E Circular from I am SME of India

This circular was authored by Mr Sangeet Kr Gupta , our Co Founder… This was dated 23-12-2024, for the GST Council meeting dt 21-12-24

Some Recommendations of the 55th Meeting of the GST Council ( As relevant to our IamSMEof India members)

ECircular -55th GST Council Meeting dt 21-12-2024  (click here)

Click the link above to see / Download the Circular

Published for the internal usage for the members and clients of M/s.  Finsys Infotech Limited and M/s. MLG Associates

E-circular dated 22-12-2024

Integrated Association of Micro, Small & Medium Enterprises of India

www.iamsmeofindia.com

E-mail: info@iamsmeofindia.com, +91-9711123111 (Executive Secretary)

Rajive Chawla Chairman, IamSMEofIndia

Sangeet Kr Gupta Hon. Consultant, IamSMEofIndia

Dear Members,

Some Recommendations of the 55th Meeting of the GST Council ( As relevant to our members )

Note : Detailed notifications are yet to be released. The above is based on the Press Release dt 22-12-24. The meanings may change, after the actual Circulars / Notifications are released

Now in Detail… first for Sale of Used Cars

To bring supply of the sponsorship services provided by the body corporates under Forward

Charge Mechanism.

GST Council recommends no GST on transaction of vouchers as they are neither supply of goods nor supply of services.

The provisions related to vouchers is also being simplified. GST Council clarifies that no GST is payable on ‘penal charges’ levied and collected by banks and NBFCs from borrowers for non-compliance with loan terms

GST on Old and Used Vehicles

Old Position

Smaller Vehicles	12% on the Gain portion only
Larger Vehicles	18% on the Gain portion only

Cess taken at Zero

New position

All Passenger Vehicles , all types

18% on the Gain portion only

Benefit : No confusion to MSME himself, and no confusion to the Government

Note

1. This GST is on the Gain portion only
2. Gain means : Margin of the Supplier, that is, the difference between the Purchase price, less Depreciation and Selling price, ( That is logical )
3. And an unregistered person, say a Salaried person = Not applicable at all
4. Cess again remains zero

 

Source for old position : Notification 8/2018 dt 25-1-2018 – Central Tax (Rate )

Meaning : Law is same for all now

		If Sold Below WDV	If sold above WDV
Size of Vehicles..4000 mm, 3000 mm.	Any Size	No GST applicable	Yes, GST on “profit portion” only
Sports SUV or non SUV	Anything	No GST applicable	Yes, GST on “profit portion” only
Ground Clearance Rules…170mm	Anything	No GST applicable	Yes, GST on “profit portion” only
Engine Capacity… 1200cc…1500cc..1600cc	Anything	No GST applicable	Yes, GST on “profit portion” only
All Size of Vehicles All Size of Vehicles All Size of Vehicles		Same Rate, Same Rules

Category		GST ?
Normal employees, without registration in GST		No GST
Normal Residents, without registration in GST		No GST
Doctors , or any exempt category		No GST
Sale of old Motorcycle by any user ( salaried or business, except Auto dealers themselves )		No GST
Any Regd person selling a old car at a loss	Usually Motor Vehicles are sold at a Loss only	No GST
Any Regd Person, selling an old Car at Profit over WDV	This is very rare… that Income tax depreciation is 15%.. and actual value reduction is less than this	Yes, GST on the Gain portion only

Calculation examples

Car	Purchase Cost	Written down value after 15% annual income tax Depreciation	Sold for	Gain or Loss Value	GST
A	20,00,000	14,00,000	13,99,000	(1,000)	Nil
B	20,00,000	14,00,000	10,00,000	(4,00,000)	Nil
C	20,00,000	14,00,000	18,00,000	4,00,000	18% on 4 lakh	But looks very rare
D	20,00,000	5,00,000	4,99,000	(1,000)	Nil
E	20,00,000	5,00,000	4,00,000	(1,00,000)	Nil
F	20,00,000	5,00,000	7,50,000	2,50,000	18% on 2.5 lakh	But usually rare, since cars have a limited life of 10/15 years now

Note : Detailed notifications are yet to be released

No GST on the Penal Charges by Banks, and NBFC’s

GST 55^th council meeting , agreed and clarified that no GST is payable on the ‘penal charges’ levied and collected by banks and NBFCs, from borrowers for non-compliance with loan terms.

