Checklist for GST ITC review for FY 17-18

[By Shaleen Shah (Partner), VNCA]

Each business entity needs to carry out input tax credit (ITC) review before due date for filing of September 2018 return. The review should cover the following:

1. ITC for FY 17-18 is getting time barred on 31-Oct-2018.  According to GST rules, if the taxpayer forgets to claim ITC for an invoice pertaining to FY 17-18, the time limit for availing it is the due date for the September 2018 returns i.e. 31-Oct-2018 (as extended).
2. Goods and services used in furtherance of business are eligible for ITC.
3. Goods and services used for exempt goods & services are not eligible for ITC.
4. ITC is not available on certain items even if used for business i.e. `blocked credits’.
5. Review conditional rate notifications where ITC is restricted and reverse if wrongly taken.
6. Where ITC has been claimed, the duty paying document i.e. purchase bill/expense invoice should contain all prescribed particulars.
7. Goods and services should be actually received at the time of claiming ITC. In case of supplies in instalments, ITC can be claimed only after receipt of last instalment of goods.
8. Review expenses liable for payment of GST on Reverse Charge Mechanism (RCM) and subsequently claim eligible ITC of tax paid on RCM.
9. Reconcile ITC taken as per books with GSTR-2A. Some credits might have been taken as per books but not reflected in GSTR-2A. And there might be several credits reflected in GSTR-2A but not taken as per books. Check for ITC leakage.
10. Payment should be made by the recipient to the supplier within 180 days failing which ITC is to be reversed with consequential interest & penalty.
11. Review debit/credit notes for GST impact.
12. Review of import documents, job work inward invoices, stock transfer inward invoices, barter transactions, transactions with non-monetary consideration, etc. Some of these may not be accounted in the system through financial entries but have an impact on ITC.
13. Identification of Transactions with distinct persons eg support services by HO to factory situated in different state. If so cross charge of the same is to be looked into.
14. Reversal of ITC – ITC has to be reversed in respect of goods lost, stolen, destroyed, written off or distributed as gifts/free samples.
15. Apportionment of ITC – common credits used for non-taxable / non-business supplies have to be proportionately reversed as per prescribed formula.
16. Review of TRAN-1, TRAN-2 filed –any ITC availed in excess should be reversed.
17. Review of disputable credits.
18. Accumulated credits – ascertain reasons and exercise option to claim refund.