24 November 2021
I was posted in West Bengal operations of my company. One of our clients has its HQ in Chattisgarh n local office in West Bengal both having seperate GST Nos. Now LD was deducted on its services rendered to our company office in West Bengal by the West Bengal office of our client. However, while filling GSTR 1 N GSTR 3B, the deduction was shown under the Chattisgarh HQ of client. GST RCM was shown as IGST RCM even though it should have been SGST N CGST RCM. PLZ advise.
27 July 2024
### Correcting GST RCM and Credit Issues for Inter-State Transactions
#### Situation Overview: - **Client Details:** The client has HQ in Chhattisgarh and a local office in West Bengal, with separate GST numbers. - **Transaction:** LD (Liquidated Damages) was deducted on services rendered by the West Bengal office of the client to your West Bengal office. - **Issue:** The deduction was incorrectly shown under the Chhattisgarh HQ of the client and GST RCM was recorded as IGST instead of SGST and CGST.
### Steps to Correct GST RCM and Credit Issues:
#### 1. **Rectify the GST RCM Entry**
1. **Identify the Error:** - **Original Entry:** IGST was applied incorrectly. - **Correct Entry:** Should be SGST and CGST since the services were rendered and consumed within West Bengal.
2. **Issue a Credit Note:** - **For Incorrect Entry:** Issue a credit note for the IGST incorrectly applied. - **Rebook Correctly:** Rebook the RCM with SGST and CGST for the West Bengal transaction.
3. **Amend GST Returns:** - **GSTR-1:** - Amend the GSTR-1 for the period in which the error occurred (if the return has been filed already). - Remove the incorrect IGST entry and include SGST and CGST as applicable. - **GSTR-3B:** - Amend the GSTR-3B to reflect the correction in RCM and ensure that the tax credits and liabilities are adjusted accordingly.
4. **Adjust Input Tax Credit (ITC):** - **Reverse Incorrect Credit:** Reverse any incorrect ITC claimed due to the IGST entry. - **Claim Correct ITC:** Ensure that the correct ITC is claimed on SGST and CGST for the West Bengal transaction.
- **Ensure Correct Classification:** - For services rendered within the same state (West Bengal), the RCM should be SGST and CGST. IGST applies to inter-state transactions.
- **Check Tax Liability:** - Confirm that the total tax liability is correctly adjusted in both GSTR-1 and GSTR-3B to reflect the corrected SGST and CGST.
#### 3. **Consult with a GST Professional**
- **Seek Guidance:** Given the complexity of GST regulations and the potential impact on your financial statements and compliance, it’s advisable to consult a GST advisor or tax professional.
- **Compliance:** Ensure that the corrected entries are compliant with GST regulations to avoid any issues with tax authorities.
### Summary of Actions:
1. **Reverse Incorrect RCM Entry:** - Issue credit note for IGST. - Rebook RCM as SGST and CGST.
2. **Amend GST Returns:** - Correct GSTR-1 and GSTR-3B. - Adjust tax liabilities and ITC.
3. **Consult a Tax Professional:** - For accurate guidance and compliance.
By following these steps, you can rectify the GST RCM issues and ensure proper accounting and compliance for your transactions.
CAclubindia
