In a significant adjudication, the Assistant Commissioner of Sales Tax, Pondy Bazaar has dropped Goods and Services Tax ( GST ) Demand amounting to Rs. 31.81 Crores to Rs. 65,000 for the Financial Years 2018-2019 and 2019-2020.
The matter was argued before the adjudicating authority by Advocate Rupesh Sharma.
The place of business was inspected by the inspecting officials under Section 65 of TNGST Act 2017. During the course of Audit, the following defects were noticed:
There was a mismatch of turnover between sales inward remittances net of credit note and Annual return GSTR-9, as detailed below. This difference was not reconciled by the Tax person at the time of Audit. It was therefore proposed to assess the mismatch turnover at 18%.
The total turnover as per GSTR 9C had a mismatch with the amount mentioned in GSTR 9. The turnover mentioned in GSTR 9 is higher by Rs. 24,801.00 and GST on the same has been discharged.
It was noted that, “A reading of the table pertaining to Details of outward & inward supplies in the GSTR 9 makes it clear that we have included the exempted and NonGST supplies for arriving at the turnover that resulted in the difference between turnover of GSTR 9C & GSTR 9 and therefore the question of levying tax at 18% does not arise as exempted and Non-GST supplies cannot be subject to tax.”
On verification of their Trial balance and cash flow statement it is noticed that they have received sale consideration for sale of fixed assets in the year 2018-19. They have not reported this turnover in the return and tax paid. It is therefore proposed to assess the turnover at 18%.
Notably, the amount pertaining to sale of computer scrap and GST on the same has been charged and discharged and therefore the question of charging GST at 18% does not arise.
It was thus noted that, “The taxpayer has produced ledger copy which was verified and found tax has been suffered. The transaction was also reported in their GSTR-1 annexure. Hence, the
proposal is hereby dropped.”
On verification of the Trial balance it was noticed that there is an inward remittance (i.e) credit entry in the Head of Salaries and allowances and other employee costs.
Though this was explained as the entries made for the statutory deduction like Employees Provident Fund, ESI which has been subsequently remitted to the respective Authorities, the tax person has not provided any documentary evidence in support of the claim. Therefore, the tax person is requested to produce documentary evidence in support of their claim, failing which, it was proposed to levy tax at 18% on the turnover with penalty.
It was contented, producing requisite ledger copies that, “In this regard we wish to submit that these are credit entries made in connection with statutory deductions like Employees Provident Fund, ESI etc.
Deduction of these amounts are a statutory requirement and the same is remitted to the concerned authorities after making the credit entries”, which was accepted and the demand was dropped.
On verification of the Profit and Loss Accounts, it was noticed that they have incurred expenses towards staff welfare expenses.
It was noted that, “The taxpayer has produced ledger copies. The said transaction which does not attract tax GST under reverse charge section 9[3] & 9[4] of the Act:.”
On verification of the Profit and Loss Accounts, it was noticed that they have incurred Miscellaneous expenses for which ITC is not eligible if the supply falls under Sec.17(5) of the TNGST Act 2017.The taxpayer is therefore requested to furnish the connected invoice details to establish whether ITC was availed on such expenses and to establish whether reversal of ITC is done as per TNGST Act 2017.Failing which tax at 18% along with penalty / interest due if applicable will be levied.
It was noted by the Assistant Commissioner that, “The taxpayer has produced ledger copies. The said transaction which does not attract tax GST under reverse charge section 9[3] & 9[4] of the Act.”
On verification of GRTR – 9 return filed for the year 2018-19 by the taxpayer, it was noticed that they have affected a turnover on which taxpayer is requested to furnish the connected invoice details to establish whether tax liability / exemption is done as per TNGST Act 2017, failing which the above turnover will be assessed to tax at 18% along with applicable penalty / interest dues.
It was found that, “The contention of the taxpayer was carefully examined. They have produced
ledger copies, sample invoice copies for exempted turnover which were verified and found to be correct. Whereas, they have not produced credit note copy, invoice copies, reason for credit note made, details of input credit reversed by the other end taxable person.