This is good

This used to be a PAIN

Already some penal charge levied

And on the top of it its GST….. Now no more

The council has agreed.. that the essence of this is of “Interest”, hence probably GST council smiled and let this go.

Note : Detailed notifications are yet to be released

Ease of Doing Service by the Associations : in GST

Topic	Current Position	New Position
Sponsorship considered	Reverse Charge GST only	Forward Charge GST if done by Corporates ( example Section 8 company )
Loss of GST	The Service provider Association cannot take ITC input of GST on its input services…. and leads to loss , Need to absorb that GST as loss / Cost	No such loss in future
Doubling of GST	Yes, Double GST, first paid to vendors of the association by the association, then Again, as RCM by the Sponsor to the Govt.	This Double loss is removed

In Short, the Government is Making Business Better

For queries, suggestions and feedback , you can e-mail us 

Sangeet Kumar Gupta, FCA, DISA, ACMA, PGDMM, B.Com(Hons), Honorary Consultant, Integrated Association of Micro Small and Medium Enterprises of India, 93126-08426, Camp Off : TB-06, 3^rd Floor, Crown Plaza, Sector-15A, Faridabad, Haryana 121007   skgupta[at]finsys.in. I am SME of India Office … Plot No.135, Sector 59, Industrial Estate Phase-II, Ballabhgarh, Faridabad- 121004, Haryana.

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Notes & disclaimer

The contents of this circular are for Private circulation & intended for the addressee/s only. We do not warrant that this email is free of mistakes, errors or any other defect. Care has been taken to provide authentic information, but it is advisable to confirm/verify with qualified legal practitioners, professionals before implementing any suggestions. The views expressed are not necessarily those of the Association. We encourage readers, our Members to write to us their opinions, suggestions, ideas, comments, thoughts and bring to our knowledge mistakes, omissions etc. which we’d be pleased to correct/implement.

For personalised suggestions, and solutions, contact our I am SME of India Team and Consultants

Regular Monthly Stock Audit Facilities from Finsys ERP Team

How will you know the correct material accountability,

 if your stock is inaccurate and haywire ?

The “Surprise” “Friendly” Stock Audit helps energise your team

That yes, Keeping Stock Correct is important

It is mandatory for GST, Income tax, Bank and yourself

It helps in Better ERP implementation too.

Excellent Web Based ERP Software Facilities from Finsys ERP Team

https://www.iamsmeofindia.com/

RCM on GST on Metal Scrap Purchase from Unregistered Persons,

Also TDS Starts for  Registered Suppliers

This is a Big News. First Time Ever. Govt has started 2% TDS on Purchase of Metal Scrap from Registered Persons.. + Also RCM GST on Purchase from URP

Note there are TWO separate NEW ITEMS…. they are related but NOT SAME.

We start with the First one : RCM

This has come up with the introduction of Notification No. 06/2024-Central Tax (Rate), dt 8th Oct 24

All businesses involved in metal scrap PURCHASE should take immediate steps to comply with the reverse charge mechanism provisions. So, Starting from October 10, 2024, registered persons purchasing metal scrap from unregistered sellers must ensure that the appropriate GST is paid under RCM.

Notification No. 06/2024-Central Tax (Rate): Amendments to GST on Metal Scrap

Date of Notification: October 8, 2024
Notification No.: 06/2024-Central Tax (Rate)
Effective Date: October 10, 2024
Issued by: Ministry of Finance (Department of Revenue), Government of India

Key Dates:

Event	Date
Notification Date	October 8, 2024
Effective Date	October 10, 2024
Deadline for Compliance	Ongoing from October 10, 2024

The metal scrap industry often involves transactions between unregistered suppliers and registered businesses. By mandating that registered recipients must pay the GST under RCM, the government aims to bring more transparency and compliance to this sector, preventing revenue leakages.

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The source of this is the Recommendation of the GST council in 54th Meeting

The 54th GST ( Goods and Services Tax ) council meeting held on 9th September 2024 has recommended 2% TDS on the supply of metal scrap by registered persons in B to B supply. It had provided the clarifications on the RCM. The meeting was presided by the Finance minister Nirmala Sitharaman.

The Council has recommended the introduction of the Reverse Charge Mechanism (RCM) on metal scrap transactions

Under this new provision, when a metal scrap supplier is unregistered AND HE supplies to a registered entity, the recipient (buyer) will be liable to pay tax under RCM.

