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INPUT TAX CREDIT –

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INPUT TAX CREDIT – ALLOWABLE/REVERSAL
5.1 Current Account Transactions and Business Transactions
5.1.1 Input Tax Credit (ITC) in Business Transactions 1-13
5.1.2 Current Account Transactions and ITC
5.2 Considerations before preparing and filing returns
5.2.1 Registration Status
5.2.2 GST Return Types
5.2.3 Tax Period
5.2.4 Accounting Software
5.2.5 Record Maintenance
14-29
5.2.6 Input Tax Credit (ITC) Reconciliation
5.2.7 HSN and SAC Codes
5.2.8 Timely Payments
5.2.9 Reverse Charge Mechanism (RCM)
5.2.10 Communication with Suppliers and Customers
5.2.11 GST Compliance Calendar
5.3 Overview of the GST Portal
5.3.1 Filing Returns 30-51
5.3.2 Audit and Assessment
5.4 Online Registration for GST
5.4.1 Eligibility Criteria
5.4.2 Gather Required Documents
5.4.3 Access the GST Portal
5.4.4 Click on "Registration" and "New Registration"
5.4.5 Fill Out the GST Registration Application 52-65
5.4.6 Verification Through OTP (One-Time Password)
5.4.7 ARN (Application Reference Number)
5.4.8 Processing and Verification
5.4.9 GSTIN (GST Identification Number)
5.4.10 Access the GST Portal for Filing Returns
5.5 Accounts, Returns, Records, Audit and Assessments under GST
5.5.1 Accounts
5.5.2 Returns
66-67
5.5.3 Records
5.5.4 Audit
5.5.5 Assessments
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5.6 Books of Accounts
5.6.1 Purchase Register 68-106
5.6.2 Sales Register
5.7 Types of returns and their Importance
5.7.1 GSTR-1 (Outward Supplies Return)
5.7.2 GSTR-3B (Monthly Summary Return)
5.7.3 GSTR-2A and GSTR-2B (Auto-populated Purchase Returns)
5.7.4 GSTR-4 (Composition Scheme Return)
5.7.5 GSTR-9 (Annual Return) 107-127
5.7.6 GSTR-9C (GST Audit Reconciliation Statement)
5.7.7 GSTR-6 (Input Service Distributor Return)
5.7.8 GSTR-8 (TCS Return)
5.7.9 GSTR-10 (Final Return)
5.7.10 GSTR-11 (Unique Identification Number Return)
 UNIT-V
INPUT TAX CREDIT – ALLOWABLE/REVERSAL
Introduction:
Input Tax Credit (ITC) is a fundamental concept in the Goods and Services Tax
(GST) system that allows businesses to claim a credit for the taxes they have paid on
their purchases of goods and services. However, there are certain situations where the
ITC claimed initially needs to be reversed or not allowed. Let's explore when ITC is
allowable and when it needs to be reversed:
 ITC Allowable:
o Business Use: ITC can be claimed for taxes paid on purchases used for
business purposes. These purchases include raw materials, capital goods,
services, and other inputs used in the course of business operations.
o Registered Suppliers: ITC can be claimed only when purchases are made
from registered suppliers who have correctly reported the transactions in their
GST returns.
o Tax Payment: The supplier must have paid the GST to the government for
the ITC to be allowable to the recipient. If the supplier has not remitted the
GST to the government, the recipient cannot claim ITC.
o Documentary Requirements: Proper documentation, including valid tax
invoices or other prescribed documents, is necessary to claim ITC.
o Within Time Limit: ITC should be claimed within the prescribed time limit,
which is typically the earlier of the due date for filing annual returns or the
date of filing the September return of the following financial year.
 ITC Reversal:
o Non-Payment to Supplier: If a supplier is not paid within 180 days from the
date of invoice, the ITC claimed on that invoice needs to be reversed.
o Supply of Exempt or Non-Taxable Goods/Services: ITC claimed on
purchases used to supply goods or services that are exempt or not taxable
under GST needs to be reversed.
o Blocked Credits: Certain inputs and services are specified as "blocked
credits," and ITC cannot be claimed on them. Examples include motor
Unit-V Input Tax Credit – Allowable/Reversal
vehicles for certain purposes and goods/services used for personal
consumption.
o Non-Compliance: If a supplier is found to have not paid the tax to the
government or if the supplier is unregistered, the ITC claimed on those
purchases needs to be reversed.
o Reverse Charge Mechanism: In cases where the recipient is liable to pay GST
under the reverse charge mechanism, the ITC can be claimed only after the
payment of the tax liability.
o Change in Use: If the purpose for which ITC was claimed changes (e.g., from
taxable supplies to exempt supplies), the ITC needs to be reversed.
5.1 BUSINESS TRANSACTIONS AND CURRENT ACCOUNT
TRANSACTIONS:
Input Tax Credit (ITC) is a concept that is specific to the Goods and Services
Tax (GST) regime in India. While both current account transactions and business
transactions may involve GST, they are fundamentally different in terms of how ITC is
applicable. Let's explore the relationship between ITC and these types of transactions
in India:
5.1.1 Input Tax Credit (ITC) in Business Transactions:
Input Tax Credit (ITC) is a fundamental concept under the Goods and Services
Tax (GST) regime in India. It is designed to eliminate the cascading effect of taxes and
allows registered businesses to claim a credit for the GST they have paid on their
purchases of goods, services, or both, which are used for furtherance of their taxable
supplies. Here's an in-depth look at ITC in the context of business transactions in India:
1. Eligibility for ITC:
Eligibility for Input Tax Credit (ITC) in India is a critical aspect of the Goods
and Services Tax (GST) system. To claim ITC, businesses need to meet specific criteria
and adhere to certain conditions. Here's a detailed look at the eligibility requirements
for ITC:
 GST Registration: To be eligible for ITC, a business must be registered under
GST. Unregistered businesses cannot claim ITC.

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 Business Purpose: ITC can be claimed only for goods, services, or both that are
used for business purposes. These goods and services should be used in the
normal course of the business operations and must be related to or intended to
be used for making taxable supplies.
 Possession of Tax Invoice or Prescribed Documents: The business must possess
valid tax invoices or other prescribed documents for the purchases on which ITC
is claimed. These invoices should contain the necessary details, such as the
supplier's GSTIN, invoice number, date, description of goods or services, and
GST amount.
 Receipt of Goods or Services: The recipient of goods or services must have
actually received them. In other words, ITC cannot be claimed for goods or
services that have not been received.
 Timely Filing of GST Returns: To claim ITC, businesses must ensure the timely
filing of their GST returns. Any delay in filing returns can lead to the lapse of
ITC eligibility.
 Matching of Invoices: ITC is provisional until it is matched with the supplier's
details and accepted by the recipient in their GST return. Therefore, it is crucial
for businesses to reconcile their purchase details with their suppliers' sales data.
 Reversal of ITC: If the recipient does not pay the supplier within 180 days from
the invoice date, the ITC claimed may be reversed. This condition is meant to
ensure that the supplier receives payment for the supplies made.
 Blocked Credit: Certain categories of goods and services are ineligible for ITC.
These include goods and services used for personal consumption, employee
welfare, and non-business purposes. Businesses need to be aware of the specific
items for which ITC is blocked.
 Apportionment of ITC: If a business uses inputs or input services for both taxable
and non-taxable supplies, it needs to apportion the ITC accordingly based on a
reasonable method.
 Compliance with Anti-Profiteering Measures: Businesses are obligated to pass
on the benefit of reduced tax incidence due to GST to customers. Anti-
profiteering measures ensure that businesses do not unjustly enrich themselves.

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 Documentation and Record-Keeping: Proper maintenance of records, invoices,
and GST returns is essential to claim and retain ITC. Businesses should keep all
relevant documents organized and accessible for audit and compliance purposes.
2. Conditions for Claiming ITC:
Conditions for claiming Input Tax Credit (ITC) under the Goods and Services
Tax (GST) regime in India are essential to ensure that businesses can offset the GST
paid on their purchases against their GST liability on outward supplies. To claim ITC
successfully, businesses must meet specific conditions and adhere to procedural
requirements. Here are the key conditions for claiming ITC:
 Possession of a Valid Tax Invoice: To claim ITC, the business must possess a
valid tax invoice or other prescribed documents for the purchases on which ITC
is being claimed. The invoice should contain essential details such as the
supplier's GSTIN, invoice number, date, description of goods or services, and
GST amount.
 Goods or Services Used for Business: ITC can only be claimed for goods,
services, or both that are used for business purposes. These goods and services
should be used in the normal course of the business operations and must be
related to or intended to be used for making taxable supplies.
 GST Registration: The business must be registered under GST to be eligible for
ITC. Unregistered businesses cannot claim ITC.
 Receipt of Goods or Services: The recipient of goods or services must have
actually received them. In other words, ITC cannot be claimed for goods or
services that have not been received.
 Timely Filing of GST Returns: To claim ITC, businesses must ensure the timely
filing of their GST returns. Any delay in filing returns can lead to the lapse of
ITC eligibility.
 Matching of Invoices: ITC is provisional until it is matched with the supplier's
details and accepted by the recipient in their GST return. Therefore, it is crucial
for businesses to reconcile their purchase details with their suppliers' sales data.
 Reversal of ITC for Non-Payment: If the recipient does not pay the supplier
within 180 days from the invoice date, the ITC claimed may be reversed. This

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Unit-V Input Tax Credit – Allowable/Reversal
condition is meant to ensure that the supplier receives payment for the supplies
made.
 Use of ITC for Business Purposes: ITC should be used exclusively for
discharging the GST liability on the supply of goods or services. It cannot be
used for other purposes, such as personal expenses or non-business transactions.
 Blocked Credit: Certain categories of goods and services are ineligible for ITC.
These include goods and services used for personal consumption, employee
welfare, and non-business purposes. Businesses need to be aware of the specific
items for which ITC is blocked.
 Apportionment of ITC: If a business uses inputs or input services for both taxable
and non-taxable supplies, it needs to apportion the ITC accordingly based on a
reasonable method.
 Compliance with Anti-Profiteering Measures: Businesses are obligated to pass
on the benefit of reduced tax incidence due to GST to customers. Anti-
profiteering measures ensure that businesses do not unjustly enrich themselves.
 Documentation and Record-Keeping: Proper maintenance of records, invoices,
and GST returns is essential to claim and retain ITC. Businesses should keep all
relevant documents organized and accessible for audit and compliance purposes.
3. ITC on Capital Goods:
Input Tax Credit (ITC) on capital goods is a crucial aspect of the Goods and
Services Tax (GST) system in India. It allows registered businesses to claim a credit for
the GST paid on the purchase of capital goods, which are assets used for business
purposes. Here's a detailed overview of ITC on capital goods:
 Definition of Capital Goods: Capital goods are assets that businesses use for their
production, supply of goods and services, or for other business-related activities.
These assets are expected to provide benefits over an extended period and are
not typically meant for resale. Examples of capital goods include machinery,
equipment, computers, vehicles used for transportation of goods, and furniture
used in business premises.
 Eligibility for ITC on Capital Goods: To be eligible for ITC on capital goods,
businesses must meet specific conditions:
o The business must be registered under GST.
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Unit-V Input Tax Credit – Allowable/Reversal
o The capital goods must be used for making taxable supplies, including
zero-rated supplies.
o The recipient must have a valid tax invoice or other prescribed documents
for the purchase of capital goods.
o The ITC on capital goods can be claimed in the same manner as for inputs
(goods) and input services.
 ITC Apportionment for Mixed-Use Capital Goods: If a capital good is used for
both taxable and non-taxable supplies or for business and non-business purposes,
businesses are required to apportion the ITC accordingly. The proportion of ITC
that can be claimed should be based on a reasonable method, such as the actual
usage for business purposes.
 Time Limit for Claiming ITC on Capital Goods: The ITC on capital goods can
be claimed in the same month or financial year in which the tax invoice or
prescribed document is received. Alternatively, businesses can claim ITC on
capital goods up to the due date for filing the annual GST return, whichever is
earlier.
 Reversal of ITC on Capital Goods: If the capital goods on which ITC has been
claimed are subsequently supplied to another person or used for non-business
purposes, the ITC claimed earlier may be subject to reversal. The reversal is done
based on the applicable rules and conditions under GST.
 ITC Utilization for Capital Goods: The ITC claimed on capital goods can be
utilized to offset the GST liability on the supply of goods or services. This credit
can be used to reduce the tax payable in the GST return.
 Record-Keeping and Documentation: Proper maintenance of records, invoices,
and documentation related to the purchase and utilization of capital goods is
essential for ITC compliance and audit purposes.
4. Apportionment of ITC:
Apportionment of Input Tax Credit (ITC) is a critical concept under the Goods
and Services Tax (GST) system in India. It applies when a registered business uses
inputs, input services, or capital goods for both taxable and non-taxable supplies or for
both business and non-business purposes. Apportionment ensures that ITC is claimed

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Unit-V Input Tax Credit – Allowable/Reversal
only for the portion that relates to taxable supplies or business use. Here's an overview
of apportionment of ITC in India:
 Need for Apportionment: Apportionment becomes necessary when a business
uses goods or services for a combination of taxable and non-taxable supplies or
for both business and non-business activities. The goal is to allocate the ITC to
the portion that is eligible for claiming under GST.
 Methods of Apportionment: Businesses have flexibility in choosing a reasonable
method for apportioning ITC. Commonly used methods include:
o Turnover-Based Apportionment: ITC is apportioned based on the
proportion of turnover generated from taxable supplies to the total
turnover. For example, if 80% of turnover comes from taxable supplies,
80% of ITC can be claimed.
o Usage-Based Apportionment: ITC is apportioned based on actual usage
for taxable and non-taxable supplies. For instance, if a machinery is used
70% for taxable supplies and 30% for non-taxable supplies, ITC is
claimed accordingly.
o Floor Area-Based Apportionment: In cases involving rental properties or
office spaces, ITC can be apportioned based on the floor area used for
taxable and non-taxable activities.
o Time-Based Apportionment: If there is a variation in usage over time, ITC
can be apportioned based on time. For example, if a vehicle is used for
business purposes for 9 months and personal use for 3 months, ITC is
claimed for 9/12th of the tax paid.
 Documentation and Records: Proper documentation and records are essential to
support the chosen method of apportionment. Businesses should maintain
detailed records that demonstrate how the apportionment was calculated, such as
usage logs, rental agreements, turnover records, or any other relevant
documentation.
 Compliance with GST Regulations: Businesses must adhere to the GST
regulations regarding apportionment. It is important to ensure that the chosen
method is reasonable and accurately reflects the proportion of ITC that should
be claimed for taxable supplies or business use.
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 Avoiding Double Taxation or Double ITC: Apportionment is crucial to prevent
double taxation or double claiming of ITC. By accurately apportioning ITC,
businesses ensure that they neither overpay GST nor claim more ITC than is
eligible.
 Reversal of ITC: If there are changes in the proportion of eligible and ineligible
supplies or business and non-business use, businesses may need to adjust their
apportionment and reverse any excess ITC previously claimed.
5. Blocked Credit:
Blocked Credit refers to the specific categories of goods and services for which
businesses in India are ineligible to claim Input Tax Credit (ITC) under the Goods and
Services Tax (GST) system. These categories are defined by the GST law to prevent
businesses from claiming credit on items that are not intended for use in the normal
course of business operations or that have been specifically restricted for credit.
Understanding these blocked credits is essential for businesses to ensure compliance
with GST regulations. Here are some common categories of blocked credits:
 Motor Vehicles: Businesses are generally not allowed to claim ITC on motor
vehicles unless they are engaged in certain specific industries or activities where
motor vehicles are an integral part of the business operation. These include
transport services, renting of vehicles, and the supply of motor vehicles.
 Food and Beverages: ITC is blocked for goods and services related to food and
beverages, including catering services, restaurants, and outdoor catering.
However, businesses that are in the business of manufacturing or selling food
and beverages are typically eligible for ITC on inputs related to their core
business.
 Health and Fitness: Businesses involved in providing health and fitness services,
such as gyms and health clubs, are not eligible for ITC on goods and services
related to these activities.
 Travel Benefits: ITC is blocked on services related to travel benefits, including
services provided by tour operators, travel agents, and accommodation services.
 Works Contracts for Immovable Property: Works contracts related to the
construction of immovable property (e.g., buildings) are subject to specific rules,

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and ITC is typically blocked on these transactions. However, ITC may be
available on goods used for such works contracts.
 Personal Consumption: Goods and services used for personal consumption or
employee welfare are generally not eligible for ITC. This includes items like
gifts, employee welfare expenses, and items used for personal comfort.
 Entertainment and Membership Fees: ITC on expenses related to entertainment,
such as cinema tickets and club memberships, is typically blocked.
 Cosmetic and Personal Care: Goods and services related to cosmetics, personal
care, and beauty treatments are generally ineligible for ITC.
 Illegal or Prohibited Activities: ITC is not allowed for goods and services used
for illegal activities or activities that are prohibited by law.
 Composition Scheme: Businesses registered under the composition scheme,
which is an alternative tax scheme under GST, are not eligible for ITC.
6. ITC Reconciliation:
ITC reconciliation, also known as Input Tax Credit reconciliation, is a vital
process under the Goods and Services Tax (GST) system in India. It involves matching
the Input Tax Credit (ITC) claimed by a business with the details of the ITC available
in the GST returns filed by their suppliers. The reconciliation process is crucial to ensure
the accuracy of ITC claims, prevent discrepancies, and comply with GST regulations.
Here's a detailed overview of ITC reconciliation:
 Why is ITC Reconciliation Necessary?
o Verification of Claims: ITC reconciliation helps businesses verify the
correctness of the ITC claimed in their GST returns by cross-referencing
it with the data provided by their suppliers.
o Compliance: It ensures compliance with GST laws and regulations,
reducing the risk of penalties and legal issues.
o Preventing Frauds: Reconciliation helps identify any discrepancies or
potential fraudulent activities related to ITC claims.
 Key Steps in the ITC Reconciliation Process:
o Gather Data: Collect all relevant documents, such as tax invoices, debit
notes, and credit notes, along with your own GST returns.

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o Match Invoices: Compare the invoices and transactions listed in your
GST returns with those provided by your suppliers.
o Rectify Discrepancies: If discrepancies are found, work with your
suppliers to rectify them by correcting errors, issuing credit notes, or
making necessary adjustments.
o Reconcile Amounts: Ensure that the total ITC claimed matches the total
eligible ITC as per the supplier's returns.
o File Corrected Returns: If discrepancies are corrected, file corrected GST
returns to reflect the accurate ITC claims.
 Common Challenges in ITC Reconciliation:
o Mismatch of Invoices: Sometimes, invoices provided by suppliers may
not match the details reported by the recipient. This can occur due to
discrepancies in invoice numbers, dates, or values.
o Delayed or Missing Invoices: Suppliers may not provide invoices or may
do so after the due date for filing returns, leading to delays in ITC
reconciliation.
o Credit Notes and Debit Notes: Reconciliation should also include credit
notes and debit notes issued by suppliers, as they can impact the ITC
claimed.
o Complex Transactions: Businesses involved in complex transactions or
those with multiple suppliers may face challenges in reconciling ITC
accurately.
 Tools and Software: Many businesses use accounting and GST compliance
software that can help streamline the ITC reconciliation process by automating
data entry, flagging discrepancies, and generating accurate GST returns.
 Compliance and Documentation: Maintaining accurate records of invoices,
credit notes, and debit notes is crucial for ITC reconciliation. Proper
documentation ensures that businesses have evidence to support their claims in
case of audits or inquiries by tax authorities.
 Periodic Review: ITC reconciliation should be performed regularly, preferably
on a monthly or quarterly basis, to identify and rectify discrepancies promptly.

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7. Anti-Profiteering Measures:
Businesses are obligated to pass on the benefit of reduced tax incidence due to
GST to customers. Anti-profiteering measures ensure that businesses do not unjustly
enrich themselves.
8. Documentation and Compliance:
Proper maintenance of records, invoices, and GST returns is crucial to claim and
retain ITC.
9. ITC Utilization:
ITC can be utilized to offset the GST liability on the outward supplies made by
the business. If the ITC balance exceeds the GST liability, it can be carried forward to
subsequent periods.
 Regular Audits and Assessments:
o Tax authorities may conduct audits and assessments to verify the
correctness.
o ITC in business transactions is a mechanism that promotes transparency
and reduces the tax burden on businesses by allowing them to claim credit
for GST paid on their purchases. However, businesses must adhere to
specific conditions and compliance requirements to avail and retain this
benefit under the GST
5.1.2 Current Account Transactions and ITC:
Current Account Transactions (CAT) and Input Tax Credit (ITC) are two distinct
concepts in the context of financial transactions in India, particularly under the Goods
and Services Tax (GST) regime. These concepts pertain to different aspects of business
operations and financial management. Here's an explanation of how they relate:
1. Current Account Transactions (CAT):
Current Account Transactions refer to a category of financial transactions that
involve the movement of money and economic resources in and out of a country for
regular and day-to-day business activities. These transactions typically do not have a
direct connection to GST or Input Tax Credit because they primarily deal with
international trade, income, and transfers. CAT includes the following components:
o Trade in Goods: Import and export of physical goods between countries.

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Unit-V Input Tax Credit – Allowable/Reversal
o Trade in Services: Exchange of intangible services, such as consulting, IT
services, and tourism.
o Income: Income earned by residents from investments abroad (e.g., dividends)
and income earned by foreigners from investments in the country.
o Current Transfers: Unilateral transfers of money, such as foreign aid,
remittances, and grants.
CAT transactions are generally outside the scope of GST as they do not involve
the supply of goods or services within India.
2. Input Tax Credit (ITC):
Input Tax Credit (ITC) is a pivotal component of the Goods and Services Tax
(GST) system in India. It is designed to prevent the cascading effect of taxes and allows
businesses to claim a credit for the tax (GST) they have paid on their purchases of goods,
services, or both, which are used for furtherance of their taxable supplies. Here is a
comprehensive explanation of ITC:
3. Eligibility for ITC:
To claim Input Tax Credit, businesses must meet specific eligibility criteria:
i. GST Registration: The business must be registered under GST.
ii. Business Purpose: ITC can be claimed only for goods, services, or both that are
used for business purposes and are related to or intended to be used for making
taxable supplies.
iii. Possession of Tax Invoice: The business must possess valid tax invoices or other
prescribed documents for the purchases on which ITC is claimed.
iv. Receipt of Goods or Services: The recipient of goods or services must have
actually received them.
4. Conditions for Claiming ITC:
Several conditions must be met to successfully claim ITC:
i. Time Limit: ITC can be claimed in the same month or financial year in which the
tax invoice was issued or up to the due date of filing the annual GST return,
whichever is earlier.

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ii. Matching of Invoices: ITC is provisional until it is matched with the supplier's
details and accepted by the recipient in their GST return. Therefore, it is essential
for businesses to reconcile their purchase details with their suppliers' sales data.
iii. Reversal of ITC: If the recipient does not pay the supplier within 180 days from
the invoice date, ITC claimed may be reversed.
5. ITC on Capital Goods:
ITC can also be claimed on capital goods, which are assets used for business
purposes. The credit is available in the same manner as for inputs and input services.
6. Apportionment of ITC:
When a business uses inputs, input services, or capital goods for both taxable
and non-taxable supplies or for both business and non-business purposes, they need to
apportion the ITC accordingly. The proportion should be based on a reasonable method.
7. Documentation and Compliance:
Proper maintenance of records, invoices, and GST returns is essential to claim
and retain ITC. Businesses should follow GST rules and regulations diligently.
8. ITC Utilization:
ITC can be utilized to offset the GST liability on the outward supplies made by
the business. If the ITC balance exceeds the GST liability, it can be carried forward to
subsequent periods.
9. Regular Audits and Assessments:
Tax authorities may conduct audits and assessments to verify the correctness of
ITC claims, making compliance and accurate record-keeping crucial.

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5.2 CONSIDERATIONS BEFORE PREPARING AND FILING RETURNS
Preparing and filing Goods and Services Tax (GST) returns in India is a crucial
compliance requirement for businesses registered under GST. It involves reporting their
financial transactions, claiming Input Tax Credit (ITC), and calculating the GST
liability. Before preparing and filing GST returns, businesses should consider the
following key factors to ensure accurate and timely compliance:
5.2.1 Registration Status:
Registration status in GST refers to the current registration status of a business
under the GST regime. In India, GST has replaced various indirect taxes, and every
business that meets specific criteria must register for GST. Understanding your
registration status and its implications is crucial for businesses. Here's what you need to
know:
 Mandatory Registration: Businesses with a turnover exceeding the prescribed
threshold limit (which varies depending on the type of business and its location)
are required to register for GST.
 Voluntary Registration: Even if a business's turnover does not exceed the
mandatory registration threshold, it can choose to register for GST voluntarily.
Voluntary registration can be advantageous, as it allows businesses to claim
Input Tax Credit (ITC) and participate in the formal economy.
 Composition Scheme: Businesses with a lower turnover have the option to
register under the composition scheme, which simplifies GST compliance.
However, businesses under this scheme cannot collect GST from customers or
claim full ITC.
 Unregistered Dealers: Unregistered dealers are not eligible to collect GST from
customers or claim ITC. They are typically small businesses or individuals who
do not meet the mandatory or voluntary registration criteria.
 Registration Types: GST registration can be of various types, including regular
registration, composition registration, and casual registration, depending on the
nature of the business and its activities.
 Multiple Registrations: A business with operations in multiple states or union
territories may require multiple GST registrations, each corresponding to the

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place of business. These registrations are typically under the same GSTIN
(Goods and Services Tax Identification Number), with a state code.
 Responsibilities of Registered Dealers: Registered businesses are responsible for
charging GST on taxable supplies, maintaining proper records, filing GST
returns, and complying with GST regulations.
 Benefits of Registration: GST registration allows businesses to legally collect
GST from customers, claim Input Tax Credit (ITC) on their purchases, and
participate in the formal economy. It also enables businesses to avail various
benefits and protections under GST laws.
 Cancellation of Registration: Registration can be cancelled under certain
circumstances, such as the closure of the business. Businesses that no longer
meet the mandatory threshold may also apply for cancellation.
 Compliance and Record-Keeping: Registered businesses must maintain proper
records and comply with GST regulations, including filing timely GST returns
and paying GST liabilities.
5.2.2 GST Return Types:
Under the Goods and Services Tax (GST) system, various GST return types are
prescribed for businesses to report their financial transactions, calculate their GST
liability, and claim Input Tax Credit (ITC). The specific return types that a business
needs to file depend on factors like its turnover, nature of business, and registration
type. Here are some of the key GST return types:
 GSTR-1 (Outward Supplies Return): GSTR-1 is used to report details of all
outward supplies made by a registered business. It includes details of sales, sales
returns, and credit or debit notes issued during a specific tax period.
 GSTR-3B (Summary Return): GSTR-3B is a simplified summary return that
businesses need to file monthly. It includes information on total sales, total
purchases, and the GST liability for the month. It is used to pay taxes on a
monthly basis.
 GSTR-4 (Composition Scheme Return): Businesses registered under the
Composition Scheme file GSTR-4. This return provides a summary of quarterly
turnover and tax payable.

