Financial Statements under Indirect Taxes

1. Reserves & Surplus

2. Bad debts written off/back

3. Interest Income (borrowings) (although exempt supply no ITC reversal)

4. Provisions against expenses (other than associated enterprises-RCM)

5. Finance costs

6. Other statutory dues payable (other than RCM possibility)

7. Loans & Advances (assets)

8. Cash flow statements/balances

9. Depreciation &Amortization (ITC not be availed on depreciation)

10. Forex gain/loss

11. Majority of employee benefits

12. Change in inventory

13. Deferred tax

14. Earnings per Share

Balance sheet & Notes

GST Impact

Share holding

GST liability & ITC impact w.r.t merger/de-merger/transfer; Registration in portal - Amend & Signing (change in signatory)

Gratuity

ITC eligible on gratuity insurance as it is not life/health insurance

Govt. Grants

Other than CG/SG, consideration received in form of grants/subsidy would be liable under GST. (Ex: NGOs/ NPOs)

Trade payables

Rule 37 - 180 days ITC reversal provision can be verified.

ITC to be reversed and re-claimed upon payment.

Note: Rule not applicable w.r.t Retention money unpaid.

Current liabilities

GST not applicable on mobilization advance.

GST applicable on advance against services only (not goods)

Property, Plant & Equipment

1. Land & Buildings: Additions - GST eligible on ancillary; Deletions - ITC reversal (common credits)

2. Plant & Machinery (others): Additions - ITC eligibility incl. civil structures/construction; Deletions - Section 18(6)

3. Motor Vehicles: Additions - ITC eligibility check; Deletions - Margin method/full rate liability.

Note: Rule 43 - ITC reversal w.r.t Capital Goods used for taxable + exempt supply. (Computational challenge)

Intangible assets

Cross charge implications if multiple GSTINs.

Absence of asset/expense may indicate related party transaction.

Trade Receivables

Decision to raise credit note before September month GSTR3B due date following the financial year (only due to deficiencies)

Note: Option of Refund against write-off of non-receivables - Payment from customer and valuation can be said to be linked, and if payment fails, levy fails. (disputable)

Inventories

1. Imports: Possible Customs/FTP benefits to be explored

2. Related party purchase: Valuation check

3. Write-off/disposals:Raw material - ITC reversal, semi/FG - ITC eligible(as used in business - disputable)

4. Scrap/Further supply:Classification& Rate applicability

5. Loss: ITC reversal may be required for abnormal loss only

GST dues & Balance with govt. authorities

1. Indicates - interest & possible SCN/demand on past dues

2. Identify - Status, accumulation reason & re-claim to bank

3. Credit & cash balance - books vs GST portal

Other current assets

1. Type of incentives (Ex: MEIS, CER, etc.), possible GST on scrip/security sale

2. Time of supply implication (Accounting standards vs GST)

Profit and Loss& Notes

GST Impact

Revenue from operations (goods/services)

1. Levy, valuation, classification, Time & Place of Supply verification

2. Exempt supplies/certain Sch III items - ITC reversal impact

Other indicators: E-invoice compliance/PLI scheme/State incentives

Other Income (identify goods/services only)

Levy, valuation, classification, Time & Place of Supply verification

Indicates - Non-GST supplies/Sch III items for GSTR 9 disclosure.

Segment reporting

1. SEIS, MEIS/RODTEP benefits realized against exports.

2. Imports - FTA between countries, CEPA and can also be explored.

Employee benefit expenses

1. Sch III no GST. (incl. ex-pat salary)

2. ITC eligibility to be verified (ex: insurances, necessity goods like water, medicine, gifts, recreational/business trip, etc.)

Conveyance

1. Women employee travel beyond 8:30 pm - statutory obligation - ITC eligible (Ex: in Karnataka)

2. 13-seater + vehicles - ITC eligible

3. Goods vehicle - ITC eligible

4. Reimbursements GTA/rent-a-cab - RCM liability

Power & fuel

Table 5 GSTR 3B - inward - exempt & non-GST supply disclosure

Freight

1. GTA (agency) vs GTO (operator - exempt and not under RCM)

2. FCM vs RCM(5% vendor beneficial if credit ineligible)

Rent

1. ITC eligibility (different state billing - ineligible)

2. Residential - exempt - even if recovered from employees

Repairs & Maintenance/Building expenses

1. Motor Vehicle: Depends on vehicle eligibility

2. Premises: Eligible when it is an expenses

3. Plant & Machinery: Eligible

Communication costs& Bank charges

ITC eligible but GSTIN missed in Tax Invoices - Internet, Telephone, bank charges (tax invoice not just statements.)

Food & Beverages (F&B)

Canteen - mandatory - ITC eligible as per Factories Act/Rules.

Water - ITC eligible (it is not ‘beverage')

Others F&B - ITCineligible

Professional fee

1. ITC eligibility

2. Possible RCM on import of services

Legal fee

1. RCM & ITC

2. Non-advocates/non-legal activity considered under this head for RCM incorrectly.

Rates & Taxes; Subscriptions

1. RCM on CG/SG/LA services not being exempt (ex: Leased line license from Ministry of Telecom). Verification of ‘supplier' not being governmental authority/entity and transaction if liable/exempt as per rate notifications.

2. Subscriptions - Import of services - Form 27Q/Credit card forex payments

CSR

Possibility to claim ITC subject to general ineligibility. (disputable)

Helps increase social expenses, positive for India.

Other common costs (Ex: IT Costs)

Requirement of ISD to transfer credit to GSTINs utilizing such services. (multiple GSTINs)

Profit/Loss of sale of FA

1. Motor Vehicle: Margin/full value liability

2. Section 18(6) - 5% per quarterreduction requirement.

3. WDV block concept can be adopted instead of date of sale.

Generally,a reconciliation item for GSTR 9C Vs AFS.

Related Party disclosures

1. Classification of goods/services

2. Valuation supply-wise

3. ITC eligibility

RPT - Directors

RCM liable on directors sitting fees/any other services rendered in the capacity of director.

Advertisement, Sales promotion expenses

1.RCM on sponsorship

2.ITC eligibility on sales promotion