This is to bring these transactions in GST Net…. Since the unregistered Scrap dealers were slightly a GREY AREA

New Accounts required in your Finsys ERP / Tally / any Accounting package

Either create Three new accounts to create in your books

CGST RCM Payable ( Scrap )

SGST RCM Payable ( Scrap )

IGST RCM Payable ( Scrap )

CGST RCM ITC Receivable ( Scrap )

SGST RCM ITC Receivable ( Scrap )

IGST RCM ITC Receivable ( Scrap )

or you can continue with your current generalised RCM Accounts also… if you can manage with them

Specifically, under the new amendment, unregistered persons selling metal scrap (falling under categories 72, 73, or 81) will be subject to the reverse charge, meaning the registered buyer will be responsible for paying the GST instead of the seller.

Read more at: https://taxguru.in/goods-and-service-tax/gst-reverse-charge-mechanism-rcm-metal-scrap.html
Copyright © Taxguru.in

Source Links

Link 1 : Govt GST Site : https://taxinformation.cbic.gov.in/view-pdf/1010100/ENG/Notifications

Link 2 : https://taxguru.in/goods-and-service-tax/gst-reverse-charge-mechanism-rcm-metal-scrap.html

Notification No. 06/2024-Central Tax (Rate) | Dated: 8th October, 2024 G.S.R. 614(E).— In exercise of the powers conferred by sub-section (3) of section 9 of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Central Government, on the recommendations of the Council, hereby makes the following further amendments in the notification of the Government of India, Ministry of Finance (Department of Revenue), notification No. 4/2017-Central Tax (Rate), published in the Gazette of India, Extraordinary, Part II, Section 3, Sub­section (i), vide number G.S.R. 676(E), dated the 28th June, 2017, namely:-

In the said notification, in the Table, after S. No. 7 and the entries relating thereto, the following S. No. and entries shall be inserted, namely: – 2. This notification shall come into force on the 10th day of October, 2024. (1) (2) (3) (4) (5)

“S No 8.

Chapters 72, 73, 74, 75, 76, 77, 79, 80 or 81 Metal scrap

Seller = Any unregistered person

Buyer = Any registered person.

Now the second topic…… A new GST TDS of 2% will be applicable on supply of metal scrap by registered person in B to B supply.

Note : Income tax TDS will be zero upto 50 lakhs.. since this is not a service… and will be 0.1% after Rs 50 lakhs year purchase

But…. this GST TDS will start from Rs 2,50,000 per contract onwards…..

TDS of 2% to Be Applicable on Supply of Metal Scrap by Registered Person in Case of B2B Supplies | Notification

The CBIC has issued notification to provide that any registered person receiving supplies of metal scrap shall deduct TDS of 2% on B2B transaction. This notification shall be applicable from 10th October, 2024.

GST is in the eighth year of its implementation.  When the CGST Act was enacted in 2017, Section 51 contained the provisions of TDS. But this section was made applicable only w.e.f 01.10.2018. Section 51 of the CGST Act causes obligation on the recipient of the supplies (deductor) to deduct some percentage as tax at source from the payments to be made to supplier (deductee) and pay it to the Government.

Till now , upto now, from July 2017 to September 2024 ….. the provisions were made applicable only to government bodies and PSUs.

However, clause (d) of section 51(1) empowers the government to notify any other category for the purpose.

A TDS of 2% will be applicable on supply of metal scrap by registered person in B to B supply.

NOTIFICATION New Delhi, the 9th October, 2024. No. 25/2024-Central Tax G.S.R. 629(E).— In exercise of the powers conferred by sub-section (3) of section 1 read with section 51 of the Central Goods and Services Tax Act, 2017 (12 of 2017), hereafter in this notification referred to as the said Act, the Central Government, on the recommendations of the Council, hereby makes the following further amendment in the notification of the Government of India in the Ministry of Finance, Department of Revenue No. 50/2018-Central Tax, published in the Gazette of India, Extraordinary, Part II, section 3, sub-section (i) vide number G.S.R 868 (E), dated 13th September, 2018, namely:– In the said notification, (i) after clause (c) and before the first proviso, the following clause shall be inserted,-

“(d) any registered person receiving supplies of metal scrap falling under Chapters 72 to 81 in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), from other registered person”;

(ii) for the third proviso, the following proviso shall be substituted, namely- “Provided also that nothing in this notification shall apply to the supply of goods or services or both, which takes place between one person to another person specified under clauses (a), (b), (c) and (d) of sub-section (1) of Section 51 of the said Act, except the person referred to in clause (d) of this notification.”