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Unit-V Input Tax Credit – Allowable/Reversal
 GSTR-5 (Non-Resident Foreign Taxpayer Return): GSTR-5 is filed by non-
resident foreign taxpayers who engage in taxable activities in India. It provides
details of their supplies, taxes paid, and other related information.
 GSTR-6 (Input Service Distributor Return): Input Service Distributors (ISDs)
file GSTR-6 to distribute the Input Tax Credit (ITC) on input services to their
branches or units.
 GSTR-7 (Tax Deducted at Source Return): GSTR-7 is filed by persons who are
required to deduct Tax Deducted at Source (TDS) under GST. It includes details
of TDS deducted, TDS liability, and the payee's details.
 GSTR-8 (Tax Collected at Source Return): E-commerce operators file GSTR-8,
which includes details of supplies made through their platform, the amount of
tax collected at source, and the TCS liability.
 GSTR-9 (Annual Return): GSTR-9 is an annual return that provides a summary
of all GST returns filed during the financial year. It includes details of outward
supplies, inward supplies, ITC, and taxes paid.
 GSTR-9A (Annual Return for Composition Taxpayers): Businesses registered
under the Composition Scheme file GSTR-9A, which provides an annual
summary of their turnover, tax payable, and ITC.
 GSTR-9C (Reconciliation Statement and Audit Report): GSTR-9C is a
reconciliation statement and audit report. It is filed by taxpayers with a turnover
above a specified threshold. It requires reconciliation of financial statements
with GST returns and is certified by a Chartered Accountant.
 GSTR-10 (Final Return): GSTR-10 is filed by businesses that have ceased
operations or have been cancelled, and it provides details of closing stock and
liabilities.
 GSTR-11 (Inward Supplies Statement for UIN): GSTR-11 is filed by persons
with a Unique Identity Number (UIN) who make purchases in India without a
GSTIN. It provides details of inward supplies for UIN holders.
5.2.3 Tax Period:
The "tax period" refers to the specific time intervals in which businesses are
required to report their financial transactions, calculate their Goods and Services Tax
(GST) liability, and file GST returns in India. The tax period varies depending on the
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Unit-V Input Tax Credit – Allowable/Reversal
type of taxpayer, their turnover, and the nature of their GST registration. Here are the
common tax periods for different categories of taxpayers:
 Monthly Tax Period: Businesses with a turnover above a specified threshold
(commonly referred to as the "monthly filers") are typically required to file GST
returns on a monthly basis. Their tax period covers one calendar month, and they
must file their returns by the 20th of the following month. For example, the tax
period for the month of January would be from January 1st to January 31st, and
the return must be filed by February 20th.
 Quarterly Tax Period: Small taxpayers who have opted for the Composition
Scheme typically have a quarterly tax period. They need to file GST returns on
a quarterly basis by the 18th of the month following the end of the quarter. For
instance, if you have a quarterly tax period and the quarter ends on March 31st,
you must file your return by April 18th.
 Annual Tax Period: The annual tax period is applicable to all taxpayers. They
are required to file an annual return, GSTR-9, which covers the entire financial
year. The return must be filed by December 31st of the subsequent financial year.
For example, for the financial year 2022-2023, the GSTR-9 return must be filed
by December 31, 2023.
 Other Tax Periods: Non-resident taxpayers, input service distributors, and
taxpayers with unique identification numbers (UIN) have their own specific tax
periods based on their unique circumstances. These taxpayers may have different
filing frequencies and due dates.
5.2.4 Accounting Software:
Accounting software plays a crucial role in managing financial transactions,
record-keeping, and ensuring compliance with tax regulations, including the Goods and
Services Tax (GST) in India. Here are some considerations when choosing and using
accounting software for GST compliance:
 GST Compliance: Ensure that the accounting software is GST-compliant. It
should be capable of handling GST calculations, generating GST invoices, and
helping you file GST returns accurately.

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Unit-V Input Tax Credit – Allowable/Reversal
 User-Friendly Interface: Choose software with an intuitive and user-friendly
interface. This makes it easier for your staff to learn and use the software
effectively.
 Integration Capability: The software should integrate seamlessly with other
systems and applications your business uses, such as point-of-sale systems, e-
commerce platforms, and bank accounts.
 Invoicing Features: Look for software that allows you to generate GST-
compliant invoices with all the required details, including GSTIN, HSN codes,
SAC codes, and tax rates.
 Input Tax Credit (ITC) Management: The software should support ITC
calculations, making it easy for you to claim and manage ITC on your purchases.
 GST Return Filing: Check if the software provides the capability to generate and
file GST returns directly from the platform. This can streamline the return filing
process.
 Real-Time Reporting: Real-time reporting features can help you keep track of
your financial health and compliance status. Look for software that offers
customizable reporting options.
 Multi-User Access: If you have multiple team members or accountants working
on your finances, choose software that allows for multi-user access with role-
based permissions.
 Cloud-Based vs. Desktop Software: Consider whether you want cloud-based or
desktop accounting software. Cloud-based solutions offer accessibility from
anywhere with an internet connection, while desktop software can provide more
control over data.
 Data Security: Ensure that the software you choose has robust security measures
in place to protect your financial data, including encryption and regular data
backups.
 Updates and Support: Opt for software that receives regular updates and offers
customer support. Updates are important to ensure ongoing compliance with
changing tax laws.

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Unit-V Input Tax Credit – Allowable/Reversal
 Scalability: Choose accounting software that can scale with your business. It
should accommodate your growth without requiring a significant change in
systems.
 Training and Resources: Check if the software provider offers training materials,
tutorials, or customer support to help your team get the most out of the software.
 Cost: Consider the cost of the software and whether it aligns with your budget.
Some software is available on a subscription basis, while others may require a
one-time purchase.
 Reviews and Recommendations: Read reviews and seek recommendations from
other businesses in your industry to get insights into the performance and
suitability of different accounting software options.
5.2.5 Record Maintenance:
Maintaining accurate and organized records is crucial for businesses in India to
comply with the Goods and Services Tax (GST) regulations. Proper record-keeping not
only ensures GST compliance but also aids in efficient business operations, financial
management, and decision-making. Here are some key considerations for record
maintenance in the context of GST:
 Retention Period: Maintain GST-related records for a minimum of six years
from the end of the financial year in which they pertain. This retention period is
essential for audit and compliance purposes.
 Digital Records: Consider digitizing your records and documents. Electronic
records are easier to manage, search, and retrieve when needed.
 Invoice Records: Keep a copy of all invoices, including both sales and purchase
invoices. Ensure that these invoices contain all the mandatory GST details, such
as GSTIN, HSN or SAC codes, tax rates, and more.
 Input Tax Credit (ITC) Records: Maintain records of all eligible input tax credit
(ITC) transactions, including invoices, debit notes, and credit notes. Ensure that
you have proper documentation to support your ITC claims.
 Bank Statements: Keep copies of your bank statements, which can help reconcile
your financial transactions and GST returns.

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Unit-V Input Tax Credit – Allowable/Reversal
 Ledgers and Journals: Maintain ledgers and journals that record all financial
transactions, including sales, purchases, expenses, and income. Ensure these
records are accurate and up to date.
 GST Returns and Acknowledgments: Keep copies of filed GST returns and their
acknowledgment receipts. These documents serve as proof of compliance.
 Payment Records: Document all GST payments made to the government,
including tax liability payments, late fees, and penalties. This will help you track
your tax obligations.
 Input Service Distributor (ISD) Records: If you are an ISD, maintain records of
how you have distributed input tax credit to various units or branches of your
business.
 E-Invoicing Records: If applicable, maintain records of e-invoices generated and
received, as e-invoicing is mandatory for certain businesses.
 Records for Exports and Imports: If your business engages in international trade,
maintain records related to exports and imports, including shipping documents,
custom declarations, and foreign exchange records.
 Record Organization: Organize your records in a systematic manner, such as by
using folders, digital filing systems, or accounting software. Proper organization
facilitates quick retrieval when needed.
 Backup and Data Security: Regularly back up your digital records and ensure
data security measures are in place to protect sensitive financial information.
 Periodic Reviews: Periodically review your records to identify any
discrepancies, missing documents, or errors. Address any issues promptly to
maintain accurate records.
 Professional Assistance: Consider seeking professional guidance or engaging a
chartered accountant or tax consultant to help you with record maintenance,
especially if your business has complex transactions.
5.2.6 Input Tax Credit (ITC) Reconciliation:
Input Tax Credit (ITC) reconciliation is a critical process under the Goods and
Services Tax (GST) system in India. It involves matching the ITC claimed by a business
with the details of the ITC available in the GST returns filed by their suppliers. This

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Unit-V Input Tax Credit – Allowable/Reversal
reconciliation process helps ensure the accuracy of ITC claims, identify discrepancies,
and maintain GST compliance. Here's a step-by-step guide to ITC reconciliation:
 Gather Relevant Documents: Collect all relevant documents, including tax
invoices, credit notes, debit notes, and your own GST returns.
 Match Invoices and Transactions: Compare the invoices and transactions listed
in your GST returns with those provided by your suppliers. Ensure that the
details match, including invoice numbers, dates, and values.
 Rectify Discrepancies: If discrepancies are found, work with your suppliers to
rectify them. This may involve correcting errors, issuing credit notes, or making
necessary adjustments in the subsequent return filing.
 Reconcile Amounts: Ensure that the total ITC claimed in your GST returns
matches the total eligible ITC available as per the supplier's returns. This
reconciliation should be done for each tax period.
 File Corrected Returns: If discrepancies are corrected, file corrected GST returns
to reflect the accurate ITC claims. Rectify errors in the returns filed for previous
periods as well.
 Monitor Pending Invoices: Keep track of invoices that are pending from your
suppliers. Ensure that you receive these invoices, as they are essential for
claiming ITC.
 Timely Communication: Maintain open lines of communication with your
suppliers to address discrepancies, missing documents, or any other issues
related to ITC reconciliation.
 Address Time Limits: Ensure that ITC is claimed within the time limits
prescribed by GST laws. ITC can generally be claimed until the due date for
filing the September return of the following financial year or the actual filing of
annual returns, whichever is earlier.
 Leverage Technology: Consider using GST-compliant accounting or
reconciliation software to automate the matching process and flag discrepancies
for review.
 Periodic Reviews: Perform ITC reconciliation regularly, preferably on a monthly
or quarterly basis, to identify and rectify discrepancies promptly. This proactive
approach can help prevent the accumulation of unresolved issues.
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Unit-V Input Tax Credit – Allowable/Reversal
 Professional Assistance: If your business deals with complex transactions or has
a high volume of suppliers, consider seeking professional assistance from a
chartered accountant or tax consultant experienced in GST reconciliation.
 Documentation: Maintain detailed records of all reconciliation activities,
including communication with suppliers, corrections made, and the resolution of
discrepancies. Proper documentation is essential for compliance and audits.
5.2.7 HSN and SAC Codes:
HSN (Harmonized System of Nomenclature) and SAC (Services Accounting
Code) codes are classification systems used in India to categorize goods and services
for the purpose of taxation, particularly under the Goods and Services Tax (GST)
regime. Understanding these codes is essential for businesses as they determine the
applicable tax rates and facilitate proper reporting on invoices and GST returns. Here's
what you need to know about HSN and SAC codes:
 HSN Codes (Harmonized System of Nomenclature):
 HSN codes are used to classify goods for taxation purposes. They are
essential for determining the correct GST rate applicable to a specific
product. Here's how HSN codes work:
o Each product is assigned a unique HSN code, which consists of up to
eight digits.
o The first two digits represent the chapter under which the product falls,
and they are common across all countries using the HSN system.
o The next two digits represent the heading, which provides more
specific classification.
o The subsequent two digits represent the sub-heading, offering further
granularity.
o The final two digits represent the product's specific code within the
sub-heading.
o For example, "HSN 8523" represents "Prepared Unrecorded Media
for Sound Recording."

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Unit-V Input Tax Credit – Allowable/Reversal
 SAC Codes (Services Accounting Code):
 SAC codes, on the other hand, are used to classify services for taxation
purposes. They help determine the applicable GST rate for a specific service.
Here's how SAC codes work:
o Each service is assigned a unique SAC code, which consists of up to
six digits.
o SAC codes are more straightforward than HSN codes because they
don't have as many levels of classification.
o They provide a broad categorization of services to determine the
appropriate GST rate.
o For example, "SAC 9983" represents "Other Recreational, Cultural,
and Sporting Services."
 Importance of HSN and SAC Codes:
 Correctly using HSN and SAC codes on invoices and GST returns is essential
for accurate GST calculation and compliance.
 The codes ensure uniformity in tax rate applicability across different goods
and services.
 They help tax authorities identify the nature of transactions, making it easier
to audit and verify tax payments.
 Using the wrong code or omitting them can lead to errors, disputes, and non-
compliance.
 How to Determine HSN and SAC Codes:
 To find the appropriate HSN code for a product or SAC code for a service,
businesses can refer to the official GST website or consult GST professionals.
 The GST Council periodically updates and revises the code list, so it's
essential to stay up-to-date with the latest changes.
 Software and accounting systems often include databases of HSN and SAC
codes to simplify the classification process.
5.2.8 Timely Payments:
Timely payments under the Goods and Services Tax (GST) regime in India are
crucial for maintaining compliance, avoiding penalties, and ensuring smooth business
operations. GST payments involve the settlement of tax liabilities with the government
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Unit-V Input Tax Credit – Allowable/Reversal
based on the GST collected from customers and the Input Tax Credit (ITC) claimed on
purchases. Here are key considerations related to timely GST payments:
 Tax Due Dates: Familiarize yourself with the due dates for GST payment, which
vary based on your GST registration type and turnover. Generally, the due date
for GST payment for regular taxpayers is the 20th of the following month.
 GST Payment Modes: Understand the various modes of GST payment, including
online payment through the GST portal, payment through authorized banks, and
generation of a GST challan for payment.
 Correct Calculation: Ensure that you accurately calculate the GST liability for
each tax period. This involves calculating the GST payable on sales and the GST
payable on purchases net of Input Tax Credit (ITC).
 Input Tax Credit (ITC) Utilization: Before making GST payments, utilize the
available Input Tax Credit (ITC) to offset your GST liability. Proper utilization
of ITC can reduce the amount of GST that needs to be paid.
 Timely Filing of Returns: File your GST returns on time, as they serve as the
basis for calculating your tax liability. Timely return filing ensures that you know
the exact amount of tax due.
 Payment of Late Fees and Interest: If you miss the due date for GST payment,
you may be liable to pay late fees and interest on the outstanding tax amount. It's
important to settle these dues promptly to prevent them from accumulating.
 Electronic Cash Ledger: Maintain your Electronic Cash Ledger on the GST
portal, which reflects your cash balance available for making tax payments. Keep
track of the ledger to ensure sufficient funds are available for tax payments.
 Compliance with Composition Scheme: If you are registered under the
Composition Scheme, pay GST at the fixed rate on your turnover. Failure to do
so may lead to penalties.
 Advance Tax Payment: For certain taxpayers, GST is required to be paid in
advance. Ensure that you meet these requirements and make timely advance tax
payments.
 Professional Assistance: If your business has complex transactions or you're
unsure about GST calculations and payments, consider seeking professional
assistance from a chartered accountant or tax consultant.
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Unit-V Input Tax Credit – Allowable/Reversal
 Record Keeping: Maintain records of all GST payments, including payment
receipts, challans, and payment acknowledgments. Proper documentation is
essential for audit and compliance purposes.
 GST Payment Reconciliation: Periodically reconcile your GST payments with
your GST returns to ensure accuracy and detect any discrepancies.
5.2.9 Reverse Charge Mechanism (RCM):
The Reverse Charge Mechanism (RCM) is an important concept under the
Goods and Services Tax (GST) regime in India. It shifts the responsibility for paying
GST from the supplier to the recipient of goods or services in certain specified
scenarios. Understanding RCM is crucial for businesses, as it impacts both the payment
and compliance aspects of GST. Here's an overview of RCM:
 When Does RCM Apply?
RCM applies when the recipient of goods or services is liable to pay GST on
behalf of the supplier. This typically occurs in the following situations:
A. Goods and Services Supplied by Unregistered Dealers:
If a registered business purchases goods or services from an unregistered
supplier, the recipient is required to pay GST under RCM. This provision is intended to
bring unregistered suppliers within the GST framework.
B. Specified Goods and Services:
The government has specified certain goods and services for which RCM
applies. These include services provided by advocates, services by way of renting or
hiring of motor vehicles, services by directors to companies, and more.
 GST Calculation under RCM: When RCM applies, the recipient of goods or
services must calculate the GST liability at the applicable rate on the invoice
value.
 ITC Availability: The recipient of goods or services under RCM can claim Input
Tax Credit (ITC) for the GST paid. This ITC can be used to offset the GST
liability on their output supplies.
 Reporting and Compliance: The recipient is responsible for reporting the GST
payable under RCM in their GST return. This includes mentioning the GST paid
under RCM and claiming the corresponding ITC.

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Unit-V Input Tax Credit – Allowable/Reversal
 Records and Documentation: Maintain proper records of invoices and
documents related to supplies on which RCM is applicable. This documentation
is essential for compliance and audit purposes.
 Threshold Limit: The threshold limit for applicability of RCM is not applicable
for registered businesses. Even if the value of supplies is below the threshold,
they are required to pay GST under RCM.
 Exemptions: Some goods and services may be exempt from RCM, and certain
businesses may be eligible for an exemption.
 Consultation with Professionals: Given the complexities of RCM and the
evolving nature of GST laws, businesses are encouraged to seek professional
advice, such as consulting with a chartered accountant or tax consultant, to
ensure compliance.
 Regular Updates: Stay updated with changes in GST laws and notifications, as
the government may periodically update the list of goods and services subject to
RCM.
 Amendments and Corrections: Be aware of the procedures for amending or
correcting GST returns if you make errors or omissions in your original filings.
 E-Invoicing: For businesses with a certain threshold turnover, e-invoicing is
mandatory. Comply with e-invoicing requirements, generate e-invoices, and
report them accordingly.
 Annual Return: File your annual GST return (GSTR-9) by the specified due date,
summarizing your financial transactions for the entire financial year.
 Input Service Distributor (ISD): If you are an ISD, correctly distribute the ITC
to the respective branches or divisions within your organization.
 Professional Assistance: If necessary, seek assistance from tax professionals or
GST consultants to ensure compliance, especially if your business has complex
transactions.
5.2.10 Communication with Suppliers and Customers:
Effective communication with both suppliers and customers is essential for
businesses to ensure smooth operations and compliance with the Goods and Services
Tax (GST) regulations in India. Clear and transparent communication can help address
issues related to invoices, Input Tax Credit (ITC), GST compliance, and payment
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Unit-V Input Tax Credit – Allowable/Reversal
disputes. Here are some key aspects of communication with suppliers and customers
under GST:
 GSTIN Verification: Verify the Goods and Services Tax Identification Number
(GSTIN) of your suppliers and customers to ensure that they are registered under
GST. This verification can be done on the GST portal.
 Accurate Invoicing: Ensure that invoices issued to customers and received from
suppliers are accurate and contain all the required details, including GSTIN,
HSN or SAC codes, tax rates, and invoice numbers.
 ITC Documentation: Maintain proper documentation for ITC claims. Request
and retain invoices and related documents from your suppliers to support your
ITC claims.
 Discrepancies Resolution: Promptly communicate and resolve any discrepancies
in invoices, including incorrect details or disputed amounts. Such discrepancies
can affect your ITC claims and compliance.
 Timely Payment: Make GST payments to your suppliers on time and ensure that
your customers make timely payments to you. Timely payments help maintain
positive business relationships and cash flow.
 Reverse Charge Mechanism (RCM): If RCM is applicable, communicate with
your suppliers about the GST liability under RCM and agree on how the payment
will be handled.
 Clarification of Tax Rates: If there is uncertainty about the applicable GST rates
for specific products or services, seek clarification from your suppliers or
customers. It's essential to apply the correct tax rates to avoid compliance issues.
 Regular Updates: Stay informed about changes in GST laws and notifications
and communicate relevant updates to your suppliers and customers to ensure
mutual compliance.
 Input Service Distributor (ISD): If your business operates as an Input Service
Distributor (ISD), communicate with your various branches or units to correctly
distribute ITC.
 E-Invoicing: If e-invoicing is applicable to your business, ensure that both you
and your suppliers are compliant with e-invoicing requirements.

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Unit-V Input Tax Credit – Allowable/Reversal
 Professional Assistance: Seek professional assistance, such as consulting with a
tax expert or chartered accountant, if you encounter complex GST issues or
disputes with suppliers or customers.
 Compliance Transparency: Be transparent with your suppliers and customers
about your GST compliance practices. Demonstrating compliance can enhance
trust and collaboration.
 Addressing Compliance Concerns: If you identify non-compliance issues with
your suppliers or customers, address them promptly and work together to rectify
the situation. This may include addressing missing GST registrations or incorrect
invoicing.
5.2.11 GST Compliance Calendar:
A GST compliance calendar is a structured schedule that businesses in India use
to keep track of important Goods and Services Tax (GST) compliance-related dates and
activities. Maintaining a GST compliance calendar helps businesses stay organized,
avoid missing deadlines, and ensure timely submission of GST returns and payments.
Here's how you can create and use a GST compliance calendar:
 Identify Important GST Dates: Start by identifying the key GST-related dates
and activities that are relevant to your business. These dates may include GST
return filing due dates, GST payment due dates, deadlines for claiming Input Tax
Credit (ITC), and any other compliance-related activities.
 Create a Calendar: Use a digital calendar tool, spreadsheet software, or a
physical calendar to create your GST compliance calendar. Organize it by
months, quarters, or any other timeframes that make sense for your business.
 List Key Activities: List the specific GST compliance activities for each month
or time period. Include the due dates and the nature of the activity (e.g., GSTR-
3B filing, GSTR-1 filing, GST payment, etc.).
 Include Reminder Notifications: If you're using a digital calendar tool, set up
reminder notifications for each compliance activity. These reminders will help
you stay informed about upcoming deadlines.
 Customize for Your Business: Customize the calendar to align with your
business's unique requirements. For instance, if you have multiple GST

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Unit-V Input Tax Credit – Allowable/Reversal
registrations in different states, consider creating separate sections or calendars
for each.
 Stay Informed: Keep yourself informed about any changes or updates to GST
laws, notifications, or compliance requirements. Be prepared to adjust your
compliance calendar accordingly.
 Regularly Review and Update: Periodically review and update your GST
compliance calendar. Make sure it remains accurate and reflects any changes in
your business operations or GST regulations.
 Delegate Responsibilities: If you have a team handling GST compliance,
delegate responsibilities for specific tasks and ensure that everyone is aware of
their roles and deadlines.
 Penalties and Late Fees: Be aware of the penalties and late fees associated with
late GST return filing or delayed GST payments. Avoid these penalties by
adhering to your compliance calendar.
 Seek Professional Guidance: If your business deals with complex GST
transactions or if you're unsure about certain compliance activities, consider
seeking professional guidance from a tax consultant or chartered accountant.
 Track Payment Liabilities: Ensure that you have a clear record of your GST
payment liabilities and set aside funds accordingly to meet your tax obligations
on time.
 Reconciliation and Audit: Schedule periodic reconciliation activities to ensure
that your GST returns align with your financial records. Be prepared for GST
audits, if required.

