount of Rs.118000. XYZ Medicos must have supplied these goods at Rs.100000 plus its margin plus output GST which may have been recovered from recipients of goods. Output GST liability got adjusted with input tax and at the end, XYZ Medicos is a beneficiary of Rs.100000 plus its margin minus interest payment to Government on reversal of tax credit of Rs.18000 due to non-payment to ABC Pharma. SUGGESTION So my suggestion to Government is, in order to protect interest of suppliers along with protection of revenues interest, taking example of this case, on 01.01.2018 i.e. after expiry of 180 days from date of invoice & at the time of adding such input credit in output GST liability of XYZ Medicos, also downgrade compliance rating of XYZ Medicos below standard level using powers given in section 149 of SGST Act, 2017 & blacklist at common portal till the time XYZ Medicos do not pay ABC Pharma fully. XYZ Medicos cant even dispute the payment by making excuses like poor quality of medicines or any other reasons once they have taken the ITC of Rs.18000 fulfilling the eligibility criteria and conditions of ITC as given in section 16(1) & 16(2).
PRADEEP KUMAR GOYAL & ASSOCIATES Chartered Accountants pradeepgoyal@kcsassociates.in +91-11-9811777103 577, Agarwal Cyber Plaza-II, Netaji Subhash Place, Pitampura, Delhi-110034 (India) 3 It will not only foster a flourishing business environment in the country but will encourage more people to undertake their business in dominion of Goods & Service Tax. Secondly, it will unfold confidence among them towards protection of their payments and they will carry out their business transaction in honest and transparent manner. Last but not least, this will also minimize litigations for default in payments resulting a huge saving of time and energy of judiciary as well litigation cost and harassment of the businesses.

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My article on how GST protecting suppliers & Further suggestion to Govt

  • 1. PRADEEP KUMAR GOYAL & ASSOCIATES Chartered Accountants pradeepgoyal@kcsassociates.in +91-11-9811777103 577, Agarwal Cyber Plaza-II, Netaji Subhash Place, Pitampura, Delhi-110034 (India) 1 MOST IMPORTANT FEATURE OF GOODS & SERVICE TAX LAWS REGARDING PROTECTION OF PAYMENT OF INWARD SUPPLY BY RECIPIENT RELATED TO SUPPLY AND A SUGGESTION TO GOVERNMENT BY WHICH SUPPLIERS PAYMENT CAN BE FULLY PROTECTED. Let us understand this with below example by making co-relation with various provisions of GST laws. ABC Pharma supplied medicines to XYZ Medicos on 01.07.2017 and raised below tax invoice:- Value of medicines Rs.100000 GST (CGST & SGST) Rs. 18000 Total Rs.118000 Now:- a) ABC Pharma deposit output GST of Rs.18000 on 18.08.2017 and file its monthly return for month of July on same day and XYZ Medicos got input credit of the same in its electronic credit ledger by complying provisions of chapter 7 of CGST Act, 2017. b) Till 31.12.2017 (180 days from date of invoice), XYZ Medicos do not make entire payment of Rs.118000 to ABC Pharma so its entire tax credit of Rs.18000 claimed earlier is added to its output GST liability on 01.01.2018 with interest. (As per second proviso of section 16(2) of CGST/SGST Act, 2017). c) XYZ Medicos is eligible to re-claim this tax credit of Rs.18000 if make entire payment to ABC Pharma under third proviso to section 16(2) but latest by 20.10.2018 (as section 16(4) set a time limit to claim ITC which is earliest of due date of furnishing return u/s 39 for the month of September following the end of the financial year to which such invoice pertains which is 20.10.2018 in present case or due date of filing annual return of relevant period which is 31st December 2018).
  • 2. PRADEEP KUMAR GOYAL & ASSOCIATES Chartered Accountants pradeepgoyal@kcsassociates.in +91-11-9811777103 577, Agarwal Cyber Plaza-II, Netaji Subhash Place, Pitampura, Delhi-110034 (India) 2 So in this case even if XYZ Medicos do not make payment to ABC Pharma on or before 20.10.2018 or after that at all, there is a loss of Rs.18000 plus interest to them. It seems, the logic behind these provisions introduced by government of India, is to protect suppliers for their payments from buyers but practically this mechanism seems working only for interest of revenue not the business concerns. In present case, ABC Pharma had already deposited output GST of Rs.18000 on supply to XYZ Medicos & value of goods is Rs.100000. Hence ABC pharma is nowhere protected as there is loss of entire amount of Rs.118000. XYZ Medicos must have supplied these goods at Rs.100000 plus its margin plus output GST which may have been recovered from recipients of goods. Output GST liability got adjusted with input tax and at the end, XYZ Medicos is a beneficiary of Rs.100000 plus its margin minus interest payment to Government on reversal of tax credit of Rs.18000 due to non-payment to ABC Pharma. SUGGESTION So my suggestion to Government is, in order to protect interest of suppliers along with protection of revenues interest, taking example of this case, on 01.01.2018 i.e. after expiry of 180 days from date of invoice & at the time of adding such input credit in output GST liability of XYZ Medicos, also downgrade compliance rating of XYZ Medicos below standard level using powers given in section 149 of SGST Act, 2017 & blacklist at common portal till the time XYZ Medicos do not pay ABC Pharma fully. XYZ Medicos cant even dispute the payment by making excuses like poor quality of medicines or any other reasons once they have taken the ITC of Rs.18000 fulfilling the eligibility criteria and conditions of ITC as given in section 16(1) & 16(2).
  • 3. PRADEEP KUMAR GOYAL & ASSOCIATES Chartered Accountants pradeepgoyal@kcsassociates.in +91-11-9811777103 577, Agarwal Cyber Plaza-II, Netaji Subhash Place, Pitampura, Delhi-110034 (India) 3 It will not only foster a flourishing business environment in the country but will encourage more people to undertake their business in dominion of Goods & Service Tax. Secondly, it will unfold confidence among them towards protection of their payments and they will carry out their business transaction in honest and transparent manner. Last but not least, this will also minimize litigations for default in payments resulting a huge saving of time and energy of judiciary as well litigation cost and harassment of the businesses.