>>>> means Registration is mandatory for the Supplier and he cannot take exemption under this 2017 notification

2. This notification shall come into force with effect from the 10th day of October, 2024. [F No. CBIC-190354/149/2024-TO(TRU-II)] AMREETA TITUS, Dy. Secy.

Note:- The principal notification no. 50/2018- Central Tax, was published in the Gazette of India, Extraordinary, Part II, section 3, sub-section (i) vide number G.S.R 868 (E), dated 13th September, 2018 and last amended vide notification no. 73/2018-Central Tax, number G.S.R 1250(E), dated 31st December, 2018.

Read more at: https://taxguru.in/goods-and-service-tax/gst-tds-applicable-metal-scrap-supplies.html#
Copyright © Taxguru.in

New Accounts required in your Finsys ERP / Tally / any Accounting package

Three new accounts to create in your books

CGST TDS Payable

SGST TDS Payable

IGST TDS Payable

And a New return to file every month GSTR7

name of this return is GSTR-7

Last date of GST TDS Deposit is 10th of next month

So, yes, GST TDS on Purchase of Metal Scrap if Regd vendor, and GST RCM if Purchased from Unregistered Vendor

Advisory on Bank Account Validation on your GST Portal

Validate your Bank, or your GSTR-1 will get STOPPED – Advisory

GST dept notification alert

Your GSTR1 returns, will get blocked…if your current Bank account is not validated on GST portal.

Alert your accounts Department

And note… if your GSTR-1 is blocked… your customers will not get the GST ITC credit… and …. if they come to know of this… they “might” block your payments…..

Alert your accounts.

Regards,
Finsys MLG team

Source : https://tutorial.gst.gov.in/downloads/news/advisory_on_bank_account_validation_17april2023.pdf

Excerpts in a user friendly language

Advisory on Bank Account Validation

Dear Valued Tax Payers,

1. GSTN is pleased to inform you that the functionality for bank account validation is now integrated with the GST System. This feature is introduced to ensure that the bank accounts provided by the Tax Payer is correct.

Interpretation / Notes:

….. Govt was facing problems…. Over years…. Citibank closed down, Syndicate Bank got merged…. various other banks merged…. some cooperative banks closed down.

People also shift from bank 1 to bank 2 , due to credit limits or rate of interest

Government was facing problem…. how to send refund and how to take recovery … and infact how to validate that the GSTIN person is genuine or not…. Bank account validation helps in that also

How to solve  ?

2. The bank account validation status can be seen under the Dashboard→My Profile→ Bank Account Status tab in the FO portal. Tax Payers will also receive the bank account status detail on registered email and mobile number immediately after the
validation is performed for his declared bank account.

3. Post validation, any bank account number in the database would have one status out of the below mentioned four status types. The exact details of the accounts can be seen by hovering mouse over these icons in the Tax Payers’ dashboard in FO Portal.

Icon Description
Success
Failure
Success With Alert Remark
Pending for Validation

4. Whenever, the Tax Payer is shown ‘Failure’ icon with further details such as
– The entered PAN number is invalid.
– PAN not available in the concerned bank account.
– PAN Registered under GSTIN, and the PAN maintained in the Bank Account are not same.
– IFSC code entered for the bank account details is invalid.
In these cases, the Tax Payer is expected to ensure that he has entered correct bank
details and the KYC is completed by bank for his bank account.

5. Whenever, the Tax Payer is shown, the status of his bank account as ‘Success With Remark’ icon with details “The account cannot be validated since the bank is not integrated with NPCI for online bank account validation”, the Tax Payer should provide alternate bank account number so that it can be revalidated to expedite further online processes.

6. If the account status is shown as “Pending for Validation” then please wait since the account will be validated by NPCI.

7. The Tax Payer at any time can add/delete the bank account details and new account details will be validated.

Thank you for your cooperation.
Team GSTN

Additional Notes

The ISP-GSP  integrated Systems like Webtel, may also not be able to push the GSTR-1 data from your ERP, to the Government Portal.  Since the Portal will stop as a barrier due to Bank account non compliance.

Hence, please take early action on this immediately

How much time does it take ?