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Unit-V Input Tax Credit – Allowable/Reversal
5.3 OVERVIEW OF THE GST PORTAL
GST (Goods and Services Tax) is an indirect tax system implemented in India to
replace the previous complex tax structure. The GST Portal is a digital platform
established by the Indian government to facilitate the administration and compliance of
the GST system. Here's an overview of the key functionalities and features of the GST
Portal in India:
Registration: Businesses and individuals required to register for GST can do so
through the portal. This includes new registrations, amendments to existing
registrations, and cancellation of registrations.
5.3.1 Filing Returns:
1. GSTR-1:
GSTR-1 is a crucial return form under the Goods and Services Tax (GST) system
in India. It is used by registered taxpayers to report details of their outward supplies of
goods and services to the tax authorities. Here's an overview of GSTR-1:
1. Frequency of Filing: GSTR-1 is typically filed on a monthly or quarterly basis,
depending on the taxpayer's annual turnover. Small taxpayers with an annual
turnover of up to ₹1.5 crores have the option to file it quarterly, while those with a
turnover exceeding ₹1.5 crores must file it monthly.
2. Reporting Outward Supplies:
 GSTR-1 is used to report information about outward supplies, including
invoices issued during the reporting period.
 It includes details such as the GSTIN (Goods and Services Taxpayer
Identification Number) of the recipient, invoice number, invoice date, taxable
value, and tax amount for each transaction.
3. Different Sections of GSTR-1: GSTR-1 is divided into multiple sections to capture
various types of outward supplies and transactions. These sections include:
 B2B (Business to Business) Invoices
 B2C (Business to Consumer) Large Invoices
 B2C Small Invoices
 Exports and Invoices to SEZ (Special Economic Zones)
 Debit and Credit Notes

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Unit-V Input Tax Credit – Allowable/Reversal
 Advances Received and Adjustments
4. Late Fee and Penalties: Filing GSTR-1 after the due date may attract late fees and
penalties. It's important to file the return within the specified deadlines to avoid such
charges.
5. Amendments and Corrections: Taxpayers can make amendments to their GSTR-1
return in subsequent periods to rectify any errors or omissions. Amendments can be
made in GSTR-1A.
6. Matching with GSTR-2A: The data reported in GSTR-1 is used for reconciliation
by the recipients of goods and services, who can match the details in GSTR-1 with
GSTR-2A, their auto-generated inward supply details.
7. Data Validation: The GST Portal performs data validation checks to ensure
accuracy and consistency in the reported information. In case of discrepancies,
taxpayers may be required to rectify the errors.
8. Tax Liability Calculation: GSTR-1 helps in the calculation of the tax liability of
the taxpayer. It provides the taxable value and tax amount for each transaction, which
is essential for accurate tax reporting and payment.
9. E-Signature and Submission:
After filling in the required details in GSTR-1, taxpayers can electronically sign and
submit the return through the GST Portal.
10. Compliance and Transparency:
 GSTR-1 enhances compliance and transparency in the GST system by
capturing and documenting all outward supplies, making it easier for tax
authorities to verify transactions and revenue collection.
 GSTR-1 is a critical component of GST compliance in India, and accurate and
timely filing of this return is essential to avoid penalties and maintain
transparency in tax reporting. It ensures that the government can track and
collect the appropriate amount of GST revenue from businesses across the
country.
2. GSTR-3B:
GSTR-3B is a simplified monthly summary return form under the Goods and
Services Tax (GST) system in India. It is used by registered taxpayers to report their

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Unit-V Input Tax Credit – Allowable/Reversal
summary of inward and outward supplies, as well as their input tax credit (ITC) for a
given tax period. Here's an overview of GSTR-3B:
1. Frequency of Filing: GSTR-3B is filed on a monthly basis by most registered
taxpayers. However, certain categories of taxpayers, such as those opting for the
Composition Scheme or those registered under the GST composition scheme, may
have different filing frequencies.
2. Reporting of Key Details: GSTR-3B is a summary return that captures key details
of a taxpayer's tax liability for a particular month. It includes information about total
sales (outward supplies), total purchases (inward supplies), and tax liability.
3. Inward and Outward Supplies:
 Taxpayers report the total value of their outward supplies, both taxable and
exempt, in GSTR-3B. It also includes supplies to registered and unregistered
persons.
 The form allows taxpayers to claim input tax credit (ITC) for the taxes paid
on their inward supplies, including goods and services purchased for business
purposes.
4. Tax Liability Calculation:
 Taxpayers calculate their tax liability by subtracting the total ITC available
from their total tax liability on outward supplies.
 GSTR-3B captures details of integrated GST (IGST), central GST (CGST),
state GST (SGST), and cess payable and payable under reverse charge.
5. Amendments and Corrections: Unlike GSTR-1, GSTR-3B does not facilitate the
amendment of invoices or details reported. Any amendments or corrections must be
made in subsequent returns, such as GSTR-1 or GSTR-2A.
6. Late Fee and Penalties: Filing GSTR-3B after the due date may attract late fees
and penalties, which can increase with the delay in filing. It's important to file the
return within the specified deadlines to avoid such charges.
7. E-Signature and Submission: After calculating and filling in the required details
in GSTR-3B, taxpayers can electronically sign and submit the return through the
GST Portal.

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Unit-V Input Tax Credit – Allowable/Reversal
8. Matching with GSTR-2A: The data reported in GSTR-3B is used by the tax
authorities for matching and reconciliation with the auto-generated GSTR-2A, which
contains details of inward supplies as per the sellers' filings.
9. Simplified Reporting: GSTR-3B is designed to simplify the return filing process
by providing a consolidated and summary view of a taxpayer's monthly tax liability
and ITC claims.
10. Regular Filing Requirement: Timely and accurate filing of GSTR-3B is essential
for GST compliance. It ensures that taxpayers fulfill their tax obligations and
contribute to the government's revenue collection.
3. Other Returns:
In addition to GSTR-1 and GSTR-3B, there are several other returns and forms
under the Goods and Services Tax (GST) system in India, each serving specific
purposes and catering to different categories of taxpayers. These "other returns" help
ensure comprehensive tax reporting and compliance. Here are some notable examples:
1. GSTR-4: A quarterly return filed by taxpayers registered under the Composition
Scheme. It summarizes the total turnover and tax liability during the quarter and
allows for the payment of a fixed percentage of tax on turnover.
2. GSTR-5: A monthly return filed by non-resident foreign taxpayers who conduct
business in India. It provides details of their inward and outward supplies during the
reporting period.
3. GSTR-6: A monthly return filed by Input Service Distributors (ISDs). ISDs are
businesses that receive invoices with input tax credit and distribute it to their
branches or units. GSTR-6 records this distribution of ITC.
4. GSTR-7: A monthly return filed by taxpayers who are required to deduct tax at
source (TDS). It includes details of TDS deducted, TDS liability, and TDS paid
during the reporting month.
5. GSTR-8: A monthly return filed by e-commerce operators who facilitate the supply
of goods and services through their platforms. It provides details of the supplies made
by sellers on the platform and the amount of TCS (Tax Collected at Source) collected.

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Unit-V Input Tax Credit – Allowable/Reversal
6. GSTR-9: An annual return filed by regular taxpayers. It consolidates the details of
outward and inward supplies, ITC, and tax paid during the financial year. It is a
comprehensive summary of all GST-related transactions.
7. GSTR-9A: An annual return filed by taxpayers registered under the Composition
Scheme. It provides an overview of the quarterly returns filed during the financial
year.
8. GSTR-9C: A reconciliation statement and certification by a Chartered Accountant
or a Cost Accountant. It is filed along with GSTR-9 and provides a reconciliation of
the financial statements and GST returns.
9. GSTR-10: A final return filed by taxpayers whose GST registration has been
cancelled or surrendered. It summarizes the tax dues, if any, and ITC as of the date
of cancellation or surrender.
10. GSTR-11: A return filed by persons with a Unique Identity Number (UIN), such
as foreign diplomatic missions and UN organizations. It reports details of inward
supplies for claiming refunds.
4. Payment of Taxes:
Payment of taxes is a crucial aspect of the Goods and Services Tax (GST) system
in India. Taxpayers are required to make timely and accurate payments of GST to the
government to fulfill their tax obligations. Here's an overview of how the payment of
taxes works under GST:
1. Tax Liability Calculation: Before making tax payments, taxpayers need to
calculate their tax liability for a specific tax period. This involves determining the
total GST payable on their outward supplies (sales) and the available Input Tax
Credit (ITC) on their inward supplies (purchases).
2. GST Components:
 The GST liability includes the following components:
 Central Goods and Services Tax (CGST): Collected by the Central
Government on intra-state supplies (transactions within the same state).
 State Goods and Services Tax (SGST): Collected by the respective state
government on intra-state supplies.

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Unit-V Input Tax Credit – Allowable/Reversal
 Integrated Goods and Services Tax (IGST): Collected by the Central
Government on inter-state supplies (transactions between different states).
3. Input Tax Credit (ITC): Taxpayers can claim ITC for the GST paid on their
purchases and expenses. ITC reduces the actual GST liability, and taxpayers pay only
the net GST amount.
4. Payment Due Date: GST payments are typically due on a monthly basis. The due
date for payment is determined based on the type of taxpayer and their turnover.
Generally, regular taxpayers must pay GST by the 20th of the following month.
5. Mode of Payment: Taxpayers can make GST payments electronically through the
GST Portal. Various payment modes are available, including net banking, credit card,
debit card, and over-the-counter (OTC) payments at authorized banks.
6. Generation of Challan: Taxpayers must generate a GST Challan on the GST Portal
by providing details such as the amount to be paid, the type of tax (CGST, SGST, or
IGST), and the mode of payment.
7. Challan Payment: Taxpayers can make the payment by transferring the specified
amount to the government's designated bank account through the GST Challan.
8. Late Fee and Penalties: Failing to make timely GST payments may result in late
fees and penalties. These charges can accrue, so it's essential to pay GST by the due
date to avoid additional costs.
9. Interest on Late Payments: In addition to late fees, interest may be charged on
overdue GST payments. The interest rate is typically specified by the government.
10. E-Credit Ledger Update: After successful payment, the taxpayer's Electronic
Credit Ledger is updated to reflect the payment of taxes.
11. GSTR-3B Filing: Payment of GST is usually accompanied by the filing of the
GSTR-3B return, which provides a summary of the tax liability and ITC claimed for
the tax period.
12. Reconciliation and Compliance: Regular reconciliation of GST payments and
returns is essential to ensure compliance and accuracy in tax reporting. Any
discrepancies should be rectified promptly.

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Unit-V Input Tax Credit – Allowable/Reversal
5. Claiming Input Tax Credit (ITC):
Claiming Input Tax Credit (ITC) is a fundamental concept under the Goods and
Services Tax (GST) system in India. ITC allows registered taxpayers to reduce their tax
liability by claiming a credit for the GST paid on their purchases and expenses related
to their business. Here's an overview of how claiming Input Tax Credit works:
1. Eligibility for ITC: To claim ITC, a taxpayer must be a registered person under
GST and must have a valid GSTIN (Goods and Services Taxpayer Identification
Number).
2. Conditions for Eligible ITC:
 To be eligible for ITC, certain conditions must be met:
 The taxpayer should have a tax invoice or debit note issued by a registered
supplier.
 Goods or services on which ITC is claimed must be used for business purposes
and in the course of furtherance of business.
 The taxpayer should have received the goods or services.
 Taxes paid must be reported correctly by the supplier in their GST return and
must have been paid to the government.
3. Match with GSTR-2A:
 Taxpayers can claim ITC based on the invoices and debit notes uploaded by
their suppliers in their GSTR-1 returns.
 The ITC claimed by a taxpayer should match with the details available in their
GSTR-2A, which is an auto-generated statement of inward supplies.
4. Reconciliation and Amendments: Taxpayers should regularly reconcile their
purchase records with GSTR-2A and make necessary amendments or corrections in
GSTR-2 or GSTR-3, if required.
5. Availability of ITC Types: ITC can be claimed for various types of taxes, including
CGST, SGST, IGST, and GST Compensation Cess, depending on the nature of the
transaction.
6. ITC on Capital Goods: ITC can also be claimed on capital goods, such as
machinery, equipment, and furniture, which are used for business purposes.
7. Partial ITC: If a good or service is used partly for business and partly for non-
business purposes, taxpayers can claim ITC only for the business portion.
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Unit-V Input Tax Credit – Allowable/Reversal
8. Time Limit for Claiming ITC: ITC for a given tax period can be claimed until the
due date for filing the GSTR-3B return for the month of September following the end
of the financial year to which the invoice pertains. After this time, the ITC cannot be
claimed.
9. Reversal of ITC: In some cases, taxpayers may need to reverse or reduce the ITC
claimed. For instance, if a supplier does not pay the tax to the government within a
specified period, the recipient must reverse the ITC claimed on that invoice.
10. Maintenance of Records: - Taxpayers are required to maintain records of all
invoices, debit notes, and other documents related to ITC claims for up to 72 months.
11. ITC Utilization: ITC can be utilized to offset the tax liability on the outward
supplies made by the taxpayer. If the available ITC exceeds the tax liability, the
excess can be carried forward to the next tax period.
6. Dashboard and Analytics:
The dashboard and analytics tools in the Goods and Services Tax (GST) system
in India provide taxpayers with valuable insights into their tax compliance status and
financial data. These features are available on the GST Portal and offer a user-friendly
interface to help taxpayers manage their GST-related activities efficiently. Here's an
overview of the dashboard and analytics features:
1. Dashboard Overview: The dashboard serves as the main landing page when
taxpayers log in to the GST Portal. It provides a snapshot of essential information
related to their GST compliance.
2. Compliance Status: The dashboard typically displays the taxpayer's compliance
status, indicating whether their GST returns are up to date or if any actions are
required.
3. Return Status: Taxpayers can see the status of their filed returns, including GSTR-
1, GSTR-3B, and other applicable returns. This helps them track whether they have
successfully filed their returns for the respective tax periods.
4. Tax Liability: The dashboard may provide a summary of the taxpayer's tax liability
for the current and previous tax periods. This information is vital for understanding
the financial impact of GST on the business.

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Unit-V Input Tax Credit – Allowable/Reversal
5. ITC Summary: The Input Tax Credit (ITC) summary section shows the total ITC
available to the taxpayer and its utilization. It helps in monitoring and managing ITC
claims and offsets.
6. Payment History: Taxpayers can access their GST payment history on the
dashboard. This includes details of payments made, the mode of payment, and the
date of payment.
7. Notices and Alerts: Any pending notices, alerts, or communications from the tax
authorities are typically displayed on the dashboard. Taxpayers can promptly address
these and ensure compliance.
8. Return Filing Calendar: Some dashboards include a calendar view that highlights
important due dates for return filing and tax payments. This serves as a visual
reminder to meet compliance deadlines.
9. Analytics Tools: Advanced analytics tools may be integrated into the dashboard,
allowing taxpayers to analyze their financial data and GST compliance trends. These
tools can provide insights into sales patterns, tax liability, and ITC utilization.
10. Historical Data: Taxpayers can often access historical data and reports through
the dashboard. This is useful for reviewing past compliance records and comparing
financial data over time.
11. User-Friendly Interface: The dashboard is designed to be user-friendly, making
it easy for taxpayers to navigate and access critical information related to their GST
activities.
12. Data Security: Data security is a top priority, and the dashboard typically requires
secure authentication and authorization to ensure that sensitive financial data remains
protected.
7. Tax Payment History:
Tax Payment History is a record of all tax payments made by an individual or
business to the tax authorities over a specific period of time. It serves as a critical
financial record, allowing taxpayers to track their tax obligations, verify payments, and
maintain a history of their tax compliance. Here's an overview of the importance and
key aspects of tax payment history:

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Unit-V Input Tax Credit – Allowable/Reversal
1. Record of Compliance: Tax payment history provides a comprehensive record of
an individual's or business's compliance with tax laws. It demonstrates that taxes
have been paid in a timely and accurate manner.
2. Verification of Payments: Taxpayers can use their tax payment history to verify
that they have fulfilled their tax obligations for each tax period. It helps in confirming
that payments match the tax liabilities for specific periods.
3. Documentation for Audits: In the event of a tax audit or examination by tax
authorities, tax payment history serves as essential documentation to support the
accuracy and completeness of tax payments.
4. Proof of Compliance: Tax payment history can act as evidence of tax compliance
when dealing with financial institutions, creditors, or potential business partners. It
demonstrates fiscal responsibility and financial stability.
5. Tax Planning: Reviewing tax payment history can aid in tax planning and
forecasting future tax obligations. It allows taxpayers to estimate their tax liabilities
based on past payment patterns.
6. Tax Refunds and Adjustments: In cases where taxpayers have overpaid taxes or
are eligible for refunds or adjustments, tax payment history helps in identifying the
overpayments and streamlining the refund process.
7. Financial Statements and Reports: Tax payment history is an important
component of financial statements and reports, providing a complete picture of a
taxpayer's financial health and tax obligations.
8. Compliance with Regulatory Requirements: Many jurisdictions require
individuals and businesses to maintain records of tax payments for a specified
number of years to comply with legal and regulatory requirements.
9. Dispute Resolution: In case of disputes or discrepancies in tax assessments, having
a well-documented tax payment history can serve as valuable evidence to support the
taxpayer's position.
10. Avoiding Penalties and Interest: Timely tax payments, as reflected in the
payment history, help taxpayers avoid penalties and interest charges associated with
late or underpaid taxes.

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Unit-V Input Tax Credit – Allowable/Reversal
11. Access to Online Portals: In some tax systems, taxpayers can access their tax
payment history through online portals provided by tax authorities. This allows for
convenient and secure access to payment records.
12. Retention and Organization: Taxpayers should maintain organized records of
their tax payment history, including payment receipts, transaction details, and
supporting documentation, to facilitate easy access and retrieval when needed.
8. Ledger Balances:
Ledger balances, also known as electronic ledger balances, are essential
components of the Goods and Services Tax (GST) system in India. They are maintained
electronically on the GST Portal and play a crucial role in the tax compliance process.
Here's an overview of what ledger balances are and their significance:
1. Electronic Ledger Accounts: Under the GST system, every registered taxpayer has
three primary electronic ledger accounts: The Electronic Cash Ledger, the Electronic
Credit Ledger, and the Electronic Liability Ledger.
2. Electronic Cash Ledger: The Electronic Cash Ledger maintains records of the cash
or cash equivalents deposited by the taxpayer for GST payment purposes. It includes
balances for Central Goods and Services Tax (CGST), State Goods and Services Tax
(SGST), Integrated Goods and Services Tax (IGST), and GST Compensation Cess.
3. Electronic Credit Ledger: The Electronic Credit Ledger records the Input Tax
Credit (ITC) available to the taxpayer. It reflects the ITC for CGST, SGST, IGST,
and GST Compensation Cess that can be used to offset future tax liabilities.
4. Electronic Liability Ledger: The Electronic Liability Ledger displays the tax
liabilities of the taxpayer. It includes the amounts to be paid for CGST, SGST, IGST,
and GST Compensation Cess based on the tax return filings.
5. Role in Tax Compliance: Ledger balances play a pivotal role in GST compliance.
They help taxpayers track their tax payments, ITC claims, and tax liabilities.
6. Real-Time Updates: Ledger balances are updated in real time as taxpayers make
payments, file returns, and claim ITC. This ensures that taxpayers have accurate and
up-to-date information on their financial positions.

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Unit-V Input Tax Credit – Allowable/Reversal
7. Offsetting Tax Liabilities: Taxpayers can use the balances in their Electronic Credit
Ledger to offset their tax liabilities in the Electronic Liability Ledger. This is done
when they file their monthly or quarterly returns.
8. Excess Balances: Excess balances in the Electronic Cash Ledger or Electronic
Credit Ledger can be carried forward to the subsequent tax periods, allowing
taxpayers to utilize them in the future.
9. Reconciliation: Regular reconciliation of ledger balances with tax return data is
crucial to ensure accuracy and compliance. Any discrepancies should be resolved
promptly.
10. Transparency: Ledger balances contribute to transparency in the GST system by
providing taxpayers with clear visibility into their tax-related financial transactions.
11. Record Keeping: Taxpayers are required to maintain records of their ledger
balances, including relevant statements and reports, as part of their compliance and
documentation requirements.
12. Secure Access: Ledger balances can be accessed securely through the GST Portal
using the taxpayer's credentials, ensuring data privacy and confidentiality.
9. GST Helpdesk:
The GST Helpdesk is a critical component of the Goods and Services Tax (GST)
system in India. It serves as a dedicated support channel for taxpayers, tax consultants,
and other stakeholders who have questions or encounter issues related to GST
compliance, registration, filing returns, and other aspects of the GST regime. Here's an
overview of the GST Helpdesk:
1. Purpose and Function: The primary purpose of the GST Helpdesk is to provide
assistance, guidance, and information to taxpayers and stakeholders regarding GST-
related matters.
2. Accessible Communication Channel: The Helpdesk offers a direct and accessible
means of communication between taxpayers and the tax authorities or GSTN (Goods
and Services Tax Network) officials.
3. Multiple Contact Channels: The GST Helpdesk may offer various contact
channels for users to reach out for support, including email, toll-free helplines, and
webchat. This ensures convenience and accessibility.

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Unit-V Input Tax Credit – Allowable/Reversal
4. Assistance with Registration: Taxpayers can seek assistance with the GST
registration process, including queries about eligibility, documentation, and the
registration application itself.
5. Filing Returns: Helpdesk personnel can provide guidance on filing various GST
returns, including GSTR-1, GSTR-3B, and annual returns. They can assist with
queries related to return preparation, due dates, and filing procedures.
6. Clarifications and Queries: Users can seek clarifications on GST rules,
procedures, and compliance requirements. They can also submit queries about
specific transactions and their GST implications.
7. Technical Support: The Helpdesk may offer technical support for using the GST
Portal, resolving technical issues, and troubleshooting problems related to online
filing and registration.
8. Policy Updates: Users can inquire about updates to GST policies, notifications,
circulars, and changes in the tax rates. The Helpdesk provides information to keep
taxpayers informed about the latest developments.
9. Grievance Redressal: Taxpayers can use the Helpdesk to file complaints and
grievances related to GST matters. The Helpdesk facilitates the resolution of disputes
and concerns.
10. Education and Outreach: The Helpdesk often conducts awareness programs,
workshops, and training sessions to educate taxpayers and stakeholders about GST
compliance and procedures.
11. Multilingual Support: To cater to India's diverse population, the Helpdesk may
offer support in multiple languages to ensure that taxpayers are comfortable
communicating their concerns and queries.
12. Professional Guidance: Tax consultants and professionals can also use the
Helpdesk to seek professional guidance on behalf of their clients or businesses.
13. Updated Information: The Helpdesk staff should have access to up-to-date
information and resources to provide accurate and relevant assistance.
10. e-Way Bill Generation:
The e-Way Bill is an electronic document generated under the Goods and
Services Tax (GST) regime in India. It serves as a permit for the movement of goods

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Unit-V Input Tax Credit – Allowable/Reversal
from one place to another, either within the same state or across state borders. Here's an
overview of e-Way Bill generation:
1. Purpose of e-Way Bill: The primary purpose of the e-Way Bill is to facilitate the
seamless movement of goods and prevent tax evasion by ensuring that goods are
accompanied by proper documentation.
2. Applicability: The e-Way Bill is required for the transportation of goods worth over
a specified threshold value. The threshold value may vary from state to state.
3. Responsible Parties: The responsibility for generating the e-Way Bill lies with the
registered supplier, recipient, or the transporter of the goods. The person generating the
e-Way Bill is referred to as the "generator."
4. Information Included: The e-Way Bill contains crucial information about the goods,
including the type, quantity, value, tax rates, and the details of the supplier, recipient,
and transporter.
5. Generation Modes: The e-Way Bill can be generated through online portals, mobile
applications, or offline methods. Online generation is the most common and convenient
mode.
6. Pre-Requisites: Before generating an e-Way Bill, the generator needs to ensure that
they have the relevant GSTIN, invoice or bill of supply details, and transportation
details.
7. Validity Period: The e-Way Bill is valid for a specific period, which varies depending
on the distance of transportation. Typically, it is valid for one day for every 100
kilometers or part thereof.
8. Updating and Cancellation: The generator can update or cancel the e-Way Bill within
a specified time frame. Updating may be necessary if there are any changes in the
transportation or goods details.
9. Inspection and Verification: During transit, tax authorities or officers may inspect the
e-Way Bill, either in physical or electronic form, to verify the compliance of the goods
being transported.
10. Inter-State Movement: When goods are transported across state borders, an e-Way
Bill is mandatory, and it should contain the GSTINs of both the supplier and recipient.

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Unit-V Input Tax Credit – Allowable/Reversal
11. Penalty for Non-Compliance: Failure to generate or produce a valid e-Way Bill
when required can result in penalties and seizure of the goods.
12. Integration with GST: The e-Way Bill system is integrated with the GST system to
ensure accurate reporting of goods movement and tax compliance.
13. Ease of Use: The e-Way Bill system is designed to be user-friendly, with online
forms that guide users through the process of generating and managing e-Way Bills.
14. Reduced Checkposts: The implementation of the e-Way Bill system has led to the
reduction of physical checkposts and inspections, thereby streamlining the movement
of goods.
15. National e-Way Bill System: The e-Way Bill system is operated through a common
national portal, making it easier for businesses to generate e-Way Bills for inter-state
movement.
11. Communication:
Communication is a fundamental aspect of business and daily life, and it plays a
crucial role in various contexts, including business operations, interpersonal
relationships, education, and more. Here's an overview of communication and its
significance:
1. Definition of Communication: Communication refers to the process of conveying
information, ideas, thoughts, or feelings from one person or entity to another through
verbal, non-verbal, or written means.
2. Types of Communication: Communication can take various forms, including:
 Verbal Communication: Using spoken words, such as face-to-face
conversations, phone calls, or video conferences.
 Non-Verbal Communication: Expressing information through gestures, body
language, facial expressions, and tone of voice.
 Written Communication: Conveying messages through written documents,
emails, reports, letters, and messages.
 Visual Communication: Using visual aids, such as charts, graphs, images, and
videos, to convey information.
3. Importance of Communication: Effective communication is essential in various
aspects of life and business, including:

44
Unit-V Input Tax Credit – Allowable/Reversal
 Building Relationships: Communication fosters trust, understanding, and
rapport in personal and professional relationships.
 Conflict Resolution: It helps resolve conflicts, misunderstandings, and
disputes by facilitating open dialogue.
 Decision-Making: Clear and timely communication supports informed
decision-making at all levels of an organization.
 Information Sharing: It enables the exchange of information, knowledge, and
updates within teams, organizations, and societies.
 Goal Achievement: Effective communication is essential for setting and
achieving goals, whether personal or organizational.
 Learning and Education: Communication is integral to the learning process,
as it enables the transfer of knowledge from educators to learners.
4. Communication Channels: Various channels are available for communication,
including face-to-face meetings, telephone calls, video conferencing, emails, instant
messaging, social media, written documents, presentations, and more. The choice of
channel depends on the nature of the message and the audience.
5. Barriers to Communication: Effective communication can be hindered by barriers
such as language differences, cultural misunderstandings, noise, distractions,
misinterpretation of non-verbal cues, and poor listening skills.
6. Communication Skills: Effective communication requires skills such as active
listening, clarity in expression, empathy, feedback, and adaptability to the needs and
preferences of the audience.
7. Business Communication: In the business context, communication is vital for
conveying business strategies, goals, policies, marketing messages, customer
service, and internal collaboration. It also includes communication with stakeholders,
suppliers, and clients.
8. Technology and Communication: Advances in technology have transformed
communication, making it faster, more efficient, and accessible. Digital tools, social
media platforms, and communication apps have revolutionized how individuals and
businesses interact.

