What should businesses keep in mind while generating invoice?
Generating an invoice is perhaps the most critical part of the new indirect tax regime, based on which the input tax credit will be decided. According to the draft rules, invoices have to be filled up in a fairly detailed format.
The absence or wrong filing of required information could trigger denial or delay in claiming input tax credit.
Largely, there are around 16 particulars that are required to be filled up. These include various details of the supplier and the buyer, such as the HSN (Harmonised System of Nomenclature) code, the 15-digit goods and services taxpayer identification number (GSTIN) of the recipient and the state code in which the delivery has been made. “Service providers are required to give state-specific registration number while filing the invoice,” said Pritam Mahure, a Pune-based chartered accountant and GST trainer. For generating the invoice, the IT configuration in a business has to capture a variety of transactions, such as services on inter-company basis, stock transfer and receipt of advances and centralised procurements for re-distribution, noted Amit Sarkar, partner & head, indirect tax, BDO India.
What are the key do’s and don’ts while claiming the input tax credit?
For claiming any input tax credit, all vendors in the supply chain have to be tax compliant. There is also a plan to rate all taxpayers on their GST score card — putting additional pressure on vendors to be GST-ready. Under the current system, a supplier can claim tax credit from the government irrespective of whether the vendor has met his tax obligations. That is set to change in the GST regime.
“Vendor should pay tax before the same is claimed as input tax credit. The recipient must receive the tax invoice and supplies before claiming credit,” said Rakesh Nangia, managing partner, Nangia & Co. Given the credits can be availed of only within the specified time limit, the date of issuance of invoice becomes important. “Monitor the payment of value for the goods or services within the period of 180 days, while keeping a track of the debit or credit notes,” advised Sarkar. According to the draft rules, vendors should be paid within 180 days of claiming credit. “Credit should be claimed only for procurements related to taxable business supplies only,” added Nangia.
Service providers such as banks and insurance companies have to register separately in all the states in which they are providing services. This state-wise registration will substantially increase compliance costs of businesses. Nangia notes the place of supply rules under the current regime of service tax are applicable only to cross border transactions.
“Going forward, similar rules would be applicable to every transaction whether domestic or international,” he said. Most experts feel the rules for the place of supply of services have the potential to trigger legal dispute for taxpayers.
Source :Business Standard