It takes just 30 to 50 seconds, or let us say less than 1 minute

so, do it now

Hence, please take early action on this immediately

Yes, You can do this yourself, it is easy and it is fast .. … very fast…

 

Link 1 :  GST Dept published August 2024 : https://tutorial.gst.gov.in/downloads/news/advisory_on_bank_account_validation_17april2023.pdf

link 2 : GST Dept portal published 2022 : https://tutorial.gst.gov.in/downloads/news/new_functionalities_compilation_may_2022.pdf

 

Bank Account validation GSTR1 stop alert … note.. your customers are going to be affected too…. if you dont solve this now.

 

Do this for all your smaller companies also

do this for all your less used small turnover / non moving State GSTIN also

Ideas and model clauses for the Audit Trail Qualifications…. in Audit Reports

Small Company with semi dormant ,  like non moving companies, with no operations….

 

As per the communication with the management,  company is maintaining books that are not in electronic mode,  and hence, audit trail maintenance is not required.

Small Company with semi dormant ,  like non moving companies, with no operations….

 

Please refer the below extracts from Audit Report in respect to Audit Trail (When Audit Trail not maintained through out the year) and advise is it correctly reported ?

Auditor’s Modified Opinion

In our opinion and to the best of our information and according to the explanations given to us, except for the matter described in the Basis for Modified Opinion section of our report the aforesaid financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at 31/03/2024, and its Profit for the year ended on that date.

Basis for Modified Opinion

The Company has used accounting software for maintaining its books of account, which did not have a feature of recording audit trail (edit log) facility throughout the year details in respect of which has been reported in the clause (b), clause (g) and point (vi) of clause (h) in the last part titled as ‘Report on other legal and regulatory requirements’ of this report.

Report on Other Legal and Regulatory Requirements

This report doesn’t include a statement on the matters specified in paragraph 3 and 4 of the Companies (Auditor’s Report) Order, 2020, issued by the Central Government of India, in terms of sub section 11 of section 143 of the companies Act, 2013 since in Our opinion and according to the information and explanation given to us, the said order is not applicable to the company.

As required by Section 143 (3) of the Act, we report that:

We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit.
In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books except for the matters stated in the point(vi) of clause (h) below on reporting under Rule 11(g) of the Companies (Audit and Auditors) Rules, 2014.
____
_____
______
______
The Modifications relating to the maintenance of accounts and other matters connected therewith are as stated in the clause (b) above on reporting under section 143(3)(b) of the Act and point (vi) of clause (h) below on reporting under Rule 11(g) of the Companies (Audit and Auditors) Rules, 2014.
With respect to the other matters to be included in the Auditor’s Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:
___ ii__________ iii ____________ iv _______ v ___________ vi Based on our examination which included test checks and information given to us, the Company has used accounting software for maintaining its books of account, which did not have a feature of recording audit trail (edit log) facility throughout the year for all relevant transactions recorded in the respective software, hence we are unable to comment on audit trail feature of the said software.

What are others writing in their auditors report in the para related to the Audit Trail, edit log as per Co Act 2013. Practical examples.

What the topics, that a MLG team HOD must cover in the Financial Review Meeting 

( Note : This is an internal SOP.. .. the Target… many of us are already achieving these.. So, dear MLG team members,, take this as an internal note… when you prepare the Super Folder for the Monthly meeting with the Client Directors… You must see yourself this list as a Self checklist. )

In case of any Clarification, please discuss with your seniors.

Monthly Meeting with Client Directors

Profit and Loss

Preparation,  with comments and all its sheets as per MLG SOP

Fund Flow –

with comments and all its sheets, as per our SOP

Debtors with Credit
Creditors with debit
Non Moving
Stock
All owners capital accounts/current accounts
imprest accounts
all related party accounts

Portals

PPT or PDF or folder of GST returns area
PPT of GST notices and other notices
PPT of GST ITC, cash balance on the portal
PPT of TDS returns area
PPT of TDS demands on the portal
PPT of TCS area
PPT of income tax portal – demands and notices

GST

2A / 2B differences

MRR pending
CC account – interest calculations
Suspense accounts
On account receipts
On account payments
inter unit differences
Debtors Ageing 30-60-90
Creditors Ageing 30-60-90
Profitability Report – based on BOM

Last 1 month issues raised by the customer – 1 PPT each
Last 1 month issues raised by the us – 1 PPT each
PDF of Bank Reco
Sales collection Report – 48 box report
Non Moving stock Report

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Suggestion to team members

for most of things, you can just keep on savings the excel
and PDF of the relevant files
from the Finsys itself
and keep them in sub folders

Folder 1

GST TDS matters

folder 2

Related party Accounts