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Unit-V Input Tax Credit – Allowable/Reversal
9. Global Communication: In the era of globalization, effective communication
across borders and cultures is essential for international trade, diplomacy, and
cultural exchange. It requires cultural sensitivity and understanding.
10. Crisis Communication: During crises or emergencies, timely and accurate
communication is critical for managing and mitigating the impact of the situation.
Crisis communication plans are often developed to guide organizations through
challenging times.
11. Continuous Improvement: Effective communication is a skill that can be
continually developed and refined through practice and feedback. Organizations
often invest in communication training and development programs.
12. Offline Tools:
Offline tools refer to software applications, resources, or instruments that operate
independently of an internet connection. These tools are designed to be used without
requiring a constant internet connection and are valuable for various purposes, including
productivity, data management, and content creation. Here are some common types of
offline tools and their uses:
1. Offline Text Editors and Word Processors:
 Examples: Microsoft Word, LibreOffice Writer, Notepad
 Use: These tools enable users to create, edit, and format text documents,
including letters, reports, and articles, without an internet connection.
2. Offline Spreadsheets:
 Examples: Microsoft Excel, LibreOffice Calc, Google Sheets (with offline
mode)
 Use: Offline spreadsheet software allows users to create and manipulate data
tables, perform calculations, and generate charts and graphs without needing
an internet connection.
3. Offline Presentation Software:
 Examples: Microsoft PowerPoint, LibreOffice Impress
 Use: These tools are used to create and deliver multimedia presentations,
slideshows, and visual content even when offline.

46
Unit-V Input Tax Credit – Allowable/Reversal
4. Offline Email Clients:
 Examples: Microsoft Outlook, Mozilla Thunderbird
 Use: Offline email clients enable users to read, compose, and manage emails
without being connected to the internet. Emails are synchronized when an
internet connection is available.
5. Offline File and Data Backup Solutions:
 Examples: External hard drives, USB flash drives, network-attached storage
(NAS)
 Use: These tools provide a means to back up and store files, documents, and
data locally for data security and recovery purposes.
6. Offline PDF Readers:
 Examples: Adobe Acrobat Reader, Foxit Reader
 Use: Offline PDF readers allow users to view, annotate, and print PDF
documents without an internet connection.
7. Offline Project Management Software:
 Examples: Microsoft Project, Trello (with offline mode)
 Use: These tools help users plan, organize, and manage projects, tasks, and
timelines, even when not connected to the internet.
8. Offline Note-Taking Apps:
 Examples: Microsoft OneNote, Evernote (with offline mode)
 Use: Offline note-taking apps are used to capture ideas, notes, and information
for personal and professional use.
9. Offline Photo and Video Editing Software:
 Examples: Adobe Photoshop, Adobe Premiere Pro
 Use: These software programs allow users to edit and enhance photos and
videos without requiring an internet connection.
10. Offline Web Browsers:
 Examples: Offline versions of web browsers like Firefox, Chrome, and Edge
 Use: Offline web browsers can access locally stored web pages and web
applications without an active internet connection.

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Unit-V Input Tax Credit – Allowable/Reversal
11. Offline Maps and Navigation Apps:
 Examples: Google Maps (with offline maps), Here WeGo
 Use: Offline maps and navigation apps allow users to access maps and get
directions without using mobile data or Wi-Fi.
12. Offline Educational Resources:
 Examples: Offline textbooks, interactive educational software
 Use: These resources provide educational content, tutorials, and learning
materials for students and teachers, even in areas with limited internet access.
13. Grievance Redressal:
Grievance redressal, also known as complaint resolution or dispute resolution,
refers to the process of addressing and resolving complaints, concerns, or disputes
raised by individuals, customers, employees, or any other stakeholders. It is an essential
component of organizational and government systems to ensure fairness, transparency,
and accountability. Here's an overview of grievance redressal:
1. Purpose: Grievance redressal aims to provide a mechanism for individuals or
entities to voice their complaints, seek resolutions, and receive a fair response to their
concerns.
2. Types of Grievances: Grievances can encompass a wide range of issues, including
product/service dissatisfaction, workplace disputes, administrative problems, legal
disputes, and more.
3. Key Components: Effective grievance redressal typically involves the following
components:
 Complaint Submission: A clear process for individuals to submit their
grievances, often through formal channels or dedicated platforms.
 Investigation: An impartial investigation of the grievance to understand the
facts and circumstances.
 Resolution: The process of finding a solution to the grievance, which may
include corrective actions, compensation, or other remedies.
 Feedback and Communication: Keeping the complainant informed
throughout the process and providing feedback on the outcome.

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Unit-V Input Tax Credit – Allowable/Reversal
4. Importance: Grievance redressal is vital for maintaining trust and goodwill among
customers, employees, and stakeholders. It helps organizations address issues
promptly, reduce conflicts, and enhance their reputation.
5. Internal and External Grievances: Grievances can be internal (within an
organization) or external (involving customers or the public). Both types require
specific processes and procedures for resolution.
6. Mechanisms for Grievance Redressal: Organizations and government agencies
may have dedicated grievance redressal mechanisms, such as customer service
departments, ombudsman offices, or online complaint portals.
7. Legal Frameworks: Many countries have legal frameworks and regulations
governing grievance redressal, particularly in areas like consumer protection, labor
laws, and administrative procedures.
8. Timeliness: Timely resolution of grievances is crucial. Delayed responses or
unresolved complaints can lead to frustration and escalate the issue.
9. Confidentiality: Maintaining confidentiality is often essential, especially when
dealing with sensitive matters such as workplace grievances or personal data.
10. Mediation and Arbitration: In some cases, grievances may be resolved through
mediation or arbitration, involving a neutral third party to facilitate a resolution.
11. Transparency: Transparent processes and clear communication with the
complainant help build trust in the grievance redressal system.
12. Continuous Improvement: Organizations and government agencies should
continually review and improve their grievance redressal mechanisms to identify
recurring issues and implement preventive measures.
13. Accountability: Accountability is key to ensuring that those responsible for
resolving grievances do so effectively and in compliance with established
procedures.
14. Public Feedback: Public feedback on grievance redressal processes and
outcomes can be valuable for organizations and government agencies to identify
areas for improvement.

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Unit-V Input Tax Credit – Allowable/Reversal
5.3.2 Audit and Assessment:
Audit and assessment are two important processes in finance, business, and
government that involve the examination and evaluation of financial records,
operations, and compliance with regulations. These processes help ensure transparency,
accountability, and adherence to established standards. Here's an overview of audit and
assessment:
1. Audit: Definition: An audit is a systematic examination and verification of an
organization's financial statements, transactions, processes, and internal controls to
determine their accuracy, completeness, and compliance with accounting standards
and regulations.
2. Types of Audits:
 Financial Audit: Focuses on the accuracy of financial statements and the
organization's financial health.
 Operational Audit: Evaluates the efficiency and effectiveness of an
organization's operations and processes.
 Compliance Audit: Ensures that an organization follows specific laws,
regulations, and internal policies.
 Internal Audit: Conducted by an organization's internal audit department to
assess internal controls and operational efficiency.
 External Audit: Conducted by independent external auditors, often required
for financial reporting and regulatory compliance.
3. Objectives:
 To provide assurance on the accuracy and reliability of financial information.
 To identify weaknesses in internal controls and recommend improvements.
 To ensure compliance with financial regulations and accounting standards.
 To detect fraud or financial irregularities.
4. Process:
 Planning: Determining audit scope, objectives, and procedures.
 Fieldwork: Collecting and examining evidence, conducting tests, and
reviewing documents.

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Unit-V Input Tax Credit – Allowable/Reversal
 Reporting: Communicating audit findings, including any discrepancies or
areas of concern.
 Follow-up: Monitoring the implementation of audit recommendations.
5. Assessment: Definition: Assessment involves evaluating or appraising a situation,
process, or performance to understand its strengths, weaknesses, risks, and
opportunities for improvement.
6. Types of Assessments:
 Risk Assessment: Identifying and evaluating potential risks that an
organization may face.
 Performance Assessment: Analyzing an individual's or organization's
performance against predetermined criteria.
 Security Assessment: Evaluating the security measures and vulnerabilities of
an IT system or facility.
 Environmental Impact Assessment: Examining the environmental
consequences of a project or activity.
 Educational Assessment: Evaluating the knowledge, skills, and abilities of
students or learners.
7. Objectives:
 To gain insights into the current state of a situation or process.
 To identify areas for improvement and develop action plans.
 To make informed decisions based on assessment results.
 To ensure compliance with standards or regulations.
8. Process:
 Define the scope and purpose of the assessment.
 Collect relevant data and information.
 Analyze and evaluate the data to draw conclusions.
 Develop recommendations or action plans based on assessment findings.
 Communicate assessment results and implement changes as needed.
9. Integration with GSTN: The GST Portal is closely integrated with the GST
Network (GSTN), which is responsible for managing the IT infrastructure and
technology backbone of the GST system.

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Unit-V Input Tax Credit – Allowable/Reversal
5.4 ONLINE REGISTRATION FOR GST
Online registration for the Goods and Services Tax (GST) is a crucial step for
businesses and individuals in India who are liable to collect and pay GST. The GST,
introduced in India in 2017, replaced various indirect taxes and streamlined the taxation
system. Here is a comprehensive guide on how to register for GST online:
5.4.1 Eligibility Criteria:
Goods and Services Tax (GST) registration in India is mandatory for certain
individuals and businesses based on their annual turnover and specific criteria. The
eligibility criteria for GST registration are as follows:
1. Turnover Threshold: For businesses located in most Indian states, GST registration
is mandatory if their aggregate turnover in a financial year exceeds Rs. 20 lakhs (Rs.
10 lakhs for special category states). However, for some specific categories of
businesses, the threshold limit may vary.
2. Mandatory Registration: Regardless of turnover, the following entities must
register for GST:
 Inter-state suppliers (supplying goods or services across state borders).
 Businesses engaged in the supply of goods or services through e-commerce
platforms.
 Individuals or entities that are liable to pay tax under the reverse charge
mechanism.
i. Non-resident taxable persons.
ii. Input Service Distributors.
iii. Casual taxable persons.
3. Voluntary Registration: Even if your turnover does not exceed the threshold, you
can opt for voluntary GST registration. This is often done to avail of input tax credit
benefits, gain trust among customers, and comply with the law.
4. Special Category States: Special category states, such as those in the north-eastern
region of India, have a lower threshold of Rs. 10 lakhs for mandatory GST
registration.

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Unit-V Input Tax Credit – Allowable/Reversal
5. Casual Taxable Persons: Individuals or businesses that occasionally make taxable
supplies in India but do not have a fixed place of business must register for GST
before starting such supplies.
6. Reverse Charge Mechanism: If you are liable to pay tax under the reverse charge
mechanism (where the recipient of goods or services is required to pay GST), you
must register for GST.
7. Non-Resident Taxable Persons:
 Non-resident entities that supply goods or services in India are required to
register for GST, regardless of their turnover.
 It's essential for businesses and individuals to be aware of the GST registration
eligibility criteria and ensure timely registration when required. Failure to
register when eligible can result in penalties and legal consequences, while
voluntary registration can offer various benefits in terms of tax compliance
and competitiveness in the Indian market.
5.4.2 Gather Required Documents:
When preparing for GST (Goods and Services Tax) registration in India, it is
vital to gather all the essential documents and information. Below is a list of the
necessary documents and details you should have ready:
1. PAN (Permanent Account Number): Provide a copy of the PAN card of the
applicant or the business entity applying for GST registration.
2. Aadhaar Card of the Primary Authorized Signatory: Ensure you have a scanned
copy of the Aadhaar card of the primary authorized signatory.
3. Proof of Business Ownership or Constitution: Depending on your business type,
provide the relevant document:
i. Partnership Firm: Partnership deed.
ii. Proprietorship: Sole proprietorship declaration.
iii. Company: Certificate of incorporation and memorandum of association.
iv. Other Entities: Registration certificate, trust deed, or relevant documents.
4. Proof of Principal Place of Business: Include documents confirming the address
of your principal place of business. This can be:
i. Rental agreement or lease deed.

53
Unit-V Input Tax Credit – Allowable/Reversal
ii. Property tax receipt or electricity bill.
iii. Municipal khata copy.
iv. Consent letter from the landlord.
5. Additional Place of Business Documents: If applicable, gather similar documents
for any additional places of business you may have.
6. Bank Account Details: Provide a copy of a canceled cheque or a bank statement
showing your entity's name, address, and bank account number.
7. Digital Signature Certificate (DSC): If required, obtain and prepare a digital
signature certificate (DSC). It is mandatory for public and private limited companies
and optional for other entities.
8. Passport-Size Photograph: Ensure you have a passport-sized photograph of the
authorized signatory.
9. Letter of Authorization: If the application is being filed by an authorized signatory,
include a letter of authorization as needed.
10. Other Business Registration Certificates: If your business holds other
registrations such as Service Tax, VAT, or Central Excise, have copies of those
registration certificates ready.
11. Business Bank Account Statement or First Page of Passbook: Prepare a document
that displays your entity's name, address, and bank account details.
12. GST Declaration Form: Complete the GST Declaration Form with information
regarding your business activities and details of promoters or partners.
13. HUF (Hindu Undivided Family) Declaration: If applicable, provide an HUF
declaration. Remember that specific document requirements may vary depending on
your business structure and activities. Some documents may need to be scanned and
uploaded during the online registration process, while others may need to be
physically submitted to the GST authorities.
5.4.3 Access the GST Portal:
Accessing the Goods and Services Tax (GST) Portal is a crucial step when
registering for GST and managing your GST-related activities. Here are the steps to
access the GST Portal:

54
Unit-V Input Tax Credit – Allowable/Reversal
1. Visit the Official GST Portal: Open your web browser and go to the official GST
Portal website. The URL for the GST Portal is https://www.gst.gov.in/. Make sure
you are using a secure and up-to-date web browser.
2. Click on "Login": On the GST Portal's homepage, locate the "Login" button,
typically positioned in the upper right-hand corner. Click on it to proceed.
3. Enter Your Credentials: You will be prompted to enter your login credentials,
which include:
Username: Your GSTIN (Goods and Services Tax Identification Number), which is
a 15-digit unique identifier.
Password: Enter the password associated with your GSTIN.
Captcha: Solve the CAPTCHA code to verify that you are not a robot.
4. Click "Login": After entering your credentials and completing the CAPTCHA,
click the "Login" button to access your GST account.
5. Navigate the GST Portal: Once logged in, you will have access to various GST-
related services and features, including:
 Filing GST returns.
 Making GST payments.
 Applying for GST registration.
 Viewing and downloading GST certificates and notices.
 Managing your GST compliance.
6. Secure Logout: After you have completed your activities on the GST Portal, ensure
that you log out securely to protect your account. Look for the "Logout" or "Sign
Out" option, typically located in the top-right corner of the portal.
7. Keep Your Credentials Secure: It's essential to safeguard your GST Portal login
credentials, including your GSTIN and password, to prevent unauthorized access to
your account.
8. Reset Password if Needed: If you forget your password or need to reset it, the GST
Portal provides a "Forgot Password" option. Follow the instructions to reset your
password securely.
9. Update Your Profile: Periodically review and update your profile information on
the GST Portal to ensure accuracy.

55
Unit-V Input Tax Credit – Allowable/Reversal
10. Seek Assistance if Required: If you encounter technical issues, have questions
about using the portal, or require assistance with specific GST-related tasks, the GST
Helpdesk and customer support services are available to assist you.
5.4.4 Click on "Registration" and "New Registration":
To initiate the process of registering for Goods and Services Tax (GST) on the
GST Portal in India, follow these steps:
 Visit the GST Portal: Open your web browser and navigate to the official GST
Portal website, which is https://www.gst.gov.in/. Ensure that you are using a secure
and up-to-date web browser.
 Login: Log in to the GST Portal using your credentials. Enter your GSTIN
(Goods and Services Tax Identification Number) as the username and your password.
Solve the CAPTCHA code to verify that you are not a robot. Click the "Login" button
to access your GST account.
 Access the Dashboard: After logging in, you will be directed to the GST Portal
dashboard.
 Click on "Registration": Look for the "Registration" tab or link on the dashboard.
Click on it to access the registration-related services.
 Select "New Registration": Under the "Registration" section, you will typically
find various options related to registration services. Click on "New Registration" to
begin the process of applying for GST registration.
 Fill Out the GST Registration Application: You will be directed to the GST
registration application form. This form will require you to provide detailed
information about your business, including its legal name, trade name, principal
place of business, and additional places of business. Ensure that you fill out all the
required fields accurately.
 Upload Required Documents: During the application process, you will need to
upload scanned copies of the necessary documents and certificates, such as your PAN
card, Aadhaar card, proof of business ownership or constitution, proof of the
principal place of business, bank account details, and any other documents as
specified by the GST authorities.

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Unit-V Input Tax Credit – Allowable/Reversal
 Submit the Application: Once you have completed the application form and
uploaded the required documents, carefully review the information for accuracy.
After ensuring that all details are correct, submit the application.
 Generate ARN (Application Reference Number): Upon successful submission,
the system will generate an Application Reference Number (ARN). This ARN serves
as a unique identifier for your GST registration application.
 Application Processing: The GST authorities will process and verify your
application. They may request additional documents or information if necessary.
 Receive GSTIN: Once your application is approved, you will be issued a unique
15-digit GSTIN (Goods and Services Tax Identification Number). This is your GST
identification number.
 Access GST Services: With your GSTIN, you can now access various GST
services on the portal, including filing GST returns and making tax payments.
5.4.5 Fill Out the GST Registration Application:
Completing the GST Registration Application Form:
When you are at the stage of filling out the GST registration application form on
the official GST Portal in India, it's important to provide accurate and complete
information. Here are the steps to fill out the GST registration application:
 Access the GST Registration Application Form: After selecting "New
Registration" as described in the previous steps, you will be directed to the GST
registration application form.
 Business Details Section:
o Fill in the legal name of your business as per the PAN card.
o Provide any trade name (if applicable).
o Specify the constitution of your business, such as proprietorship, partnership,
company, etc.
o Enter the district and sector/ward/circle.
o Provide the date of liability, which is typically the date you became liable to
register for GST.
o Mention the reason for registration, such as crossing the turnover threshold.

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Unit-V Input Tax Credit – Allowable/Reversal
 Promoter/Partner Details: Enter details about the promoters, partners, or
directors of the business, including their names, date of birth, PAN numbers, and
Aadhaar numbers.
 Principal Place of Business: Provide the address of your principal place of
business. This should include the floor, building, street, locality, town/city,
district, state, and PIN code. Upload supporting documents as proof of your
principal place of business, such as a rental agreement, property tax receipt, or
electricity bill.
 Additional Places of Business: If you have additional places of business, you can
add their details by clicking the "Add Additional Place of Business" button.
Provide the address and upload supporting documents for each additional place.
 Bank Account Details: Enter the bank account number, IFSC code, and branch
details of your business's bank account. Upload a scanned copy of a canceled
cheque or the first page of the passbook as proof.
 Authorized Signatory Details: Specify details of the authorized signatory,
including their name, PAN number, and Aadhaar number. Provide the mobile
number and email address of the authorized signatory. Upload a passport-sized
photograph of the authorized signatory.
 Goods and Services: Select the goods and services you deal with from the list
provided. You can add multiple goods and services.
 Verification: Review all the information you've entered on the form. Check the
declaration box to confirm the accuracy of the details provided.
 Submit the Application: After confirming the accuracy of the information, click
the "Submit" button to send your GST registration application.
 Generate ARN (Application Reference Number): The system will generate an
Application Reference Number (ARN) after your application is successfully
submitted. Keep this number for future reference and tracking.
 Processing and Verification: The GST authorities will process and verify your
application. They may contact you or request additional documents if needed.
 Receive GSTIN: Once your application is approved, you will be issued a unique
15-digit GSTIN (Goods and Services Tax Identification Number), which will be
your GST registration number.

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Unit-V Input Tax Credit – Allowable/Reversal
5.4.6 Verification Through OTP (One-Time Password):
One-Time Password (OTP) is a widely used method for enhancing security in
various digital platforms and transactions. It provides an additional layer of
authentication beyond traditional username and password combinations. OTPs are
typically short numeric or alphanumeric codes that are valid for a limited time and can
only be used once. This method is employed to verify the identity of users and reduce
the risk of unauthorized access or fraudulent activities. Here's how the verification
process through OTP works:
 User Initiation: The verification process usually begins when a user attempts to
access a secured system, log in to an account, make a transaction, or perform any
action that requires authentication.
 Request for OTP: In response to the user's initiation, the system or service
provider sends a request to the user for an OTP. This request is often triggered
by clicking a "Send OTP" button or a similar action on the user interface.
 Generation of OTP: The system generates a unique OTP, typically a 6 to 8-digit
numeric code or an alphanumeric combination. This code is randomly generated
and is valid for a short period, usually a few minutes.
 Delivery of OTP: The OTP is sent to the user via a predetermined communication
channel. Common delivery methods include:
 SMS (Short Message Service): The OTP is sent as a text message to the user's
registered mobile number.
 Email: The OTP is delivered to the user's registered email address.
 Mobile App: Some services use their mobile apps to display the OTP directly to
the user.
 Voice Call: In some cases, an automated voice call may deliver the OTP to the
user.
 User Input: The user receives the OTP and enters it into the designated field on
the website, app, or platform.
 Validation: The system checks the entered OTP against the one it generated. If
the OTP matches and is still within the valid time frame, the user is granted
access or allowed to proceed with the requested action.

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Unit-V Input Tax Credit – Allowable/Reversal
 Timeout and Expiry: OTPs are time-sensitive, and they expire after a short period
(e.g., 5 minutes). If the user doesn't enter the OTP within this timeframe, they
will need to request a new OTP.
 Security: OTPs enhance security because they are one-time use and, therefore,
difficult for attackers to predict or intercept. They provide an additional layer of
security beyond a static password.
 Multi-Factor Authentication (MFA): OTP can be a component of multi-factor
authentication (MFA) when combined with something the user knows
(password) and something the user has (the OTP). This makes it even more
secure.
 Fallback Methods: In case the user doesn't receive the OTP or faces issues with
its delivery, some systems provide alternative methods for verification, such as
backup codes or contacting customer support.
5.4.7 ARN (Application Reference Number):
An Application Reference Number (ARN) is a unique identifier assigned to an
application, transaction, or request within various systems and processes. ARNs are
commonly used in various domains, including finance, technology, and government, to
track and manage the status and progress of applications or requests. Here's a closer
look at the concept of ARNs:
 Unique Identifier: An ARN is a string of alphanumeric characters that serves as
a unique reference for a specific application or transaction. It distinguishes one
application from another and helps in organizing and retrieving information
efficiently.
 Application and Transaction Tracking: ARNs are primarily used to track the
status and progress of applications or transactions. For example, in the financial
sector, when you apply for a credit card, loan, or insurance, you are typically
assigned an ARN to monitor the processing of your application.
 Government and Official Documents: Government agencies often use ARNs to
track various official documents and applications. This can include passport
applications, visa requests, tax filings, and more. ARNs streamline the handling
of large volumes of applications and improve accountability.