As per Section 34(2) of the GST Act any registered person who issued a credit note in relation to a supply of goods or services or both shall declare the details of such credit notes in the return for the month during which such credit note has been issued but not later than September following the end of the financial year in which such supply was made, or the date of furnishing of the relevant annual return whichever is earlier, and the tax liability shall be adjusted in such manner as may be prescribed: Provided that no reduction in output tax liability of the supplier shall be permitted, if the incidence of tax and interest on such supply has been passed on to any other person.”
Hence, the proposal was thereby confirmed to the extent of Rs. 46,280.00 at 18%.
On verification of the Profit and Loss Accounts for the year 2018-19 it was noticed that they have effected the following expenses —
Security Services
Business Promotion
Outsourcing Charges
Legal Charges
The taxpayer was requested to furnish the connected invoice details to establish whether tax liability under Reverse charge mechanism arises u/s.9(3) of the TNGST Act 2017.Failing which the above amounts will be brought to tax liability at 18% along with applicable Penalty / Interest dues.
It was noted in this regard that, The taxpayer has produced ledger copy, invoice copies for every expenses incurred by them. As per section 9[3] and section 9[4] covers the forward charge, the recipient is liable to pay GST amount to the Government on Forward charge.”
The entire expenses incurred by them was verified and found reverse charge mechanism tax portion has been suffered. There is no loss of tax by the taxpayer. Hence, the proposal was thereby dropped.
On verification of GRTR – 9 return filed for the year 2018-19 it was noticed that they have affected turnover on which the taxpayer was requested to furnish the details of ITC reversal u/s.17 of TNVAT Act 2017, failing which tax liability will be arrived at 18% along with applicable penalty / interest dues.
The tax payer has clarified that the income is pertaining to interest income, bank charges, fixed deposit etc. As per notification no. 12 /2017 dated 28.06.2017, under HSN 9971, interest income received from banks and deposits are purely exempt under GST.
The proposal was thereby dropped.
On verification of the financial statements and GRTR – 2A, 9 & 9C, it is noticed that there is a difference between Input Tax Credit availed in annual return (including reversal) filed by the dealer GRTR 9C and ITC reflected in GSTR-2A, during the financial year 2018-19.
The Tax persons were requested to reconcile the difference of ITC. After verification of the reply given by the Tax person the Audit officer has noticed that there is excess availment of IGST credit. This was also admitted by the Tax person. It was therefore proposed to reverse the excess availed IGST credit along with interest u/s 50 of the TNGST Act 2017.
The taxpayer has stated that the input tax credit availed by them is less than the eligible claim of input credit. Whereas, they have produced input registers which were verified and that the short claim of input credit is pertaining to reverse charge input credit. The documents furnished by them were verified. The input credit availed by them as per provision section 16[2] under TNGST Act 2017. Hence, the proposal is hereby dropped.
On verification of Financial statements for FY 2018-19 by the taxpayer, it was noticed that they have received other incomes, including rental income.
The taxpayer was requested to furnish the connected invoices details to establish whether tax liability arises under TNGST Act 2017. Failing which the entire amount will be assessed to tax at 18% rate of tax along with applicable penalty / Interest dues.
Regarding rental income, the taxpayer has produced invoice copies, ledger summary which were verified tax sufferance proof and found to be acceptable. There is no tax evasion by the taxpayer as per provision of section 73[1] under TNGST Act 2017.
Regarding dividend income, interest on fixed deposit, As per notification no. 12 /2017 dated 28.06.2017, under HSN 9971, interest income received from banks and deposits are purely exempt under GST. The proposal was thereby dropped.
The summary of demands for FY 2018-19 and FY 2019-20 after the adjudication reflects a significant reduction in the total confirmed demand compared to the initial notice, indicating the resolution of highlighted audit discrepancies and the drop of non-applicable demands.
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