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Unit-V Input Tax Credit – Allowable/Reversal
 Online Services: In the digital age, ARNs are frequently employed by online
service providers to manage customer requests and support tickets. When you
contact customer support or submit a service request, you may be provided with
an ARN to reference during follow-up inquiries.
 Consistency and Accuracy: ARNs ensure consistency and accuracy in tracking
and referencing applications or transactions. They reduce the chances of
confusion or errors when multiple parties are involved in processing requests.
 Communication and Updates: When you inquire about the status of your
application or request, providing the ARN allows customer service
representatives or automated systems to quickly access relevant information and
provide updates.
 Security and Privacy: ARNs can also play a role in maintaining security and
privacy. By using a unique identifier rather than sensitive personal information,
organizations can protect individuals' data while still efficiently managing their
requests.
 Integration with Workflow Systems: In organizations with complex workflows,
ARNs can be integrated with workflow management systems. This integration
allows for automated routing and tracking of applications, reducing manual
intervention.
 Expiration and Archiving: ARNs may have an associated expiration date, after
which they are archived or no longer accessible. This helps maintain a clean and
organized database of applications and requests.
5.4.8 Processing and Verification:
 Processing:
I. Application Submission: The registration process begins with the applicant
(business owner or taxpayer) submitting an online application through the
GST portal, which is maintained by the Goods and Services Tax Network
(GSTN). The applicant provides essential business details and chooses the
appropriate GST registration category, such as Regular, Composition, or
Non-Resident.
II. Document Submission: Along with the application, the applicant must
upload supporting documents as per the registration category. These
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Unit-V Input Tax Credit – Allowable/Reversal
documents typically include proof of identity, address, and business
ownership, as well as bank account details.
III. Data Validation: The GST portal processes the application and validates the
information provided. This includes verifying the applicant's Permanent
Account Number (PAN) and the mobile number and email address linked to
the PAN. Any discrepancies or missing information are flagged for
correction.
IV. Acknowledgment: Once the application is successfully processed, the GST
portal generates an acknowledgment in the form of an Application Reference
Number (ARN). This ARN is sent to the applicant via email and SMS.
 Verification:
I. Document Verification: After receiving the application, the GST authorities
initiate the document verification process. They examine the uploaded
documents to ensure they meet the required standards and match the
information provided in the application.
II. Physical Verification (if required): In some cases, tax authorities may
conduct physical verification of the business premises to confirm its
existence and compliance with GST rules. However, physical verification is
usually reserved for situations where there are concerns about the
authenticity of the application.
III. Background Checks: Authorities may conduct background checks on the
applicant to verify their financial history and tax compliance. This is
particularly important in cases where individuals or entities have a history of
tax evasion.
IV. Validation of Business Details: The GSTN validates the business details
provided, including the GSTIN (Goods and Services Tax Identification
Number) allotted to the applicant. This helps ensure that the applicant's
registration aligns with the GST laws.
V. Final Approval: Once all verifications are successfully completed, and the
application is found to be in compliance with GST regulations, the GST
authorities issue the GSTIN to the applicant. This is a critical step as it
officially grants the business the right to collect and pay GST.
VI. Communicating the GSTIN: The GST authorities communicate the GSTIN
to the applicant through the GST portal, email, and SMS. The applicant can

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Unit-V Input Tax Credit – Allowable/Reversal
then start complying with GST regulations, including filing regular returns
and remitting GST payments.
5.4.9 GSTIN (GST Identification Number):
The Goods and Services Tax Identification Number (GSTIN) is a unique 15-
digit alphanumeric code assigned to every registered taxpayer under the Goods and
Services Tax (GST) regime in India. Introduced in 2017, GSTIN has become a vital
component of the taxation system, streamlining tax collection, enhancing transparency,
and simplifying compliance for businesses across the country.
Here's a breakdown of the components and significance of the GSTIN:
 Structure of GSTIN:
A GSTIN is structured in a systematic format, which conveys specific
information about the taxpayer. The 15-digit GSTIN is divided into the following parts:
I. State Code (First 2 Digits): The first two digits represent the state code where
the business is registered. Each Indian state and union territory has a unique
code assigned to it.
II. PAN (Permanent Account Number) of the Business (Next 10 Digits): The
next 10 digits of the GSTIN typically correspond to the PAN of the business
entity. This ensures that every taxpayer's identity is linked to their PAN.
III. Entity Code (Next 2 Digits): These two digits indicate the number of
registrations a business entity has within the same state. It is useful for
entities with multiple business verticals or branches within a state.
IV. Zonal Code (Next 1 Digit): The 13th digit, also known as the zonal code, is
reserved for future use and is usually set to "0" for now.
V. Check Digit (Last 1 Digit): The final digit is a check digit calculated using a
specific formula to verify the correctness of the entire GSTIN.
 Significance of GSTIN:
I. Uniqueness: The GSTIN is a unique identifier, ensuring that no two
registered businesses have the same number. This uniqueness prevents
duplication and simplifies the identification of taxpayers.
II. Interstate Transactions: GSTINs play a crucial role in interstate transactions.
They help in identifying the origin and destination of goods and services,
facilitating the collection of Integrated GST (IGST) for interstate supplies.
III. Tax Compliance: GSTIN is essential for tax compliance. Registered
businesses use it to file their GST returns, pay taxes, and claim input tax
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Unit-V Input Tax Credit – Allowable/Reversal
credits. It also enables the government to track tax payments and assess
compliance.
IV. Input Tax Credit (ITC): Businesses can claim input tax credit on the GST
paid on their purchases only if they are dealing with registered suppliers.
GSTIN verification ensures that businesses are dealing with legitimate
taxpayers to avail of ITC.
V. E-invoicing: E-invoicing, a digital invoicing system under GST, relies on the
GSTIN for generating structured electronic invoices. This enhances
transparency and simplifies the invoicing process for businesses.
VI. Legal Recognition: The GSTIN is legally recognized and accepted as proof
of a business's registration under the GST Act. It is often required for various
business transactions and regulatory filings.
VII. Compliance Monitoring: Tax authorities use GSTINs to monitor tax
compliance, conduct audits, and investigate potential tax evasion. This
ensures a level playing field for all businesses and helps prevent tax fraud.
5.4.10 Access the GST Portal for Filing Returns:
The Goods and Services Tax (GST) Portal is the official online platform
provided by the Government of India for taxpayers to manage their GST-related
activities, including filing returns. Filing returns accurately and on time is a crucial part
of GST compliance. Here's a step-by-step guide on how to access the GST Portal for
filing returns:
 Visit the GST Portal: Open your web browser and go to the GST Portal's official
website. The URL for the GST Portal is https://www.gst.gov.in/.
 Log In: On the GST Portal's homepage, you'll find the "Login" button. Click on
it to access the login page.
 Enter Credentials: Provide your GSTIN (Goods and Services Tax Identification
Number) and password. If you're a new user, you can click on the "New User
Login" link to register and create a username and password.
 Captcha Verification: To enhance security, you'll be required to enter the
characters shown in the captcha image. This step is crucial for preventing
automated bots from accessing the portal.
 Click 'Login': Once you've entered your GSTIN, password, and completed the
captcha verification, click the "Login" button to access your GST Portal
dashboard.
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Unit-V Input Tax Credit – Allowable/Reversal
 Dashboard Overview: After logging in, you will be directed to your dashboard.
Here, you can see various options and links related to GST compliance, including
filing returns, making payments, and updating your profile.
 Navigate to the 'Returns' Section: To file your GST returns, locate and click on
the "Returns" tab or link on the dashboard. This will take you to the returns
section.
 Select the Appropriate Return Form: Depending on your business type and
registration details, you'll need to select the relevant GST return form. Common
return forms include GSTR-1, GSTR-3B, and GSTR-4, among others. Click on
the form that corresponds to your filing requirements.
 Fill in the Details: You will now be presented with the return form, which you
need to fill out with the required details. This may include information on sales,
purchases, and tax calculations, depending on the specific return form.
 Validate Data: After entering all the necessary data, it's essential to validate the
information to ensure there are no errors or discrepancies.
 Save and Preview: Save the data you've entered and preview the return to
confirm that all information is accurate.
 File the Return: Once you're satisfied with the data, click on the "File Return"
button. You may also be prompted to make the tax payment, if applicable, during
this process.
 Confirmation and Acknowledgment: After successfully filing the return, you'll
receive an acknowledgment or reference number. This serves as confirmation
that your return has been filed.
 Keep Records: It's crucial to maintain records of all filed returns and
acknowledgment receipts for future reference and compliance audits.
 Compliance Responsibilities: Comply with GST regulations by filing monthly
or quarterly returns, paying taxes, and maintaining accurate records.
 Consult a Tax Professional: If you have complex business structures or require
assistance with GST compliance, consider consulting a tax professional or GST
consultant for guidance.

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5.5 ACCOUNTS, RETURNS, RECORDS, AUDIT AND ASSESSMENTS UNDER
GST
The Goods and Services Tax (GST) system in India places several
responsibilities on registered taxpayers, including maintaining accounts, filing returns,
maintaining records, undergoing audits, and facing assessments. These aspects are
critical to ensure compliance with GST regulations. Here's an overview of each
component:
5.5.1 Accounts:
Registered taxpayers are required to maintain accurate and up-to-date accounts
related to their business transactions. These accounts include records of:
 Sales and supplies
 Purchases and expenses
 Output GST (collected from customers)
 Input GST (paid on purchases)
 Reverse charge transactions
 Maintaining organized and complete accounts is essential for calculating and
reconciling GST liabilities accurately.
5.5.2 Returns:
Filing GST returns is a regular obligation for registered taxpayers. The GST
return forms vary based on the nature and size of the business. Common return forms
include GSTR-1 (for outward supplies), GSTR-3B (for summary returns), and GSTR-
4 (for composition dealers), among others.
Taxpayers must file their returns on time, typically on a monthly or quarterly
basis, depending on their turnover. Accurate reporting of sales, purchases, and tax
calculations is crucial in GST returns.
5.5.3 Records:
Maintaining proper records is a legal requirement under GST. Taxpayers are
expected to keep records of various documents, including:
 Invoices issued and received
 Vouchers and bills of supply
 Details of all transactions

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 GST challans (proof of tax payments)
 GST Input Tax Credit (ITC) records
 These records serve as evidence of transactions and can be inspected during
audits or assessments.
5.5.4 Audit:
GST audit is a process where tax authorities examine a taxpayer's financial
records, accounts, and returns to verify compliance with GST laws. There are three
types of GST audits:
 Annual Audit: This is conducted once a year and is applicable to taxpayers with
a turnover above a specified threshold.
 Special Audit: Tax authorities may order a special audit when they suspect
underreporting or evasion of taxes. A Chartered Accountant or Cost Accountant
conducts this audit.
 Departmental Audit: Tax authorities can conduct an audit based on their
discretion or upon noticing irregularities in a taxpayer's records. GST audit
ensures that taxpayers are adhering to the provisions of the GST Act and are
correctly calculating and paying their taxes.
5.5.5 Assessments:
Assessment under GST is the process where tax authorities determine the tax
liability of a taxpayer based on their records, returns, and other information.
Assessments can be conducted for various reasons, including:
 When a taxpayer fails to file returns.
 When there are discrepancies in the filed returns.
 When the tax authorities suspect tax evasion.
 After an assessment, tax authorities issue an assessment order, which specifies
the amount of tax payable or any refunds due.

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5.6 BOOKS OF ACCOUNTS
Businesses are required to maintain specific books of accounts and records to
ensure proper compliance with GST regulations. Accurate and organized record-
keeping is essential for calculating GST liability, claiming Input Tax Credit (ITC), and
demonstrating compliance during audits. Here are the key books of accounts and
records that businesses must maintain under GST:
5.6.1 Purchase Register:
A purchase register is a critical accounting document used by businesses to
record and track all purchases of goods and services. It is especially important for
businesses in India operating under the Goods and Services Tax (GST) regime. The
purchase register helps organizations maintain accurate records, calculate Input Tax
Credit (ITC), and ensure GST compliance. Here's what you need to know about a
purchase register:
 Purpose of a Purchase Register: The primary purpose of a purchase register is
to record all purchases made by a business, whether they are for goods or
services. This register is used to maintain transparency in financial transactions,
facilitate ITC claims, and ensure compliance with GST laws.
 Components of a Purchase Register: A purchase register typically includes the
following details for each purchase transaction:
o Supplier's Name and GSTIN (Goods and Services Tax Identification
Number): Verify that your supplier is registered under GST and accurately
record their details.
o Invoice Number: Unique identifier for the purchase transaction.
o Invoice Date: Date on which the purchase invoice was issued.
o Description of Goods or Services: A brief description of the goods or services
purchased.
o HSN or SAC Codes: Harmonized System of Nomenclature (HSN) for goods
or Services Accounting Code (SAC) for services to classify the product or
service.
o Quantity: The quantity of goods purchased or the units of services received.
o Taxable Value: The value of goods or services on which GST is applicable.

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o GST Amount: The amount of GST applicable, including Integrated GST
(IGST), Central GST (CGST), and State GST (SGST) or Union Territory
GST (UTGST).
o Total Invoice Value: The total amount payable, including the taxable value
and GST.
 Record-Keeping Requirements: Under GST, businesses are required to maintain
purchase registers and related documents for a minimum of six years from the
end of the financial year in which the transactions occurred.
 Input Tax Credit (ITC): The purchase register plays a crucial role in calculating
and claiming Input Tax Credit (ITC). By accurately recording purchases and
matching them with corresponding supplier invoices, businesses can claim ITC
on their GST returns.
 Reconciliation and Compliance: Regularly reconcile the entries in the purchase
register with the supplier's invoices and supporting documents. This ensures
accuracy and compliance with GST regulations.
 Software and Automation: Many businesses use accounting software or
enterprise resource planning (ERP) systems to automate the purchase register
process, making it easier to record, manage, and report purchase transactions.
 Supporting Documents: Maintain supporting documents such as supplier
invoices, credit notes, debit notes, e-way bills, and payment receipts to
substantiate the entries in the purchase register.
 Accuracy and Timeliness: It's crucial to accurately record purchases in the
register as soon as they occur. Timely and accurate record-keeping reduces the
risk of errors, discrepancies, and non-compliance.
1. Record-Keeping Requirements:
Record-keeping requirements refer to the obligation for businesses and
individuals to maintain organized and accurate records of financial transactions,
activities, and documents related to their business operations or personal finances.
These requirements are essential for various purposes, including compliance with tax
laws, financial reporting, audit preparation, and legal documentation. The specific
record-keeping requirements can vary by country, industry, and type of transaction. In

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the context of business and tax compliance in India, here are some key record-keeping
requirements:
 Goods and Services Tax (GST) Record-Keeping:
 Purchase Register: Maintain a record of all purchases of goods and services,
including supplier details, invoice numbers, invoice dates, descriptions of
goods or services, HSN or SAC codes, taxable values, and GST amounts.
 Sales Register: Keep a record of all sales of goods and services, including
customer details, invoice numbers, invoice dates, descriptions of goods or
services, HSN or SAC codes, taxable values, and GST amounts.
 Input Tax Credit (ITC) Register: Maintain records of eligible ITC
transactions, including invoices, credit notes, and debit notes, along with the
corresponding adjustments.
 Output Tax Liability Register: Record GST liabilities, including CGST,
SGST/UTGST, and IGST on sales transactions.
 GST Payment Register: Keep a register of GST payments made to the
government, including payment dates, modes of payment, and GSTIN
details.
 E-Way Bills and Transport Documents: Preserve e-way bills and transport
documents for the movement of goods valued above specified thresholds.
 Debit and Credit Notes Register: Document all debit and credit notes issued
or received, including reasons for issuance, original invoice details, and
adjustments made.
 Income Tax Record-Keeping:
 Maintain records of all income and expenses, including salary, business
income, rental income, and other sources of income.
 Keep records of tax-saving investments, deductions, and exemptions
claimed.
 Preserve supporting documents such as bank statements, salary slips, rent
agreements, and investment proofs.
 Corporate and Financial Records:
 Maintain financial statements, including balance sheets, income statements,
and cash flow statements.
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 Preserve shareholder agreements, board meeting minutes, and annual
reports.
 Keep records of contracts, agreements, and legal documents related to
business operations.
 Employee Records: Maintain personnel files for employees, including
employment contracts, payroll records, attendance registers, and tax-related
documents.
 Audit and Compliance Records: Keep records necessary for audits and
compliance reviews, including reconciliation statements, audit trails, and
compliance reports.
 Legal and Regulatory Records: Preserve legal documents, licenses, permits, and
regulatory approvals.
 Banking and Financial Records: Maintain bank statements, loan agreements,
investment statements, and financial transaction records.
 Inventory Records: Keep records of inventory transactions, including purchases,
sales, and stock levels.
 Electronic Records: In the digital age, electronic records are widely accepted.
Ensure that electronic records are secure, backed up, and easily retrievable.
2. Input Tax Credit (ITC):
Input Tax Credit (ITC) is a crucial concept under the Goods and Services Tax
(GST) system in India. It allows businesses to claim a credit for the GST paid on the
purchase of goods and services, which can be offset against the GST liability on their
sales. ITC ensures that the tax is levied only on the value addition at each stage of the
supply chain, promoting the seamless flow of credits across the supply chain. Here are
the key aspects of Input Tax Credit:
 Eligibility for ITC:
 To claim Input Tax Credit, a business must meet certain eligibility criteria,
including:
 Being a registered taxpayer under GST.
 Possessing a valid tax invoice or debit note issued by a GST-registered
supplier.
 Receiving the goods or services and using them for business purposes.
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 Ensuring that the supplier has deposited the GST amount with the
government.
 Types of ITC:
There are primarily three types of ITC under GST:
 Input Tax Credit on Inputs: ITC can be claimed on GST paid on raw
materials, components, and other inputs used in the manufacturing or
provision of taxable supplies.
 Input Tax Credit on Capital Goods: Businesses can claim ITC on GST paid
for capital goods like machinery, equipment, and assets that are used in the
business.
 Input Tax Credit on Input Services: ITC is available for GST paid on services
used for business purposes, such as legal services, consulting, or logistics.
 Conditions for Claiming ITC: Claiming Input Tax Credit (ITC) under the Goods
and Services Tax (GST) regime in India is subject to certain conditions and
requirements to ensure that businesses are eligible for this benefit and that the
GST credit system operates smoothly. Here are the key conditions for claiming
ITC:
i. Valid GST Registration: To claim ITC, a business must be a registered
taxpayer under GST. Unregistered businesses or those operating under a
composition scheme are not eligible to claim ITC.
ii. Possession of a Valid Tax Invoice: ITC can only be claimed if the business
possesses a valid tax invoice or debit note issued by a GST-registered
supplier. The invoice should contain specific information, including the
supplier's GSTIN, invoice number, and other prescribed details.
iii. Actual Receipt of Goods or Services: The business must have received the
goods or services for which ITC is being claimed. Mere booking of an
invoice or payment is not sufficient; actual receipt is necessary.
iv. Payment of GST by the Supplier: The supplier must have filed their GST
returns and paid the GST to the government treasury. The recipient can
claim ITC only if the supplier has complied with these requirements.
v. Compliance with Time Limits: ITC must be claimed within the time limits
specified under GST laws. Generally, ITC for a particular financial year
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can be claimed until the due date for filing the September return of the
following financial year or the actual filing of the annual return, whichever
is earlier.
vi. Matching of Details: The details of the supplier's invoice must match the
details entered in the recipient's GST return. Any discrepancies or errors
should be rectified to ensure accurate ITC claims.
vii. Use for Business Purposes: ITC can only be claimed for goods or services
that are used for business purposes. Personal or non-business use of goods
and services is not eligible for ITC.
viii. Reverse Charge Mechanism (RCM) Compliance: If the recipient is liable
to pay GST under the reverse charge mechanism (RCM), they can claim
ITC on the GST paid under RCM, provided all other conditions are met.
ix. Compliance with Anti-Profiteering Measures: Businesses must pass on the
benefits of ITC to customers through reduced prices. Compliance with anti-
profiteering measures is essential to ensure that businesses do not retain the
benefits of ITC for themselves.
x. Reconciliation and Documentation: Businesses must maintain proper
records and documentation of invoices, credit notes, debit notes, and
relevant documents to support their ITC claims. Regular reconciliation of
ITC claimed with supplier details is also important to rectify discrepancies.
 Apportionment of ITC: Apportionment of Input Tax Credit (ITC) is a crucial
aspect of GST compliance when a business uses inputs, capital goods, or input
services for both taxable and non-taxable supplies. Apportionment ensures that
ITC is claimed only on the portion of inputs or capital goods that are used for
taxable supplies, in accordance with the Goods and Services Tax (GST)
regulations in India. Here's what you need to know about the apportionment of
ITC:
a) Why Apportionment is Necessary: When a business uses inputs or capital
goods for both taxable and non-taxable supplies (exempt or non-GST
supplies), it cannot claim full ITC on the entire value. This is because ITC
can only be claimed for inputs and capital goods used for taxable supplies.
Apportionment helps determine the eligible ITC amount.

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b) Methods of Apportionment: Businesses can use various methods to
apportion ITC, depending on their circumstances. The two primary
methods are:
 Turnover-Based Method: This method is based on the ratio of the
turnover of taxable supplies to the total turnover (including exempt or
non-GST supplies). The ITC is apportioned in proportion to this ratio.
 Transaction-Based Method: In this method, businesses directly allocate
ITC to specific taxable supplies based on the actual consumption or
utilization of inputs or capital goods for those supplies.
c) Documentation and Record-Keeping: Proper documentation is crucial for
apportioning ITC accurately. Businesses should maintain records that
clearly show the basis for apportionment, whether it's turnover-based or
transaction-based. This includes records of invoices, calculations, and
supporting documents.
d) Input Services and Common Credit: For input services that are commonly
used for both taxable and non-taxable supplies, businesses may need to
apportion the ITC based on a reasonable method. It's essential to have a
clear and documented methodology for such cases.
e) Special Considerations: Special considerations apply to certain categories
of goods and services, such as capital goods. When capital goods are used
for both business and non-business purposes, the ITC is apportioned based
on the extent of business use.
f) Impact on GST Returns: The apportionment of ITC directly impacts the
GST returns. The amount of ITC claimed in the returns should align with
the apportioned ITC as per the chosen method.
g) Professional Advice: Apportioning ITC can be complex, especially for
businesses with diverse operations. It's advisable to seek professional
advice from a chartered accountant or tax consultant to ensure compliance
with the correct apportionment method.
h) Compliance and Audit: Maintain proper records and documentation for the
apportionment of ITC as part of GST compliance. These records may be

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subject to audit by GST authorities, so accuracy and transparency are
essential.
 Blocked Credit: Blocked Credit refers to Input Tax Credit (ITC) that cannot be
claimed by businesses under the Goods and Services Tax (GST) system in India.
The concept of blocked credit is designed to restrict or deny ITC on specific
categories of goods and services to prevent misuse or revenue leakage.
Businesses should be aware of these blocked credits to ensure compliance with
GST laws. Here are some key categories of blocked credit under GST:
 Motor Vehicles: ITC cannot be claimed on motor vehicles, except in certain
cases. However, credit can be claimed for motor vehicles when they are used for
specific purposes, such as providing transportation services, transporting goods,
or used in the furtherance of business.
 Food and Beverages: ITC is blocked for goods and services related to food and
beverages, including:
 Food and beverages served in restaurants, eateries, or outdoor catering
services.
 Food and beverages purchased for employee consumption in the workplace.
 Food and beverages supplied as part of the business's services, such as in
hotels or resorts.
 Health Services and Cosmetic Surgery: ITC cannot be claimed for health
services and cosmetic surgery. This includes medical services provided to
employees.
 Outdoor Catering: ITC is blocked for outdoor catering services.
 Membership of Clubs, Health and Fitness Centers: ITC cannot be claimed for
membership fees paid for clubs, health and fitness centers, and similar facilities.
 Travel Benefits to Employees: ITC is blocked for travel benefits provided to
employees on vacation, such as leave travel concessions.
 Renting of Motor Vehicles: ITC cannot be claimed on the renting of motor
vehicles for passenger transport.
 Works Contract Services: ITC for works contract services for the construction
of immovable property cannot be claimed. However, credit can be claimed for
works contract services used for further supply of works contract services.
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 Construction of Immovable Property: ITC is blocked for the construction of
immovable property for personal use.
 Goods and Services Used for Non-Business Purposes: Credit is blocked for
goods and services used for personal or non-business purposes.
 Exempt Supplies: If a business makes exempt supplies (supplies that are not
subject to GST), the ITC on inputs and services related to those exempt supplies
is blocked.
 Composition Scheme: Businesses opting for the composition scheme under GST
cannot claim ITC. They pay tax at a lower rate but are not eligible for ITC on
their purchases.
 ITC Reconciliation: Businesses are required to reconcile the ITC claimed in their
GST returns with the details available in the GST returns of their suppliers. This
reconciliation helps identify and rectify discrepancies, ensuring accurate ITC
claims.
3. Reverse Charge Mechanism (RCM):
The Reverse Charge Mechanism (RCM) is a concept under the Goods and
Services Tax (GST) system in India where the liability to pay GST is shifted from the
supplier to the recipient of goods or services. In a typical GST scenario, the supplier of
goods or services is responsible for collecting and remitting the GST to the government.
However, under RCM, the recipient becomes liable to pay GST directly to the
government, and the recipient can also claim Input Tax Credit (ITC) for the GST paid
under RCM. Here's a closer look at the Reverse Charge Mechanism:
 Applicability of RCM:
 RCM is typically applicable in specific situations and for certain categories
of supplies. The following are common scenarios where RCM is applicable:
 Services from Unregistered Suppliers: If a registered business receives
services from an unregistered supplier, the recipient is liable to pay GST
under RCM.
 Goods Transport Agency (GTA) Services: When a registered business avails
the services of a Goods Transport Agency for transportation of goods, it is
required to pay GST under RCM.

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Unit-V Input Tax Credit – Allowable/Reversal
 Legal Services by an Advocate: If a registered business receives legal
services from an advocate who is also registered under GST, the recipient
must pay GST under RCM.
 Certain Specified Goods and Services: The government can notify specific
goods and services for which RCM is applicable. For instance, certain
categories of works contracts and manpower supply services may attract
RCM.
 Registration Requirement: Businesses that are liable to pay GST under RCM
must be registered under GST, regardless of their turnover. This ensures that they
can comply with their RCM obligations.
 Calculating GST under RCM: When GST is paid under RCM, the recipient is
required to calculate the GST liability at the applicable rates (e.g., CGST,
SGST/UTGST, or IGST) on the value of the goods or services received. The
recipient must then remit this GST to the government.
 ITC under RCM: The recipient who pays GST under RCM can claim Input Tax
Credit (ITC) for the GST paid. This ITC can be used to offset the GST liability
on the recipient's taxable outward supplies.
 Reporting in GST Returns: Businesses are required to report transactions under
RCM in their GST returns. They must clearly indicate the GST liability paid
under RCM and the corresponding ITC claimed.
 Compliance and Record-Keeping: Compliance with RCM involves maintaining
proper records and documentation of the transactions subject to RCM. This
includes invoices, payment receipts, and records of the calculation of GST and
ITC.
4. Impact on Cash Flow:
The Reverse Charge Mechanism (RCM) in the Goods and Services Tax (GST)
system can have a significant impact on the cash flow of businesses. Here's how RCM
can affect cash flow:
 Upfront Payment of GST: Under RCM, the recipient of goods or services
becomes liable to pay the GST directly to the government, instead of the supplier.
This means that the recipient must make an upfront payment of the GST amount
when they receive the goods or services.
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 GST Liability without Immediate Revenue: When a business pays GST under
RCM, it incurs a GST liability without an immediate corresponding revenue.
This can create a cash flow challenge, especially if the business has a limited
cash reserve.
 Impact on Working Capital: Paying GST under RCM can tie up a portion of the
working capital, as the business must set aside funds to cover the GST liability.
This can reduce the liquidity available for day-to-day operations, payments to
suppliers, and other expenses.
 Delayed Recovery through ITC: While businesses can claim Input Tax Credit
(ITC) for the GST paid under RCM, the recovery of this amount may not be
immediate. The ITC can only be used to offset the GST liability on taxable
outward supplies made by the business. Therefore, the recovery of GST paid
under RCM depends on the business's subsequent sales and output tax liability.
5. ITC Set-off Timing:
The timing of Input Tax Credit (ITC) set-off in the Goods and Services Tax
(GST) system in India is an important aspect of managing a business's cash flow and
GST compliance. ITC represents the credit a business can claim for the GST paid on its
purchases of goods and services, which can be offset against the GST liability on its
sales. The timing of ITC set-off can impact a business's financial operations. Here's how
the timing of ITC set-off works:
 Accumulation of ITC: When a business makes purchases and pays GST on those
purchases, it accumulates ITC. This ITC amount is reflected in the Electronic
Credit Ledger maintained on the GST portal.
 Timing of ITC Claim: The timing of claiming ITC depends on the GST return
filing cycle and the applicable rules. Generally, businesses can claim ITC in the
following manner:
 Monthly Filing: For businesses filing monthly GST returns, they can claim
ITC on eligible purchases in the same month.
 Quarterly Filing: Businesses filing quarterly GST returns can claim ITC on
eligible purchases in the same quarter.
 Reporting in GST Returns: To claim ITC, businesses must report their eligible
purchases in their GST returns, specifically in GSTR-2A (auto-drafted inward
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supplies), GSTR-2B (input tax credit statement), or GSTR-3B (monthly or
quarterly return).
 Set-off against GST Liability: Once ITC is claimed in the GST return, it becomes
available for set-off against the GST liability on the business's sales. The GST
liability is calculated by adding the GST on sales (output tax) minus the available
ITC (input tax credit).
 Timing of Set-off: The timing of the set-off occurs when the business files its
GST return. If the business has sufficient ITC available in its Electronic Credit
Ledger, it can offset this against its GST liability, resulting in a reduced amount
of GST payable.
 Impact on Cash Flow: The timing of ITC set-off can have a direct impact on a
business's cash flow. If the business has substantial ITC available and can claim
it early in the return filing cycle, it can reduce its GST liability and conserve cash
for other business expenses. Conversely, delayed ITC set-off may require the
business to pay more GST upfront, affecting cash flow.
 Compliance and Reconciliation: Businesses must ensure that they accurately
report and reconcile their ITC claims with their purchases and GST returns. Any
discrepancies can lead to compliance issues and potential penalties.
 Quarterly vs. Monthly Filers: Businesses that file quarterly GST returns have a
longer interval between ITC accrual and set-off compared to monthly filers. This
means they may need to plan their finances differently to manage cash flow
effectively.
 Impact on Working Capital: The timing of ITC set-off can impact a business's
working capital. Effective management of ITC set-off can help optimize working
capital and liquidity.
6. Cash Flow Planning:
Cash flow planning is a critical financial management process that involves
forecasting, managing, and optimizing the flow of money in and out of a business over
a specific period, typically on a monthly or quarterly basis. Effective cash flow planning
is vital for ensuring a business's financial stability, liquidity, and ability to meet its short-
term and long-term financial obligations. Here are key steps and considerations for cash
flow planning:
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 Forecast Cash Flows: Begin by creating a cash flow forecast, which estimates
the expected cash inflows and outflows over a specific period. This forecast
should encompass all sources of revenue, including sales, loans, and
investments, as well as all expenses, such as rent, payroll, utilities, and loan
repayments.
 Analyze Historical Data: Review historical financial data to identify trends and
patterns in your cash flow. This analysis can provide valuable insights into
seasonal fluctuations, cyclical trends, and regular payment schedules.
 Identify Cash Flow Drivers: Identify the key drivers of your cash flow, both
positive (e.g., sales growth, accounts receivable collections) and negative (e.g.,
supplier payments, loan repayments). Understanding these drivers helps in
making informed decisions.
 Create Cash Flow Statements: Develop cash flow statements that categorize
cash flows into operating, investing, and financing activities. This helps in
distinguishing between everyday operational cash flows and those related to
investments or financing.
 Budgeting and Expense Management: Create a detailed budget that aligns with
your cash flow forecast. Focus on managing expenses efficiently by seeking
cost-saving opportunities, negotiating with suppliers, and controlling
discretionary spending.
 Accounts Receivable Management: Implement effective accounts receivable
management to ensure timely collection of outstanding invoices. Offer discounts
for early payments and have clear credit policies to minimize delayed payments.
 Inventory Control: Maintain an optimal inventory level to avoid tying up excess
capital in unsold goods. Monitor inventory turnover ratios to identify slow-
moving items.
 Supplier Negotiations: Negotiate favorable payment terms with suppliers, such
as extended payment periods or early payment discounts, to align with your cash
flow needs.
 Debt Management: Manage debt obligations carefully, including loan
repayments and interest payments. Consider refinancing options if it helps
improve cash flow.

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 Emergency Fund: Maintain an emergency fund or cash reserve to cover
unexpected expenses or disruptions in cash flow. This reserve acts as a financial
buffer during challenging times.
 Regular Review and Adjustments: Continuously monitor your cash flow against
your forecast and budget. If variances occur, take proactive steps to adjust your
operations or financial strategies accordingly.
 Scenario Planning: Prepare for different scenarios, including best-case, worst-
case, and most likely outcomes. This helps in assessing the potential impact of
external factors on your cash flow.
 Professional Guidance: Consider seeking advice from financial professionals,
such as accountants or financial advisors, to ensure accurate forecasting and
effective cash flow management.
 Cash Flow Tools and Software: Utilize cash flow management tools and
software that can help automate calculations, track cash flow in real time, and
provide insights into your financial position.
7. Regular Reconciliation:
Regular reconciliation is a financial and accounting process that involves
comparing and matching financial records, transactions, and accounts to ensure
accuracy, consistency, and compliance with financial regulations. It is an essential
practice for businesses and organizations to maintain transparency, identify
discrepancies, and prevent financial errors. Here are key aspects and benefits of regular
reconciliation:
 Bank Reconciliation: Bank reconciliation is one of the most common forms of
regular reconciliation. It involves comparing a company's internal financial
records (general ledger) with the bank statement to ensure that all transactions
are accurately recorded and that there are no discrepancies.
 Accounts Receivable and Payable Reconciliation: Reconciliation of accounts
receivable (money owed to the company) and accounts payable (money the
company owes to others) ensures that outstanding invoices, bills, and payments
are correctly recorded and managed.

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Unit-V Input Tax Credit – Allowable/Reversal
 Inventory Reconciliation: Regular reconciliation of inventory records with
physical counts helps prevent stock discrepancies and ensures that the value of
inventory on the books matches the actual inventory on hand.
 Credit Card and Vendor Statement Reconciliation: Reconciling credit card
statements and vendor invoices is crucial for verifying the accuracy of expenses,
reducing the risk of overpayment, and managing vendor relationships
effectively.
 Payroll Reconciliation: Ensuring that payroll records are accurate by reconciling
salary payments, deductions, and taxes is essential for employee satisfaction and
legal compliance.
 Tax Reconciliation: Businesses must reconcile their financial records with tax
records to ensure that tax payments, deductions, and credits are accurately
reported and paid on time.
 Benefits of Regular Reconciliation:
 Accuracy: Regular reconciliation helps identify and rectify errors or
discrepancies in financial records, preventing financial inaccuracies.
 Fraud Detection: It can uncover unauthorized or fraudulent transactions by
identifying inconsistencies in financial records.
 Transparency: Reconciliation provides transparency into a company's
financial health and ensures that financial reports are reliable for decision-
making.
 Compliance: It helps ensure compliance with financial regulations and tax
laws, reducing the risk of penalties or legal issues.
 Cash Flow Management: By verifying the accuracy of accounts receivable
and payable, businesses can manage their cash flow more effectively.
 Cost Control: Reconciliation helps control costs by identifying billing errors,
double payments, or overcharges.
 Improved Decision-Making: Accurate financial records resulting from
reconciliation are critical for making informed business decisions.
 Frequency of Reconciliation: The frequency of reconciliation depends on the
type of accounts and the size and complexity of the business. Some accounts

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Unit-V Input Tax Credit – Allowable/Reversal
may require daily or weekly reconciliation, while others can be reconciled
monthly or quarterly.
 Automation and Software: Many businesses use accounting software and
reconciliation tools to automate the reconciliation process, making it more
efficient and less prone to human error.
 Documentation: Proper documentation of reconciliation procedures, findings,
and adjustments is essential for auditing purposes and maintaining an audit trail.
8. Professional Guidance:
Professional guidance refers to seeking advice, expertise, and assistance from
qualified and experienced professionals in various fields to make informed decisions,
solve problems, or achieve specific goals. Professional guidance is invaluable in
personal, business, and financial matters, as it allows individuals and organizations to
benefit from the knowledge and expertise of experts who specialize in specific areas.
Here are some key aspects and benefits of seeking professional guidance:
 Expertise and Knowledge: Professionals are experts in their respective fields and
possess specialized knowledge that may not be readily available to the average
person or organization. They can provide insights, strategies, and solutions based
on their years of experience and training.
 Legal and Regulatory Compliance: Professionals, such as lawyers, accountants,
and regulatory consultants, can help individuals and businesses navigate
complex legal and regulatory requirements, ensuring compliance and
minimizing legal risks.
 Financial Planning and Investment: Financial advisors and investment
professionals can assist individuals and businesses in creating effective financial
plans, managing investments, and optimizing wealth growth while mitigating
financial risks.
 Tax Planning and Compliance: Tax professionals can help individuals and
businesses navigate tax laws, optimize tax strategies, and ensure accurate tax
filings, potentially reducing tax liabilities and avoiding penalties.
 Business Strategy and Management: Business consultants and advisors offer
guidance on business strategy, operations, marketing, and management, helping
businesses grow, innovate, and stay competitive.
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Unit-V Input Tax Credit – Allowable/Reversal
 Health and Wellness: Healthcare professionals, nutritionists, and fitness trainers
can provide guidance on maintaining physical and mental well-being, achieving
fitness goals, and managing health conditions.
 Personal Development: Life coaches and career counsellors offer guidance on
personal development, goal setting, and career advancement, helping individuals
reach their full potential.
 Real Estate and Property Matters: Real estate professionals, including real estate
agents and property lawyers, can assist with property transactions, lease
agreements, and property management.
 Educational and Academic Support: Tutors, academic advisors, and career
counsellors can provide educational guidance, helping students excel
academically and make informed career choices.
 Risk Management: Risk management professionals can assess and mitigate risks
in various domains, such as finance, insurance, and project management.
 Problem Solving: Professionals often have a structured problem-solving
approach, which can be invaluable in addressing complex issues and challenges.
 Time and Cost Savings: Seeking professional guidance can save time and money
by avoiding mistakes, optimizing strategies, and ensuring efficient decision-
making.
 Objective Perspective: Professionals can provide an objective viewpoint, free
from emotional bias, allowing for rational decision-making.
 Confidentiality: Many professionals are bound by codes of ethics and
confidentiality, ensuring that personal and sensitive information remains secure.
 Tailored Solutions: Professional guidance is often customized to meet the
specific needs and goals of the individual or organization, ensuring that solutions
are tailored to unique circumstances.
9. Legal Provisions and Notifications:
Legal provisions and notifications are critical components of the legal and
regulatory framework that governs various aspects of society, including business,
taxation, healthcare, environment, and more. These provisions and notifications are
issued by government authorities at various levels (central, state, or local) and serve to
establish rules, rights, obligations, and standards that individuals, businesses, and
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Unit-V Input Tax Credit – Allowable/Reversal
organizations must adhere to. Here's an overview of legal provisions and notifications
and their significance:
 Legal Provisions:
 Legal provisions are statutory rules and regulations that are enacted through
legislative processes. They are formal laws passed by legislative bodies, such
as parliaments or legislatures, and are often part of a broader legal
framework, such as a constitution or a specific act of legislation.
 Legal provisions define rights, duties, and responsibilities, and they may
cover a wide range of topics, including civil and criminal law, contracts,
property rights, employment, taxation, and more.
 Compliance with legal provisions is mandatory, and non-compliance can
result in legal consequences, including fines, penalties, imprisonment, or
legal liabilities.
 Notifications:
 Notifications are official announcements or notices issued by government
authorities to convey specific information, directives, or decisions to the
public or specific stakeholders. They are typically used to provide updates or
details related to legal provisions or regulations.
 Notifications can serve various purposes, such as announcing changes in tax
rates, declaring public holidays, issuing safety guidelines, or notifying the
public about government initiatives.
 Notifications can be issued by government departments, ministries,
regulatory agencies, or local authorities, depending on the subject matter and
jurisdiction.
 Significance:
 Legal provisions and notifications are essential for maintaining order,
protecting rights, ensuring public safety, and promoting fairness in society.
They provide a structured and enforceable framework for individuals and
organizations to conduct their affairs.
 Legal provisions and notifications are crucial for businesses and individuals
to understand their legal obligations, rights, and liabilities. They help in

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Unit-V Input Tax Credit – Allowable/Reversal
making informed decisions, complying with the law, and avoiding legal
disputes.
 Legal provisions can be challenged or interpreted in courts of law, and legal
notifications may be subject to judicial review. Therefore, they play a central
role in the justice system.
 Compliance and Consequences:
 It is imperative for businesses, individuals, and organizations to stay
informed about legal provisions and notifications that apply to their activities
or sectors. Compliance with these rules is essential to avoid legal
repercussions.
 Failure to comply with legal provisions can result in fines, penalties, legal
actions, or other consequences, depending on the severity of the violation and
the applicable laws.
 Updates and Changes:
 Legal provisions and notifications may change over time due to legislative
amendments, regulatory updates, or government policies. Staying updated
with these changes is essential to ensure ongoing compliance.
 Governments often provide public access to legal provisions and
notifications through official websites, publications, and notifications in the
official gazette or similar publications.8. Anti-Profiteering Measures:
 Businesses must pass on the benefits of ITC to customers through reduced
prices. Anti-profiteering measures are in place to ensure that businesses do
not retain the benefits of ITC for themselves.
10. ITC Documentation:
Documentation related to Input Tax Credit (ITC) is a crucial aspect of Goods
and Services Tax (GST) compliance in India. Proper documentation helps businesses
substantiate their claims for ITC and ensures transparency in tax transactions. Here are
the key aspects of ITC documentation:
 GSTIN: Every business registered under GST is assigned a Goods and Services
Tax Identification Number (GSTIN). It is essential to maintain records of your
GSTIN and those of your suppliers and customers.

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Unit-V Input Tax Credit – Allowable/Reversal
 Tax Invoices:
 Tax invoices are critical documents for claiming ITC. Businesses must obtain
valid tax invoices from their suppliers for the purchases of goods or services.
 The tax invoice must contain specific details, including the supplier's GSTIN,
invoice number and date, a description of the goods or services, quantity,
value, and GST details (GST rate and amount).
 Receipts and Payment Vouchers: Proper documentation of all receipts and
payment vouchers related to GST transactions is essential. These documents
help substantiate your ITC claims and payments.
 GST Returns: GST returns, such as GSTR-1, GSTR-2A, GSTR-2B, GSTR-3B,
and annual returns, provide a consolidated view of your GST transactions.
Maintain copies of these returns for audit and record-keeping purposes.
 Delivery Challans: Delivery challans are required for the movement of goods
without a supply, such as for job work or branch transfers. Proper
documentation of delivery challans is essential to support ITC claims.
 Credit and Debit Notes: Credit and debit notes are used to adjust the value or
tax amount of a supply. Maintain records of credit and debit notes issued or
received as they impact ITC calculations.
 Input Tax Credit Ledger: Maintain records of the Input Tax Credit Ledger,
which shows the balance of eligible ITC available to you at any given time. It
helps in reconciling ITC claims.
 Reconciliation Statements: Regularly reconcile your purchase records with your
supplier's GSTR-2A and GSTR-2B to ensure that the ITC claimed matches the
ITC available as per your records.
 Inward and Outward Supplies Registers: Maintain separate registers for inward
and outward supplies, recording details such as GSTIN, invoice numbers, dates,
and amounts. This helps in cross-verification during audits.
 ITC Register: Maintain a comprehensive ITC register that tracks all eligible
ITC, segregating it based on CGST, SGST, IGST, and CESS components. This
register should provide a clear record of ITC availed and utilized.

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Unit-V Input Tax Credit – Allowable/Reversal
 Legal Documentation: Keep copies of legal agreements, contracts, and other
documents related to your business transactions that may impact your eligibility
for ITC.
 Backup and Storage: Ensure secure storage of all your GST-related
documentation, either in physical or electronic format, as per legal
requirements.
 Audit Trail: Maintain a clear audit trail that shows how ITC claims were
calculated, especially if multiple transactions are involved.
 Periodic Review: Periodically review your ITC documentation to ensure it
remains accurate and up-to-date. Correct any errors promptly.
11. Reconciliation and Compliance:
Reconciliation and compliance are two essential aspects of financial
management and regulatory adherence for businesses and organizations. They involve
the process of comparing and aligning financial records, transactions, and activities with
applicable laws, regulations, and standards. Here's a closer look at reconciliation and
compliance and their significance:
a) Reconciliation:
Reconciliation is the process of verifying and aligning financial records,
transactions, or accounts to ensure accuracy, consistency, and integrity.
Types of Reconciliation:
 Bank Reconciliation: Verifying and matching a company's internal financial
records with its bank statement to identify discrepancies, errors, or missing
transactions.
 Accounts Receivable and Payable Reconciliation: Matching accounts receivable
(money owed to the company) and accounts payable (money the company owes
to others) records to confirm their accuracy.
 Inventory Reconciliation: Comparing the physical count of inventory with the
recorded inventory in the financial records to identify discrepancies.
 Tax Reconciliation: Ensuring that tax records align with financial statements and
that taxes are accurately reported and paid.

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Unit-V Input Tax Credit – Allowable/Reversal
 Vendor Statement Reconciliation: Verifying vendor invoices against company
records to ensure correct payments and manage vendor relationships.
Importance of Reconciliation:
 Reconciliation helps prevent financial errors, fraud, and discrepancies by
identifying and resolving discrepancies promptly.
 It ensures that financial statements accurately represent a company's financial
position, aiding in decision-making and financial planning.
 Reconciliation is crucial for regulatory compliance, audits, and maintaining the
trust of stakeholders.
 It supports transparency, accountability, and sound financial management.
b) Compliance:
Compliance refers to adhering to laws, regulations, industry standards, and
internal policies that govern various aspects of business operations, such as finance,
taxation, environmental practices, data security, and more.
Types of Compliance:
 Tax Compliance: Ensuring that a business or individual complies with tax laws,
including timely filing of returns, accurate reporting, and payment of taxes.
 Financial Compliance: Adhering to financial reporting standards, such as
Generally Accepted Accounting Principles (GAAP) or International Financial
Reporting Standards (IFRS).
 Environmental Compliance: Complying with laws and regulations related to
environmental practices, emissions, waste management, and conservation.
 Data Privacy and Security Compliance: Adhering to data protection laws and
safeguarding sensitive information.
 Labor and Employment Compliance: Following labor laws, employment
regulations, and workplace safety standards.
Importance of Compliance:
 Compliance helps mitigate legal risks, avoid penalties, and maintain a good
reputation.
 It ensures fairness, accountability, and ethical business practices.

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Unit-V Input Tax Credit – Allowable/Reversal
 Compliance supports trust and confidence among stakeholders, including
customers, investors, and regulators.
 Non-compliance can result in legal consequences, financial losses, and damage
to reputation.
 Reconciliation and Compliance Synergy:
 Reconciliation is often a component of compliance efforts. For instance, bank
reconciliation ensures accurate financial reporting, which is a compliance
requirement.
 Both reconciliation and compliance aim to ensure accuracy, transparency, and
accountability in financial and operational activities.
 Regular reconciliation can help identify and rectify discrepancies that may lead
to non-compliance.
12. Software and Automation:
Software and automation play a pivotal role in modern business operations,
offering numerous advantages across various sectors and functions. They enable
organizations to streamline processes, enhance efficiency, reduce manual errors, and
improve decision-making. Here's how software and automation contribute to business
success:
 Improved Efficiency: Software automates repetitive and time-consuming tasks,
allowing employees to focus on more value-added activities. This leads to
increased productivity and efficiency.
 Accuracy and Error Reduction: Automation minimizes the risk of human
errors, which can be costly and time-consuming to rectify. Software
consistently performs tasks with precision.
 Data Management: Software systems are essential for collecting, storing, and
managing large volumes of data. They enable businesses to analyze and
leverage data for informed decision-making.
 Streamlined Workflows: Automation helps streamline complex workflows,
ensuring that tasks and processes are completed in a systematic and efficient
manner.

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Unit-V Input Tax Credit – Allowable/Reversal
 Cost Reduction: Automation reduces labor costs and operational expenses. It
also eliminates the need for physical paperwork and storage, saving on materials
and storage space.
 Scalability: Software and automation solutions can easily scale to accommodate
business growth without a proportional increase in labor requirements.
 Enhanced Customer Experience: Automation allows for better customer service
through chatbots, automated responses, and personalized marketing campaigns
based on customer data.
 Real-Time Insights: Business intelligence software provides real-time insights
into operations, helping organizations make informed decisions quickly.
 Compliance and Reporting: Automation ensures that businesses adhere to
regulatory requirements by generating accurate reports and facilitating
compliance checks.
 Remote Work: Software tools and cloud-based solutions enable remote work,
which has become increasingly important in the digital age.
 Competitive Advantage: Automation and software can provide a competitive
edge by allowing businesses to respond more swiftly to market changes and
customer demands.
 Innovation and Customization: Custom software solutions can be developed to
meet specific business needs, fostering innovation and differentiation.
 Data Security: Security software helps protect sensitive data from cyber threats
and unauthorized access.
 Predictive Analytics: Software can use historical data and algorithms to make
predictions and recommendations, aiding in strategic planning.
 Sustainability: Automation can optimize resource usage, reduce waste, and
support sustainability efforts.
 Customer Relationship Management (CRM): CRM software helps manage and
nurture customer relationships, leading to better customer retention and loyalty.
 Supply Chain Management: Automation in supply chain management
optimizes inventory levels, reduces lead times, and improves overall efficiency.

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Unit-V Input Tax Credit – Allowable/Reversal
 Marketing and Sales: Marketing automation tools enable businesses to segment
their audience, target specific demographics, and track marketing campaign
performance.
 Financial Management: Accounting and financial software streamlines
financial transactions, budgeting, forecasting, and financial reporting.
 Employee Management: HR software manages employee data, payroll,
benefits, and recruitment processes.
 Customer Support: Helpdesk and support ticket software facilitate efficient
customer issue resolution.
 Project Management: Project management software aids in planning, tracking,
and executing projects efficiently.
 E-commerce and Online Sales: E-commerce platforms enable businesses to sell
products and services online, expanding their market reach.
 Internet of Things (IoT): IoT devices and software collect and analyze data from
connected devices, enabling remote monitoring and control.
 Robotics and Process Automation: Robotic Process Automation (RPA)
automates rule-based tasks and processes using software robots.
13. Supporting Documents:
Maintain supporting documents such as supplier invoices, credit notes, debit
notes, e-way bills, and payment receipts to substantiate the entries in the purchase
register.
14. Accuracy and Timeliness:
It's crucial to accurately record purchases in the register as soon as they occur.
Timely and accurate record-keeping reduces the risk of errors, discrepancies, and non-
compliance.
5.6.2 Sales Register:
Keep a sales register that documents all sales of goods and services. Include
details such as the customer's name and GSTIN (if registered), invoice number, invoice
date, description of goods or services, HSN or SAC codes, tax amounts, and the total
sales amount.

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Unit-V Input Tax Credit – Allowable/Reversal
1. Input Tax Credit Register:
An Input Tax Credit (ITC) Register is a critical accounting record maintained by
businesses that are registered under the Goods and Services Tax (GST) system in India.
It serves as a ledger or logbook to record and track the input tax credit availed on
purchases of goods and services for use in the business. The ITC Register is essential
for complying with GST regulations and ensuring accurate financial reporting. Here's
what you need to know about the ITC Register:
Key Components of an ITC Register:
GSTIN (Goods and Services Tax Identification Number): The GSTIN of the
registered business should be clearly mentioned in the ITC Register.
Supplier Details: Record the details of the supplier, including their GSTIN, legal
name, and address, for each transaction.
Invoice Details: For each purchase transaction, record the following invoice
details:
o Invoice number and date
o Description of goods or services
o Value of goods or services
o GST rate and amount (both CGST and SGST/IGST)
o Total invoice value
Eligible ITC: Calculate the eligible input tax credit for each purchase transaction
based on the GST rates and amounts mentioned in the invoices.
Reversal and Adjustments: If any input tax credit is reversed or adjusted due to
factors like returns, discounts, or non-compliance with GST rules, document
these adjustments in the register.
Total ITC Availed: Maintain a running total of the input tax credit availed during
the tax period.
Important Considerations for the ITC Register:
Accurate Record-Keeping: It's crucial to maintain accurate and up-to-date
records in the ITC Register to ensure compliance with GST regulations and to
facilitate reconciliation.

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Unit-V Input Tax Credit – Allowable/Reversal
Matching with GSTR-2A and GSTR-2B: Regularly reconcile the entries in your
ITC Register with the details available in your GSTR-2A and GSTR-2B returns.
Discrepancies should be investigated and resolved promptly.
Reversal of ITC: In cases where the input tax credit needs to be reversed (e.g.,
non-payment to suppliers within 180 days or certain blocked credits), ensure that
these reversals are documented correctly in the register.
Maintenance of Records: GST law requires businesses to maintain records,
including the ITC Register, for a specified period (usually six years). Ensure that
you keep these records in a secure and accessible manner.
Software and Automation: Many businesses use accounting software that can
automate the calculation and maintenance of the ITC Register, reducing the risk
of manual errors.
I. Regular Reconciliation: Regularly reconcile the ITC Register with your
financial books and GST returns to identify and rectify any discrepancies.
II. Compliance with GST Rules: Stay informed about changes in GST rules and
regulations to ensure that your ITC Register aligns with current requirements.
III. Professional Guidance: For complex transactions or situations, consider seeking
advice from tax professionals or chartered accountants to ensure accurate
recording of ITC.
2. Output Tax Liability Register:
An Output Tax Liability Register is a crucial component of the Goods and
Services Tax (GST) compliance system in India. It is a record maintained by businesses
that are registered under the GST regime. The purpose of the Output Tax Liability
Register is to track and document the GST collected from customers on the sale of goods
and services. This register is essential for accurate tax reporting and compliance with
GST laws. Here's what you need to know about the Output Tax Liability Register:
Key Components of an Output Tax Liability Register:
GSTIN (Goods and Services Tax Identification Number): The GSTIN of the
registered business should be prominently mentioned in the Output Tax Liability
Register.
Customer Details: Record the details of the customers, including their GSTIN (if
applicable), legal name, and address, for each transaction.
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Unit-V Input Tax Credit – Allowable/Reversal
Invoice Details: For each sale transaction, record the following invoice details:
o Invoice number and date
o Description of goods or services
o Value of goods or services
o GST rate and amount (both CGST and SGST/IGST)
o Total invoice value
Total GST Collected: Calculate and maintain a running total of the GST
collected from customers during the tax period.
GST Rate Breakdown: Record the GST amounts separately for Central Goods
and Services Tax (CGST) and State/Union Territory Goods and Services Tax
(SGST/UTGST) or Integrated Goods and Services Tax (IGST) based on the
nature of the transaction (intra-state or inter-state).
Important Considerations for the Output Tax Liability Register:
Accurate Record-Keeping: It's crucial to maintain accurate and up-to-date
records in the Output Tax Liability Register to ensure compliance with GST
regulations and facilitate tax reporting.
Matching with GSTR-1: The data in the Output Tax Liability Register should
align with the details reported in your GSTR-1 return. Discrepancies should be
addressed and rectified promptly.
Reconciliation: Regularly reconcile the entries in the register with your financial
books to identify and rectify any discrepancies.
Maintenance of Records: GST law requires businesses to maintain records,
including the Output Tax Liability Register, for a specified period (usually six
years). Ensure that you keep these records in a secure and accessible manner.
Software and Automation: Many businesses use accounting software that can
automate the calculation and maintenance of the Output Tax Liability Register,
reducing the risk of manual errors.
Compliance with GST Rules: Stay informed about changes in GST rules and
regulations to ensure that your Output Tax Liability Register aligns with current
requirements.

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Unit-V Input Tax Credit – Allowable/Reversal
Professional Guidance: For complex transactions or situations, consider seeking
advice from tax professionals or chartered accountants to ensure accurate
recording of output tax liability.
3. GST Payment Register:
A GST Payment Register is a financial record maintained by businesses
registered under the Goods and Services Tax (GST) system in India. It is used to track
and document GST payments made to the government. Under GST, registered
businesses are required to collect GST from their customers and subsequently remit it
to the government. The GST Payment Register helps businesses ensure accurate and
timely payment of their tax liabilities. Here's what you need to know about the GST
Payment Register:
Key Components of a GST Payment Register:
GSTIN (Goods and Services Tax Identification Number): The GSTIN of the
registered business should be prominently mentioned in the GST Payment
Register.
Payment Details: Record the details of each GST payment made to the
government. This includes the following information:
o Payment date
o Payment mode (e.g., online transfer, check, electronic cash ledger)
o GSTIN of the tax authority to which the payment is made (Central or
State/Union Territory)
Tax Liability Breakdown: Specify the breakdown of the GST payments into
Central Goods and Services Tax (CGST), State/Union Territory Goods and
Services Tax (SGST/UTGST), and Integrated Goods and Services Tax (IGST),
based on the nature of the transaction (intra-state or inter-state).
Payment Reference: Include a reference or payment acknowledgment number
provided by the tax authority for each payment made. This helps in tracking and
reconciliation.
Total GST Payments: Maintain a running total of the total GST payments made
during the tax period.

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Unit-V Input Tax Credit – Allowable/Reversal
Important Considerations for the GST Payment Register:
Accuracy and Timeliness: Ensure that the information recorded in the GST
Payment Register is accurate, and payments are made on time to avoid penalties
and interest charges.
Matching with Tax Returns: The data in the GST Payment Register should align
with the details reported in your GST returns, such as GSTR-3B and GSTR-1.
Any discrepancies should be investigated and rectified promptly.
Reconciliation: Regularly reconcile the entries in the register with your financial
books to identify and rectify any discrepancies.
Maintenance of Records: GST law requires businesses to maintain records,
including the GST Payment Register, for a specified period (usually six years).
Ensure that you keep these records in a secure and accessible manner.
Software and Automation: Many businesses use accounting software that can
automate the calculation and maintenance of the GST Payment Register,
reducing the risk of manual errors.
Compliance with GST Rules: Stay informed about changes in GST rules and
regulations to ensure that your GST Payment Register aligns with current
requirements.
Professional Guidance: For complex transactions or situations, consider seeking
advice from tax professionals or chartered accountants to ensure accurate
recording of GST payments.
4. E-Way Bills and Transport Documents:
E-way bills and transport documents are essential components of the Goods and
Services Tax (GST) system in India, particularly for the movement of goods. They serve
as proof of the legal and compliant transportation of goods from one location to another.
Here's an overview of e-way bills and transport documents:
E-Way Bills:
Definition: An e-way bill is an electronically generated document required for
the movement of goods valued at over a specified threshold (which can vary by
state) under the GST regime. It contains information about the consignment,
supplier, recipient, and the vehicle transporting the goods.
Generation: E-way bills can be generated through the official GST portal
(www.ewaybillgst.gov.in) or via compatible third-party systems. Registered
taxpayers and transporters are responsible for generating e-way bills.
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Unit-V Input Tax Credit – Allowable/Reversal
Information: An e-way bill typically includes the following information:
o GSTIN of the supplier and recipient
o Invoice or bill of supply number and date
o Description of the goods
o Quantity and unit of measurement
o Value of the goods
o Place of delivery
o Vehicle details (if applicable)
Validity: E-way bills have different validity periods depending on the distance
to be covered:
o For distances up to 100 kilometre's, it's valid for one day.
o For distances between 100 kilometre's and 300 kilometre’s, it's valid for
three days.
o For distances exceeding 300 kilometre’s, it's valid for five days.
Transporter Responsibility: Transporters must carry a copy of the e-way bill
during the transportation of goods and present it for inspection if required by
authorities.
Compliance: E-way bills are crucial for compliance with GST regulations and
are checked by tax authorities during transit. Non-compliance can result in
penalties.
Transport Documents:
Definition: Transport documents are records or forms that provide details about
the shipment, transportation, and receipt of goods. They may include traditional
paper documents like the bill of lading, consignment note, or delivery challan.
Contents: The content of a transport document can vary but typically includes
the following information:
o Names and addresses of the sender and receiver
o Description of the goods
o Quantity, weight, and packaging details
o Mode of transport (road, rail, air, sea, etc.)
o Vehicle or vessel information
o Date and place of dispatch
o Date and place of delivery

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Unit-V Input Tax Credit – Allowable/Reversal
Purpose: Transport documents serve as evidence of the shipment, ensuring that
the goods reach their intended destination and that the recipient can verify the
details of the consignment.
Legal Importance: In addition to supporting the transportation process, transport
documents are legally significant in cases of disputes, insurance claims, and for
customs and regulatory compliance.
Varieties: Different types of transport documents are used depending on the
mode of transportation. For example, a bill of lading is commonly used in
maritime transport, while a consignment note is often used for road transport.
Compliance: Accurate and complete transport documents are essential for legal
compliance, risk management, and smooth logistics operations.
5. Debit and Credit Notes Register:
A Debit Notes and Credit Notes Register is an important financial record
maintained by businesses to track debit and credit notes issued or received during
transactions. These notes are used to adjust invoices and financial records when there
are changes or corrections needed in the original transaction amounts. Here's what you
need to know about the Debit and Credit Notes Register:
Debit Notes:
Definition: A debit note is a document issued by a seller to a buyer to request
additional payment. It is typically used in cases where the original invoice
amount was understated, or there are additional charges to be added to the
invoice.
Contents of a Debit Note: A debit note typically includes the following
information:
o Date of issue
o Seller's and buyer's details
o Reference to the original invoice
o Description of the reason for the debit
o Additional amount to be paid
o GST details (if applicable)
Purpose: Debit notes are used to rectify under billing or make adjustments for
additional charges that were not included in the original invoice.

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Credit Notes:
Definition: A credit note is a document issued by a seller to a buyer to provide a
credit or refund for an overpayment, returns, or other reasons for reducing the
invoice amount.
Contents of a Credit Note: A credit note typically includes the following
information:
o Date of issue
o Seller's and buyer's details
o Reference to the original invoice
o Description of the reason for the credit
o Amount to be credited or refunded
o GST details (if applicable)
Purpose: Credit notes are used to rectify overbilling, provide refunds for returned
goods, or make adjustments to reduce the invoice amount.
Debit and Credit Notes Register:
Maintenance: The Debit and Credit Notes Register is a ledger or logbook where
all issued and received debit and credit notes are recorded.
Transaction Details: Each entry in the register should contain the details of the
debit or credit note, including the date, reference to the original invoice, parties
involved, reason for the note, and the adjusted amount.
GST Implications: If applicable, GST details related to the debit or credit notes
should be recorded in the register to ensure compliance with GST regulations.
Reconciliation: Regularly reconcile the entries in the register with your financial
books and invoices to ensure that the adjustments are accurately reflected in your
accounts.
Audit and Compliance: Proper maintenance of the Debit and Credit Notes
Register is essential for auditing purposes and for demonstrating compliance
with financial regulations.
Dispute Resolution: Debit and credit notes serve as critical documentation in
cases of disputes or discrepancies in transactions.
Record Retention: Businesses should retain the Debit and Credit Notes Register
for a specified period, as required by financial and tax regulations (usually
several years).

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Automation: Many businesses use accounting software that can automate the
generation and recording of debit and credit notes, improving accuracy and
efficiency.
6. GST Returns and Acknowledgments:
Goods and Services Tax (GST) returns and acknowledgments are integral
components of the GST compliance system in India. Businesses registered under the
GST regime are required to file GST returns periodically to report their financial
transactions and tax liability. Here's an overview of GST returns and acknowledgments:
GST Returns:
Definition: GST returns are comprehensive statements that registered taxpayers
are required to file with the tax authorities, typically on a monthly or quarterly
basis. These returns contain details of their sales, purchases, output GST (tax
collected from customers), and input GST (tax paid on purchases).
Types of GST Returns: Several types of GST returns are applicable, depending
on the nature of the taxpayer's business and transaction types. Common types
include GSTR-1, GSTR-3B, and GSTR-4, among others.
Filing Frequency: The frequency of filing GST returns depends on the taxpayer's
turnover and the state in which they are registered. Monthly and quarterly return
filing options are available.
Contents of GST Returns: The contents of GST returns typically include:
o Details of outward supplies (sales) - GSTR-1
o Summary of inward and outward supplies, along with tax liability -
GSTR-3B
o Return for composition taxpayers - GSTR-4
o Annual return summarizing the entire year's transactions - GSTR-9
Filing Deadline: GST returns have specific due dates, and businesses must
ensure that they file their returns within the prescribed time frame to avoid
penalties and interest.
GSTIN: The Goods and Services Tax Identification Number (GSTIN) is a unique
identifier assigned to each registered taxpayer and must be provided when filing
returns.
Acknowledgments:
Definition: An acknowledgment is a document or confirmation received by
taxpayers after successfully filing their GST returns. It serves as proof of filing
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and is issued by the GSTN (Goods and Services Tax Network), the government's
IT platform for GST.
Generation: The acknowledgment is typically generated and made available for
download on the official GST portal (www.gst.gov.in) after a taxpayer
successfully files their GST return.
Contents of Acknowledgment: The acknowledgment includes essential
information such as the return filing period, the taxpayer's GSTIN, and a
confirmation of successful filing.
Importance: The acknowledgment serves as evidence of compliance with GST
return filing requirements. Taxpayers are advised to retain a copy of the
acknowledgment for their records.
Key Considerations for GST Returns and Acknowledgments:
Accuracy: Ensure that the information provided in the GST returns is accurate
and matches the financial records of the business.
Timely Filing: File GST returns well before the due date to avoid late filing
penalties and interest charges.
Reconciliation: Regularly reconcile the data in your GST returns with your
financial books and invoices to identify and rectify any discrepancies.
Record Retention: Maintain a record of the acknowledgments and filed GST
returns as part of your financial documentation.
Professional Guidance: Seek advice from tax professionals or chartered
accountants if you have complex transactions or need assistance with GST
compliance.
7. Records of Export and Import Transactions:
Records of export and import transactions are vital for businesses engaged in
international trade and are necessary for compliance with customs regulations, taxation,
and financial reporting. Proper documentation of these transactions helps ensure
transparency, accuracy, and adherence to legal requirements. Here are key aspects of
maintaining records of export and import transactions:
Export Transaction Records:
Export Declaration: Businesses must submit an export declaration to customs
authorities, providing details of the goods to be exported, their value, destination,
and other relevant information.

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Unit-V Input Tax Credit – Allowable/Reversal
Commercial Invoice: A commercial invoice serves as a legal document and
includes details of the goods, their value, terms of sale, shipping instructions,
and payment terms. It is a crucial record for accounting and taxation purposes.
Export License or Permit: Some goods require an export license or permit,
depending on their nature and destination. Records of these licenses or permits
should be maintained.
Shipping Documents: Shipping documents, such as bills of lading, airway bills,
or other transport-related documents, provide evidence of the shipment's
departure and are necessary for tracking and customs clearance.
Export Sales Contracts: Copies of export sales contracts should be retained.
These contracts outline the terms of the sale, including payment terms, delivery
obligations, and quality specifications.
Export Packing List: This document lists the contents of each package within a
shipment, aiding in customs inspection and inventory management.
Export License Records: If applicable, records of export licenses, including their
issuance and expiration dates, should be maintained.
Export Customs Declarations: Copies of export customs declarations submitted
to customs authorities should be retained, including any responses or
acknowledgments.
Import Transaction Records:
Import Declaration: Similar to export declarations, import declarations provide
details of the goods to be imported, their origin, value, and other relevant
information. These records are submitted to customs authorities.
Commercial Invoice: Importers receive commercial invoices from foreign
suppliers, which include details of the goods, their value, and payment terms.
These are essential for accounting and taxation purposes.
Bill of Entry: The bill of entry is submitted to customs authorities and contains
information about the imported goods, such as their classification, customs
valuation, and applicable duties and taxes.
Import License or Permit: Certain goods may require import licenses or permits.
Records of these permits, including issuance and expiration dates, should be
maintained.
Customs Duty Payment Records: Records of customs duties and taxes paid on
imported goods should be documented, including payment receipts and
transaction details.

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Unit-V Input Tax Credit – Allowable/Reversal
Import Clearance Documents: Documents related to the customs clearance
process, such as clearance certificates and release orders, should be retained.
Import Sales Contracts: Copies of import sales contracts should be maintained.
These contracts specify the terms of purchase, including payment terms, delivery
conditions, and quality requirements.
Import Shipping Documents: Shipping documents, such as bills of lading, are
crucial for verifying the receipt of goods and for inventory management.
Import Customs Declarations: Copies of import customs declarations submitted
to customs authorities, including any responses or acknowledgments, should be
kept as part of the import transaction records.
Record Retention: Businesses should adhere to regulatory requirements
regarding the retention of import and export transaction records, which often
require records to be kept for several years.
8. Records for Reverse Charge Mechanism (RCM):
Records for the Reverse Charge Mechanism (RCM) are essential for businesses
registered under the Goods and Services Tax (GST) system in India. RCM is a
mechanism where the liability to pay GST is shifted from the supplier to the recipient
of goods or services. Maintaining accurate records related to RCM is crucial for
compliance and audit purposes. Here's what you should include in your records for
RCM:
1. Supplier Details: Record the details of the supplier who provided goods or
services where RCM is applicable. Include the supplier's GSTIN, legal name,
and address.
2. Invoice Records: Maintain copies of invoices or bills received from the supplier
indicating the applicability of RCM. The invoices should include:
 Invoice number and date
 Description of goods or services
 Value of goods or services
 GST rate and amount (both CGST and SGST/IGST)
 Place of supply
 Supplier's GSTIN
3. Payment Records: Keep records of payments made to the supplier, indicating the
payment date, payment mode (e.g., bank transfer, check), and payment reference.

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Unit-V Input Tax Credit – Allowable/Reversal
4. RCM Calculation: Calculate the GST liability under RCM for each transaction.
This includes calculating the CGST and SGST/IGST amounts that need to be
paid.
5. ITC Reconciliation: If you are eligible to claim Input Tax Credit (ITC) on the
GST paid under RCM, maintain records of the ITC claimed. Ensure that you
reconcile your ITC claims with the GST returns.
6. GST Returns: Keep copies of GST returns filed, including GSTR-3B and GSTR-
1, which should reflect the GST liability under RCM.
7. Compliance Documentation: Maintain documentation related to compliance
with RCM provisions, including communication with the supplier regarding
RCM applicability and any compliance notices or acknowledgments received
from tax authorities.
8. Record Retention: Adhere to the record retention requirements specified in GST
regulations, which typically require businesses to retain records for a specified
period (usually six years).
9. Software and Automation: Many businesses use accounting software that can
automate the calculation and maintenance of RCM-related records, reducing the
risk of manual errors.
10. Professional Guidance: Seek advice from tax professionals or chartered
accountants to ensure accurate recording and compliance with RCM provisions,
especially for complex transactions or industries where RCM is prevalent.
9. Records of Exempted and Non-GST Supplies:
Maintaining records of exempted and non-GST supplies is crucial for businesses
registered under the Goods and Services Tax (GST) system in India. Proper
documentation of these supplies helps businesses accurately report their tax liability,
claim input tax credit (ITC), and demonstrate compliance with GST regulations. Here's
what you should include in your records for exempted and non-GST supplies:
1. Supplier and Customer Details: Record the details of both the supplier and the
customer involved in exempted and non-GST supplies. This includes their
GSTINs, legal names, and addresses.
2. Invoice Records: Maintain copies of invoices or bills for exempted and non-GST
supplies. These invoices should clearly indicate the nature of the supply and
whether it falls under the category of exempted or non-GST supply.
3. Description of Supplies: Clearly describe the goods or services supplied,
specifying whether they are exempted or non-GST supplies.

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4. Value of Supplies: Record the value of the supplies made, along with any
additional charges or discounts applied.
5. GST Liability Determination: Clearly document the reasons for classifying
supplies as exempted or non-GST. This may include reference to relevant GST
provisions, notifications, or circulars.
6. Exemption Notifications: Maintain copies of any government notifications or
circulars that specify the conditions or categories under which certain supplies
are exempted from GST.
7. ITC Reconciliation: If you are a recipient of exempted or non-GST supplies and
you are eligible to claim ITC on other taxable supplies, maintain records of your
ITC claims and reconciliations with GST returns.
8. Compliance Documentation: Maintain documentation related to compliance
with GST regulations for exempted and non-GST supplies, including any
communication with tax authorities regarding the classification of supplies.
9. Record Retention: Adhere to the record retention requirements specified in GST
regulations, which typically require businesses to retain records for a specified
period (usually six years).
10. Professional Guidance: Seek advice from tax professionals or chartered
accountants to ensure accurate recording and compliance with GST regulations,
especially for complex transactions or industries with specific exempted or non-
GST provisions.
11. Software and Automation: Many businesses use accounting software that can
help automate the recording and classification of exempted and non-GST
supplies, reducing the risk of manual errors.
12. Records of Advance Payments and Receipts: Record any advances received or
paid along with the corresponding GST implications.
13. Electronic Cash Ledger and ITC Ledger: Keep track of your Electronic Cash
Ledger and Input Tax Credit Ledger on the GST portal, which reflects your tax
balances and ITC availability.
14. Records of GST Audit: Prepare and maintain records necessary for GST audits,
including reconciliation statements and any other documents required by the
authorities.

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5.7 TYPES OF RETURNS AND THEIR IMPORTANCE
Various types of returns play a crucial role in facilitating tax compliance,
transparency, and the smooth flow of tax information between businesses and tax
authorities. Here are some of the key types of returns and their importance in GST:
5.7.1 GSTR-1 (Outward Supplies Return):
GSTR-1 (Outward Supplies Return) is one of the key GST return forms used by
registered taxpayers in India. It serves the purpose of reporting details of outward
supplies or sales made by a taxpayer to other registered taxpayers. GSTR-1 is a critical
component of the GST compliance framework and is filed on a monthly or quarterly
basis, depending on the taxpayer's turnover. Here are the key details and the importance
of GSTR-1:
Key Details in GSTR-1:
GSTIN: The Goods and Services Tax Identification Number (GSTIN) of the
taxpayer, which is a unique identifier.
Legal Name: The legal name of the taxpayer as registered under GST.
Reporting Period: The specific month or quarter for which the return is being
filed.
Invoice Details: GSTR-1 requires the reporting of individual invoice-level
details for each outward supply. These details include:
o Invoice number and date
o Customer's GSTIN (if registered)
o Customer's legal name
o Place of supply
o Description of goods or services
o HSN (Harmonized System of Nomenclature) or SAC (Services
Accounting Code) code
o Taxable value
o Tax rates (CGST, SGST/UTGST, IGST)
o GST amount (both CGST and SGST/UTGST or IGST)
B2B and B2C Supplies: GSTR-1 differentiates between supplies made to
registered (B2B) and unregistered (B2C) customers.

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Unit-V Input Tax Credit – Allowable/Reversal
Exports and Deemed Exports: Exports and deemed exports are reported
separately in GSTR-1.
Amendments: Any amendments or modifications to previously reported invoices
are also to be included in GSTR-1, ensuring accurate and up-to-date information.
Importance of GSTR-1:
Calculation of Tax Liability: GSTR-1 is essential for calculating the tax liability
of the supplier. It provides the details needed to determine the amount of GST to
be paid to the government.
Input Tax Credit (ITC) Reconciliation: Recipients of goods or services use the
data from GSTR-1 to reconcile and claim ITC. Accurate and timely filing of
GSTR-1 by suppliers is crucial for their customers to claim ITC correctly.
Invoice Matching: GSTR-1 data is used for invoice matching by the GSTN
(Goods and Services Tax Network). It ensures that the input tax claimed by the
recipient matches the output tax declared by the supplier, promoting
transparency and compliance.
Compliance and Audit: GSTR-1 serves as a vital record of a taxpayer's sales
transactions. It is used for audit purposes and during tax assessments by tax
authorities.
Transparency: GSTR-1 filing enhances transparency in the GST system, as it
provides a detailed account of a taxpayer's sales to other registered entities.
Taxpayer Accountability: Timely and accurate filing of GSTR-1 ensures that
taxpayers fulfill their compliance obligations, reducing the risk of penalties and
interest charges.
Data Availability: The information in GSTR-1 is used for data analytics and
policy formulation by the government.
5.7.2 GSTR-3B (Monthly Summary Return):
GSTR-3B (Monthly Summary Return) is a critical GST return form used by
registered taxpayers in India to summarize their monthly tax liabilities and ITC (Input
Tax Credit) claims. Unlike GSTR-1, which provides detailed invoice-level information,
GSTR-3B offers a simplified summary of the tax liabilities and credits. Here are the key
details and the importance of GSTR-3B:

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Unit-V Input Tax Credit – Allowable/Reversal
Key Details in GSTR-3B:
GSTIN: The Goods and Services Tax Identification Number (GSTIN) of the
taxpayer.
Legal Name: The legal name of the taxpayer as registered under GST.
Reporting Period: The specific month for which the return is being filed.
Summary of Tax Liability: GSTR-3B requires taxpayers to summarize their tax
liability for different types of GST:
o Outward supplies (both taxable and exempted)
o Inward supplies on which reverse charge is applicable
o Integrated GST (IGST), Central GST (CGST), State GST (SGST), and
Union Territory GST (UTGST) liabilities
Input Tax Credit (ITC): Taxpayers need to report the ITC they are eligible to
claim for the month. This includes ITC on purchases and expenses related to
business activities.
Payment of Tax: Taxpayers are required to calculate the net tax liability (tax
payable or refundable) by subtracting the total ITC from the total tax liability.
The payment of GST for the month is made based on this calculation.
Late Fees and Interest: In case of delayed filing, late fees and interest may be
applicable, and taxpayers must report and pay these charges, if applicable.
Importance of GSTR-3B:
Monthly Compliance: GSTR-3B ensures that taxpayers meet their monthly GST
compliance obligations, including the payment of taxes.
Simplified Reporting: Unlike GSTR-1, which requires detailed invoice-level
data, GSTR-3B provides a more straightforward summary of transactions. This
simplification streamlines the filing process.
Payment of GST: GSTR-3B facilitates the calculation and payment of GST
liabilities for the month, ensuring that businesses fulfill their tax obligations on
time.
ITC Reconciliation: The ITC claimed in GSTR-3B can be reconciled with the
purchase invoices and GSTR-2A, ensuring that businesses are correctly claiming
eligible credits.

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Unit-V Input Tax Credit – Allowable/Reversal
Transparency: GSTR-3B provides a clear snapshot of a taxpayer's monthly tax
transactions, which can be useful for both businesses and tax authorities.
Audit and Assessment: Tax authorities use GSTR-3B data for tax audit and
assessment purposes. Accurate and timely filing is essential to avoid scrutiny
and penalties.
Input Tax Credit: Timely filing of GSTR-3B helps businesses maximize their
ITC claims and reduce the overall tax liability.
Compliance with Due Dates: Filing GSTR-3B by the due date is crucial to avoid
late fees and interest charges.
Data for Policy Making: The data from GSTR-3B is used by the government for
policy formulation, revenue collection, and data analytics.
5.7.3 GSTR-2A and GSTR-2B (Auto-populated Purchase Returns):
GSTR-2A and GSTR-2B are auto-populated GST return forms that provide
important purchase-related information to registered taxpayers in India. These forms
are crucial for recipients of goods and services as they help in reconciling input tax
credit (ITC) claims and ensure accurate compliance with GST regulations. Here's an
overview of GSTR-2A and GSTR-2B:
1. GSTR-2A (Auto-populated Purchase Return):
Importance: GSTR-2A is an automatically generated purchase return that
contains details of all the inward supplies (goods and services) received by a
registered taxpayer. These details are auto-populated from the GSTR-1 returns
filed by the taxpayer's suppliers.
Information Included: GSTR-2A includes information such as:
o Supplier's GSTIN
o Supplier's legal name
o Invoice numbers and dates
o Invoice-wise taxable value
o GST amount (CGST, SGST/UTGST, and IGST)
o Place of supply
Reconciliation: Recipients use GSTR-2A to reconcile the data with their own
purchase records and to verify whether the input tax credit (ITC) claimed aligns
with the supplies they've received.
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ITC Claim: Accurate reconciliation helps in correctly claiming ITC on eligible
purchases while avoiding discrepancies that might lead to notices or penalties
from the tax authorities.
2. GSTR-2B (Auto-populated Purchase Return - Optional):
Importance: GSTR-2B is another auto-populated purchase return, but it is not
generated by default. Taxpayers can voluntarily download GSTR-2B from the
GST portal.
Information Included: GSTR-2B includes information similar to GSTR-2A, but
it provides additional features and benefits. It offers a summary of input tax
credit available, and it categorizes supplies into different sections, such as
"Eligible ITC" and "Ineligible ITC."
Reconciliation: GSTR-2B is beneficial for recipients as it aids in reconciling
their ITC claims more efficiently. By categorizing supplies, taxpayers can
quickly identify eligible and ineligible ITC.
Planning and Decision-Making: Businesses can use GSTR-2B to make informed
decisions regarding ITC utilization and to ensure compliance.
Optional Download: Taxpayers have the option to download GSTR-2B if they
find it useful for their reconciliation and compliance processes.
Importance of GSTR-2A and GSTR-2B:
ITC Reconciliation: Both GSTR-2A and GSTR-2B are crucial for reconciling
the ITC claimed with the purchases made. This reconciliation ensures accurate
reporting and compliance with GST regulations.
Data Accuracy: These forms help in cross-verifying the details provided by
suppliers with the recipient's records, reducing the risk of errors and
discrepancies.
Efficiency: GSTR-2A and GSTR-2B simplify the process of verifying and
reconciling ITC, saving time and effort for taxpayers.
Compliance: Accurate reconciliation and ITC claims help businesses comply
with GST laws and avoid penalties or audits.
Decision-Making: GSTR-2B, in particular, provides insights into eligible and
ineligible ITC, aiding in informed decision-making regarding tax planning and
utilization of ITC.
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Optional Download: While GSTR-2A is auto-generated, GSTR-2B offers
additional features and is available for optional download, allowing businesses
to use it as per their needs.
5.7.4 GSTR-4 (Composition Scheme Return):
GSTR-4 is a GST return form used by taxpayers who have opted for the
Composition Scheme under the Goods and Services Tax (GST) regime in India. The
Composition Scheme is designed for small businesses with an annual aggregate
turnover up to a specified limit. These businesses are subject to a lower GST rate and
have simplified compliance requirements. Here's an overview of GSTR-4 and its
importance:
Key Details in GSTR-4:
GSTIN: The Goods and Services Tax Identification Number (GSTIN) of the
taxpayer.
Legal Name: The legal name of the taxpayer as registered under GST.
Reporting Period: GSTR-4 is filed on a quarterly basis, covering the entire
quarter.
Aggregate Turnover: The taxpayer is required to declare their aggregate turnover
for the quarter in this return. If the aggregate turnover exceeds the specified
threshold, the taxpayer may become ineligible for the Composition Scheme.
Details of Outward Supplies: GSTR-4 requires the taxpayer to provide summary
details of outward supplies made during the quarter. This includes:
o Details of taxable supplies made
o Details of exempt supplies made
o Details of supplies made to composition taxable persons (if any)
Tax Liability: The taxpayer calculates the GST liability for the quarter based on
the prescribed GST rate and the supplies made during the quarter.
Payment of Tax: The tax liability calculated is paid by the taxpayer through the
cash ledger. Unlike regular taxpayers, composition scheme taxpayers do not
have the option to claim Input Tax Credit (ITC).

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Unit-V Input Tax Credit – Allowable/Reversal
Importance of GSTR-4:
Simplified Compliance: GSTR-4 is designed to simplify GST compliance for
small businesses by reducing the frequency of returns (quarterly instead of
monthly) and by providing a straightforward format.
Lower Tax Liability: Taxpayers under the Composition Scheme are subject to
lower GST rates. GSTR-4 helps in calculating and paying the reduced tax
liability.
Eligibility Assessment: By reporting their aggregate turnover in GSTR-4,
taxpayers can assess their eligibility to continue under the Composition Scheme.
If the turnover exceeds the threshold, they may need to switch to regular GST
compliance.
Transparency: GSTR-4 provides a clear summary of the taxpayer's supplies and
tax liability for the quarter, promoting transparency in tax reporting.
Timely Filing: Timely filing of GSTR-4 is essential to avoid penalties and
maintain compliance with the Composition Scheme provisions.
Cash Ledger Usage: Taxpayers under the Composition Scheme use the cash
ledger to pay their GST liability, as they cannot claim ITC. GSTR-4 facilitates
this payment process.
Support for Small Businesses: The Composition Scheme is designed to provide
relief to small businesses by reducing the compliance burden and offering a
simplified tax structure. GSTR-4 is an integral part of this support system.
5.7.5 GSTR-9 (Annual Return):
GSTR-9 is an important annual return under the Goods and Services Tax (GST)
system in India. It is filed by registered taxpayers on an annual basis to provide a
comprehensive summary of their GST transactions for a particular financial year. Here's
an overview of GSTR-9 and its significance:
Key Details in GSTR-9:
GSTIN: The Goods and Services Tax Identification Number (GSTIN) of the
taxpayer.
Legal Name: The legal name of the taxpayer as registered under GST.
Financial Year: GSTR-9 covers the entire financial year, and taxpayers are
required to report data for that year.
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Unit-V Input Tax Credit – Allowable/Reversal
Aggregate Turnover: The taxpayer declares their aggregate turnover for the
financial year.
Details of Outward and Inward Supplies: GSTR-9 requires taxpayers to provide
a summary of their outward supplies (sales) and inward supplies (purchases) for
the financial year. These details include:
o Supplies subject to GST
o Supplies exempt from GST
o Supplies to unregistered persons
o Supplies through e-commerce operators
o Input tax credit (ITC) claimed during the year
o ITC reversed and ineligible ITC
o Any other adjustments
Details of Tax Paid: Taxpayers need to report the total amount of GST paid
under various heads, including CGST, SGST/UTGST, and IGST, for the
financial year.
Late Fees and Interest: If there are any late fees or interest payable, taxpayers
are required to report and pay them as well.
Importance of GSTR-9:
Annual Reconciliation: GSTR-9 serves as an annual reconciliation statement that
allows taxpayers to cross-verify the data reported in their monthly or quarterly
returns (GSTR-1, GSTR-3B) with the annual summary.
Compliance Verification: Tax authorities use GSTR-9 to verify the accuracy and
completeness of a taxpayer's GST returns for the financial year. Discrepancies
can lead to scrutiny and potential audits.
Input Tax Credit Reconciliation: GSTR-9 helps taxpayers reconcile the ITC
claimed during the year with their actual purchases and expenses, ensuring that
ITC claims are accurate.
Transparency: By providing a comprehensive summary of GST transactions,
GSTR-9 promotes transparency in tax reporting.
Legal Requirement: GSTR-9 is a mandatory filing requirement for all registered
taxpayers under GST. Failure to file it can lead to penalties and notices from tax
authorities.
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Unit-V Input Tax Credit – Allowable/Reversal
Data for Policy and Analysis: The data from GSTR-9 is used by the government
for policy formulation, data analysis, and revenue collection purposes.
Business Records: GSTR-9 serves as an important record of a taxpayer's GST
transactions for the entire financial year, helping in maintaining financial
records.
Eligibility Assessment: GSTR-9 allows taxpayers to assess their eligibility for
various GST provisions, such as the Composition Scheme or opting for the
Annual Return option.
Audit Trail: GSTR-9 provides an audit trail for tax authorities to trace the flow
of GST transactions from suppliers to recipients.
Taxpayer Self-assessment: Taxpayers can use GSTR-9 to self-assess their GST
compliance, identify errors or discrepancies, and rectify them before they are
detected during tax audits.
5.7.6 GSTR-9C (GST Audit Reconciliation Statement):
GSTR-9C is a GST Audit Reconciliation Statement that taxpayers in India are
required to file under the Goods and Services Tax (GST) regime. GSTR-9C is a
comprehensive reconciliation document that is filed by certain taxpayers who meet
specific turnover thresholds. Here's an overview of GSTR-9C and its significance:
Key Details in GSTR-9C:
GSTIN: The Goods and Services Tax Identification Number (GSTIN) of the
taxpayer.
Legal Name: The legal name of the taxpayer as registered under GST.
Financial Year: GSTR-9C covers the entire financial year for which the audit is
being conducted.
Audit by Chartered Accountant or Cost Accountant: GSTR-9C must be certified
and audited by a Chartered Accountant (CA) or a Cost Accountant. The auditor
certifies that the taxpayer's annual return (GSTR-9) matches the audited financial
statements.
Reconciliation of GSTR-9 with Audited Financial Statements: The primary
purpose of GSTR-9C is to reconcile the figures reported in the annual GST return
(GSTR-9) with the audited financial statements of the taxpayer. This

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reconciliation ensures that there are no material discrepancies between the two
sets of data.
Audit Findings and Recommendations: GSTR-9C includes findings,
observations, and recommendations made by the auditor during the course of the
audit. These findings may relate to compliance with GST laws, tax liabilities,
and other relevant matters.
Supplementary GST Liability: If any discrepancies are identified during the
reconciliation, taxpayers are required to rectify them in the subsequent returns
and pay any additional tax liability, interest, or penalties, if applicable.
Importance of GSTR-9C:
Audit Compliance: GSTR-9C ensures that taxpayers subject to GST audits
comply with the statutory requirement of having their GST records audited by a
qualified professional.
Reconciliation: The reconciliation process in GSTR-9C helps identify
discrepancies between the GST returns and the financial statements. This ensures
the accuracy of tax reporting.
Taxpayer Accountability: The auditor's findings and recommendations provide
insights into the taxpayer's compliance with GST laws and help identify areas of
improvement.
Dispute Resolution: GSTR-9C can assist in resolving disputes or discrepancies
with tax authorities by providing an independently audited reconciliation
statement.
Corrective Action: If any discrepancies are identified during the audit, taxpayers
can take corrective action by amending their returns and paying any additional
tax, interest, or penalties.
Statutory Requirement: For taxpayers with an annual aggregate turnover above
the prescribed threshold, filing GSTR-9C is a legal requirement under the GST
law.
Transparency: GSTR-9C promotes transparency by independently verifying the
accuracy of GST reporting and financial statements.

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Support for Tax Authorities: Tax authorities may use GSTR-9C findings as a
basis for conducting further investigations or audits if discrepancies or non-
compliance are detected.
5.7.7 GSTR-6 (Input Service Distributor Return):
GSTR-6 is a GST return form used by Input Service Distributors (ISDs) in India
under the Goods and Services Tax (GST) regime. An ISD is an entity that receives
invoices for input services and distributes the Input Tax Credit (ITC) to its branches or
units that make taxable supplies. GSTR-6 is used to report and declare the distribution
of ITC to these branches or units. Here's an overview of GSTR-6 and its significance:
Key Details in GSTR-6:
GSTIN: The Goods and Services Tax Identification Number (GSTIN) of the
Input Service Distributor (ISD).
Legal Name: The legal name of the ISD as registered under GST.
Reporting Period: GSTR-6 is filed on a monthly basis, covering the entire
month.
Details of Input Services: ISDs are required to provide details of invoices for
input services received during the reporting period. This includes:
o Invoice numbers and dates
o Supplier's GSTIN
o Supplier's legal name
o Input services received and their corresponding HSN (Harmonized
System of Nomenclature) or SAC (Services Accounting Code) codes
Taxable value and tax amount (both CGST and SGST/UTGST or IGST)
Details of Distribution: ISDs need to declare the distribution of ITC to their
branches or units. This includes the recipient's GSTIN, legal name, and the
amount of ITC distributed for each GSTIN.
Debit/Credit Notes: Any debit or credit notes related to input services during the
reporting period are to be reported.
Late Fees and Interest: If there are any late fees or interest payable, ISDs are
required to report and pay them, if applicable.

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Importance of GSTR-6:
Input Service Distribution: GSTR-6 is the mechanism through which ISDs
distribute ITC to their branches or units, ensuring that the credit is utilized for
further taxable supplies.
Compliance: Timely filing of GSTR-6 is essential for ISDs to comply with GST
laws. Failure to file can result in penalties.
Correct ITC Distribution: GSTR-6 helps ISDs ensure that the ITC is correctly
distributed among the recipient branches or units based on their taxable supplies.
Transparency: GSTR-6 provides transparency in the distribution of ITC, helping
tax authorities monitor and verify the flow of credits.
Audit and Assessment: Tax authorities may use GSTR-6 data for audit and
assessment purposes to verify the accuracy of ITC distribution.
ITC Reconciliation: Recipient branches or units can use GSTR-6 data to
reconcile the ITC received with the information provided by the ISD.
Legal Requirement: For ISDs, filing GSTR-6 is a legal requirement under the
GST law.
Support for Tax Authorities: GSTR-6 data assists tax authorities in tracking ITC
distribution and ensuring compliance by ISDs.
Minimizing Tax Liability: Effective ITC distribution helps reduce the overall tax
liability of recipient branches or units, enhancing the efficiency of their
operations.
5.7.8 GSTR-8 (TCS Return):
GSTR-8 is a GST return form used by e-commerce operators in India who collect
Tax Collected at Source (TCS) on certain supplies made through their platforms. It is a
statement that provides details of the supplies and the TCS collected by the e-commerce
operator from suppliers who use their platform. Here's an overview of GSTR-8 and its
significance:
Key Details in GSTR-8:
GSTIN: The Goods and Services Tax Identification Number (GSTIN) of the e-
commerce operator.
Legal Name: The legal name of the e-commerce operator as registered under
GST.
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Reporting Period: GSTR-8 is filed on a monthly basis, covering the entire
month.
Details of Supplies: E-commerce operators are required to provide details of
supplies made through their platform. This includes:
o Supplier's GSTIN
o Supplier's legal name
o Invoice numbers and dates
o Description of goods or services supplied
o Taxable value of supplies
o Tax rates (CGST, SGST/UTGST, and IGST)
o TCS amount collected on behalf of the supplier
TCS Amount: GSTR-8 reports the total amount of TCS collected during the
reporting period.
Late Fees and Interest: If there are any late fees or interest payable, e-commerce
operators are required to report and pay them, if applicable.
Importance of GSTR-8:
TCS Reporting: GSTR-8 is the mechanism through which e-commerce operators
report and remit the TCS collected on behalf of suppliers who use their platform.
Compliance: Timely and accurate filing of GSTR-8 is essential for e-commerce
operators to comply with GST laws. Failure to file can result in penalties.
Transparency: GSTR-8 provides transparency in the TCS collection process,
helping tax authorities monitor and verify the collection of taxes by e-commerce
operators.
Audit and Assessment: Tax authorities may use GSTR-8 data for audit and
assessment purposes to verify the accuracy of TCS collection and remittance.
Supplier Credits: The TCS collected is credited to the respective supplier's
electronic cash ledger, and suppliers can claim it as a credit against their GST
liability.
Tax Reconciliation: Suppliers can reconcile the TCS collected by e-commerce
operators with their own records to ensure proper accounting.
Legal Requirement: For e-commerce operators, filing GSTR-8 is a legal
requirement under the GST law.
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Support for Tax Authorities: GSTR-8 data assists tax authorities in tracking TCS
collections, ensuring compliance by e-commerce operators, and facilitating
revenue collection.
5.7.9 GSTR-10 (Final Return):
GSTR-10, also known as the Final Return, is a GST return form filed by
taxpayers in India when their GST registration is cancelled or surrendered. It is a one-
time return that summarizes the final details of the taxpayer's financial transactions
related to GST. Here's an overview of GSTR-10 and its significance:
Key Details in GSTR-10:
GSTIN: The Goods and Services Tax Identification Number (GSTIN) of the
taxpayer whose registration is cancelled.
Legal Name: The legal name of the taxpayer as registered under GST.
Reporting Period: GSTR-10 covers the period from the date of registration
cancellation until the date of cancellation.
Details of Stock Held: Taxpayers are required to provide details of stock held on
the date of cancellation. This includes:
o Description of goods
o HSN (Harmonized System of Nomenclature) code or SAC (Services
Accounting Code)
o Quantity
o Value
Liabilities and Refunds: GSTR-10 includes details of any outstanding tax
liabilities, including interest and penalties, as well as any refunds claimed.
Taxpayers are required to pay any outstanding liabilities before filing the return.
ITC Reversal: Taxpayers must reverse any Input Tax Credit (ITC) that is not
eligible for refund or carried forward. This includes ITC related to capital goods.
Details of Advances: Any advances received but not accounted for in previous
returns are to be reported in GSTR-10.
Late Fees and Interest: If there are any late fees or interest payable, taxpayers
are required to report and pay them, if applicable.

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Importance of GSTR-10:
Closure of GST Registration: GSTR-10 is the final step in the closure of a GST
registration when a taxpayer ceases to carry out taxable activities or surrenders
their registration.
Compliance: Filing GSTR-10 is essential to comply with GST regulations and
to inform tax authorities about the cessation of business operations.
Stock Declaration: Taxpayers must declare the stock held at the time of
registration cancellation to account for any tax liability or refunds related to the
remaining stock.
Liabilities Settlement: GSTR-10 helps taxpayers settle any outstanding tax
liabilities, interest, or penalties before closing their GST registration.
ITC Reversal: It ensures that any unutilized ITC is reversed and not carried
forward, as it may not be eligible for a refund.
Audit and Assessment: Tax authorities may use GSTR-10 data for audit and
assessment purposes to verify the accuracy of the final return and the closure of
the GST registration.
Legal Requirement: Filing GSTR-10 is a legal requirement under the GST law
for taxpayers who cancel their registration.
Transparency: GSTR-10 provides transparency in the process of closing a GST
registration and ensures that all financial transactions are accounted for.
Support for Tax Authorities: GSTR-10 data assists tax authorities in closing the
records of cancelled registrations and ensuring that taxpayers fulfill their
obligations.
5.7.10 GSTR-11 (Unique Identification Number Return):
GSTR-11 is a return form used in India for the reporting of inward supplies
received by a person having a Unique Identification Number (UIN) under the Goods
and Services Tax (GST) system. UIN is issued to foreign diplomatic missions and
international organizations that are not liable to pay GST but are eligible to claim
refunds for taxes paid on their purchases. GSTR-11 helps these entities report and claim
refunds for the taxes paid on their inward supplies. Here's an overview of GSTR-11 and
its significance:

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Key Details in GSTR-11:
GSTIN/UIN: The Goods and Services Tax Identification Number (GSTIN) or
Unique Identification Number (UIN) of the entity having UIN.
Legal Name: The legal name of the entity as registered under GST.
Reporting Period: GSTR-11 is filed on a monthly basis, covering the entire
month.
Details of Inward Supplies: The return form requires the reporting of details of
inward supplies received during the reporting period. This includes:
o Supplier's GSTIN (if applicable)
o Supplier's legal name (if applicable)
o Invoice numbers and dates
o Description of goods or services received
o Taxable value
o GST amount (IGST)
Refund Claim: GSTR-11 allows the entity to claim refunds for the GST paid on
the inward supplies. The refund claimed is based on the eligible taxes paid on
purchases.
Late Fees and Interest: If there are any late fees or interest payable, the entity is
required to report and pay them, if applicable.
Importance of GSTR-11:
Refund Claim: GSTR-11 is used to claim refunds for the GST paid on inward
supplies by entities with UINs. It helps them recover the taxes paid on their
purchases.
Compliance: Timely and accurate filing of GSTR-11 is essential for entities with
UINs to comply with GST regulations and claim eligible refunds.
Transparency: GSTR-11 provides transparency in reporting and claiming
refunds for UIN holders, helping tax authorities monitor and verify refund
claims.
Audit and Verification: Tax authorities may use GSTR-11 data for audit and
verification purposes to ensure that UIN holders are eligible for the claimed
refunds.

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Legal Requirement: Filing GSTR-11 is a legal requirement under the GST law
for entities with UINs.
Support for Tax Authorities: GSTR-11 data assists tax authorities in processing
refund claims, reconciling inward supplies, and ensuring that UIN holders
receive the eligible refunds.
Reconciliation: Entities with UINs can reconcile the inward supplies reported in
GSTR-11 with their purchase records to ensure accuracy in refund claims.
1. Review in GST:
This review can be conducted by the taxpayer internally or by tax authorities,
including the GST department. Here are some key aspects of the review process in GST:
Self-Review (Internal Review):
 Reconciliation: Registered taxpayers often conduct regular reviews to reconcile
their GST-related data, including sales and purchases, with their accounting
records. This helps ensure that the data reported in GST returns (such as GSTR-
1, GSTR-3B) is accurate and matches their financial records.
 Compliance Check: Businesses may perform compliance checks to ensure that
they are meeting all GST compliance requirements, such as filing returns on
time, maintaining proper records, and correctly calculating and remitting GST
liabilities.
 Input Tax Credit (ITC) Reconciliation: A crucial part of the review process
involves reconciling the Input Tax Credit (ITC) claimed with the purchases
made. This helps identify any discrepancies and rectify them before filing
returns.
 Review of Exemptions and Special Provisions: Some businesses may be eligible
for exemptions or special provisions under GST. They need to review and ensure
they are correctly availing these benefits.
GST Department Review (Tax Audit):
 Scrutiny and Audits: Tax authorities can conduct scrutiny or audit of a taxpayer's
GST records and transactions. This review is often more thorough and can lead
to further investigations if discrepancies are found.

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 Verification of Returns: Tax authorities may verify the details provided in GST
returns, including GSTR-1, GSTR-3B, GSTR-9, and GSTR-9C, to check for any
inconsistencies or underreporting.
 Refund Review: In cases where taxpayers claim refunds, the tax department may
review the refund application, invoices, and supporting documents to verify the
eligibility of the refund.
 Input Tax Credit (ITC) Verification: Tax authorities may verify the ITC claimed
by taxpayers by matching it with the details provided by their suppliers in their
GSTR-1 and GSTR-2A returns.
 Penalties and Consequences:
o Non-compliance with GST regulations or discrepancies found during a
review can lead to penalties, fines, and legal consequences.
o Tax authorities can take enforcement actions, including the initiation of
recovery proceedings for unpaid taxes, if they find irregularities during a
review.
2. Appeal in GST:
Appeals are part of the legal recourse available to taxpayers to address disputes
related to GST. Here's an overview of the process for filing appeals in GST:
Types of Appeals in GST:
 First Appeal (Appellate Authority): Taxpayers can file a first appeal against
decisions or orders issued by lower-level GST officers. The first appeal is
typically heard by the First Appellate Authority, who is an officer appointed by
the GST department. This authority has the power to review and modify orders
passed by lower-level officers.
 Second Appeal (Appellate Tribunal): If a taxpayer is not satisfied with the
decision of the First Appellate Authority, they can file a second appeal before
the GST Appellate Tribunal. The Appellate Tribunal is an independent body that
reviews and decides on appeals related to GST disputes. It consists of judicial
and technical members.
 Third Appeal (High Court): If either the taxpayer or the GST department is not
satisfied with the decision of the Appellate Tribunal, they can file a third appeal

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before the High Court. The High Court has jurisdiction to hear appeals related to
substantial questions of law.
 Fourth Appeal (Supreme Court): In cases where a party is not satisfied with the
decision of the High Court, they can file a fourth appeal before the Supreme
Court of India. The Supreme Court has the highest authority to review and decide
on GST-related matters.
Process for Filing an Appeal in GST:
 Drafting the Appeal: The taxpayer, or their authorized representative, must draft
the appeal carefully, specifying the grounds for the appeal and providing all
relevant facts and evidence to support their case.
 Payment of Dues: In some cases, taxpayers may be required to pay a part of the
disputed tax amount before filing an appeal. This is known as a pre-deposit.
Failure to make this pre-deposit can lead to the appeal being dismissed.
 Submission of Appeal: The appeal, along with all supporting documents, must
be submitted to the appropriate authority within the prescribed time frame. The
appeal should be filed online through the GST portal or in physical form, as
specified.
 Appeal Hearing: After the appeal is filed, it will be assigned to the respective
appellate authority or tribunal. The appellant may need to attend hearings,
present their case, and provide additional documents or evidence as required.
 Decision: The appellate authority or tribunal will review the case, consider the
arguments and evidence presented, and issue a decision. This decision may
uphold, modify, or reverse the original order.
 Further Appeals: Depending on the outcome, further appeals may be filed at
higher levels, as explained above.
 Time Limits for Filing Appeals: It's crucial for taxpayers to adhere to the
prescribed time limits for filing appeals. The time limits vary depending on the
type of appeal and the authority to which it is being filed. Failing to meet these
time limits can result in the appeal being dismissed.

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3. Closure of GST Registration in India
Closure of Goods and Services Tax (GST) registration in India is a crucial step
for businesses that are no longer required to be registered under GST. It is essential to
follow the prescribed procedure to avoid any legal or compliance issues. This guide will
provide you with a comprehensive overview of the process and important
considerations for the closure of GST registration.
1. Reasons for Closure:
 Businesses may consider closing their GST registration for various reasons,
including:
o Discontinuation of the business.
o Transfer, amalgamation, or demerger of the business.
o Change in the nature of the business that no longer requires GST
registration.
o If the turnover falls below the threshold limit (currently INR 20 lakhs for
most states).
2. Voluntary vs. Compulsory Closure:
 Voluntary Closure: A business can apply for voluntary closure if it meets the
criteria mentioned above. Voluntary closure can be initiated by the taxpayer.
 Compulsory Closure: GST authorities can compulsorily cancel a GST
registration if they find any non-compliance, evasion, or other irregularities. In
such cases, the taxpayer is usually provided with an opportunity to respond
before cancellation.
3. Procedure for Closure:
The process for the closure of GST registration involves the following steps:
 Step 1: Apply for Closure:
o Log in to the GST portal (www.gst.gov.in).
o Navigate to the 'Services' tab and select 'Application for Cancellation of
Registration.'
o Fill out the required details in Form GST REG-16.
o Attach the necessary documents, such as a business closure certificate or
other relevant documents.
o Submit the application.

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 Step 2: Verification:
o GST authorities may conduct a verification to ensure all liabilities have
been cleared.
o They may also conduct an audit or inspection if necessary.
 Step 3: Order for Closure:
o If the authorities are satisfied with the application and verification, they
will issue an order for the closure of GST registration in Form GST REG-
19.
o If not satisfied, they may issue a notice seeking clarification or additional
information.
 Step 4: Surrender of GST Certificate:
o The taxpayer should surrender their GST registration certificate to the
authorities within seven days of receiving the closure order.
 Step 5: Final Return:
o The taxpayer must file a final GST return in Form GSTR-10 within three
months from the date of closure.
o This return should include details of any outstanding liabilities.
4. Outstanding Liabilities:
 It's essential to clear all outstanding tax liabilities, interest, penalties, and any
other dues before applying for GST registration closure. Failure to do so can lead
to complications and legal consequences.
5. Implications of Closure:
 After closure, the taxpayer is no longer required to collect or remit GST on their
supplies.
 They cannot claim Input Tax Credit (ITC) after the closure date.
 Any assets and liabilities of the business should be settled accordingly.
6. Post-Closure Compliance:
 Maintain all records and documents related to the business for the period
specified under the GST law (usually 72 months).
 Be prepared for possible audits or inquiries by tax authorities for a certain period
after closure.
7. Seek Professional Assistance:
 Considering the legal and financial implications, it is advisable to consult with a
tax professional or legal expert when closing a GST registration.
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