Procedural Compliance under GST: formula sheet

Key formulas

General threshold, section 22(1)

Register if aggregate turnover in a financial year > ₹20,00,000

Applies to suppliers in States other than special category States. The test is 'exceeds', so turnover of exactly ₹20 lakh does not trigger registration.

Special category State threshold

Register if aggregate turnover in a financial year > ₹10,00,000

First proviso to section 22(1). The Explanation defines special category States as those in article 279A(4)(g) of the Constitution, except the State of Jammu and Kashmir and the States of Arunachal Pradesh, Assam, Himachal Pradesh, Meghalaya, Sikkim and Uttarakhand. The Government may enhance the ₹10 lakh limit up to ₹20 lakh only at the request of a special category State and on the Council's recommendation, on notified conditions and limitations.

Goods-only suppliers

Limit may be enhanced from ₹20 lakh to a notified amount not exceeding ₹40 lakh

Only if the State requests, the Council recommends and the supplier is exclusively in goods. It operates through notification, with conditions.

Aggregate turnover

All supplies by the person, on own account and on behalf of all principals

Explanation (i) to section 22. A registered job worker's post-job-work supply of goods is excluded (Explanation (ii)).

Transfer of business, section 22(3)

Transferee liable to register from date of transfer or succession

Applies where a registered taxable person's business is transferred as a going concern.

Amalgamation or demerger, section 22(4)

Transferee liable from the date the Registrar of Companies issues the certificate of incorporation

Applies to a scheme sanctioned by a High Court or Tribunal.

Cancellation by officer, section 29(2)

Grounds: contravention of prescribed provisions; composition person not filing annual return beyond three months of due date; non-filing of returns for prescribed continuous period; voluntary registrant not commencing business within six months; fraud, wilful misstatement or suppression

The officer may cancel from any date, including a retrospective date, but only after giving an opportunity of being heard.

Effect of cancellation

Pay higher of ITC on stock and capital goods, or output tax on those goods

Section 29(5), paid by debit in the electronic credit or cash ledger, calculated as prescribed. For capital goods, the ITC is reduced by prescribed percentage points, or tax on transaction value under section 15, whichever is higher. Section 29(3): past liabilities continue.

Credit note (section 34(1))

Issued by supplier when: taxable value or tax charged > amount payable, OR goods returned, OR deficiency in goods or services

Issued by the supplier, to the recipient. It reduces the tax liability of the supplier. The recipient must reverse the credit accordingly.

Credit note time limit (section 34(2))

Declare in return of month of issue, but not later than 30 November following the end of the financial year of supply, or date of annual return, whichever is earlier

The limit is linked to the year of the original supply, not the year of the note.

Credit note proviso

No reduction in output tax if incidence of tax and interest has been passed on to any other person

This is the unjust enrichment safeguard. Quote it in answers on refusal of adjustment.

Debit note (section 34(3))

Issued by supplier when: taxable value or tax charged < taxable value or tax payable

The word is 'shall'. A debit note is compulsory in this case. A supplementary invoice counts as a debit note.

Debit note declaration (section 34(4))

Declare in return for the month in which the debit note is issued

Tax liability is adjusted as prescribed. It increases the supplier's liability.

ITC condition on documents (section 16(2)(a))

Recipient must hold a tax invoice or debit note issued by a registered supplier, or other prescribed tax paying document

A credit note is not a document for claiming credit. It leads to reversal.

ITC time limit (section 16(4))

No credit after 30 November following the end of the financial year of the invoice or debit note, or annual return, whichever is earlier

Link this to debit notes in answers on late credit.

Section 35(1): what to account for

Production/manufacture + inward and outward supplies + stock + ITC availed + output tax payable and paid + prescribed particulars

Accounts must be true and correct, kept at the principal place of business.

Multiple places of business

Accounts of each place of business kept at that place

Applies where the registration certificate specifies more than one place.

Section 35(2): warehouse and transporter records

Owner/operator of warehouse or godown and every transporter: records of consigner, consignee and other details of goods

Applies whether registered or not.

Section 36: retention period

72 months from the due date of furnishing the annual return for the relevant year

Extended in case of appeal, revision, proceedings or Chapter XIX investigation: one year after final disposal, or the 72 months, whichever is later.

Section 65(3): audit notice

Notice not less than 15 working days before audit

Given in the prescribed manner.

Section 65(4): audit duration

3 months from commencement; extendable by up to 6 months more by the Commissioner for reasons recorded in writing

Commencement is the later of the date records called for are made available and the actual institution of audit at the place of business.

Section 65(6): audit findings

Inform the registered person within 30 days of conclusion of audit

Findings, rights and obligations and reasons must be communicated.

Section 71(2): production of records

Within 15 working days of demand, or further period allowed

Records include trial balance, audited accounts, cost audit report and income-tax audit report where applicable.

Late fee: outward supplies and returns (section 47(1))

₹100 per day of default, maximum ₹5,000

Applies to failure to furnish details under section 37, or returns under section 39, section 45 or section 52, by the due date. Shown in the Act text as ₹100 a day; check notified reductions for the exam year.

Late fee: annual return (section 47(2))

₹100 per day, maximum 0.25% of turnover in the State or Union territory

Applies to failure to furnish the annual return under section 44 by the due date. The cap is a quarter per cent of turnover in the State or Union territory.

Conditions for ITC (section 16(2))

Tax invoice or debit note + supplier has furnished details and they are communicated + goods or services received + not restricted under section 38 + tax actually paid to Government + return under section 39 furnished

All conditions must be met together.

Time limit for claiming ITC (section 16(4))

Earlier of: 30 November following the end of the financial year of the invoice or debit note, OR furnishing of the annual return

Credit cannot be taken after this date.

Non-payment to supplier within 180 days (section 16(2) second proviso)

Pay value plus tax to supplier within 180 days of invoice date, else pay back the ITC with interest under section 50

Does not apply to supplies on reverse charge. Credit can be re-availed on payment.

Assessment of non-filers (section 62)

Order within 5 years from the annual return due date for that financial year; withdrawn if valid return filed within 60 days of service

A further 60 days is allowed on an additional late fee of ₹100 per day beyond 60 days. Interest and late fee still continue.

Time limit for refund claim (s 54(1))

Application before the expiry of 2 years from the relevant date

Count from the relevant date, not from the date of supply. Missing it ends the claim.

Time limit for notified bodies (s 54(2))

2 years from the last day of the quarter in which the inward supply was received

Applies to UN agencies, embassies, consulates and other notified persons.

Order on refund (s 54(7))

Order within 60 days from receipt of application complete in all respects

The clock starts only when the application is complete.

Provisional refund (s 54(6))

Provisional refund = 90% of the amount claimed (zero-rated supply claims)

Final order follows after verification. Not available to categories notified by the Government.

Unincorporated evidence threshold (s 54(4))

Claim below ₹2,00,000: a declaration of non-passing of incidence is enough

At ₹2,00,000 or more, documentary evidence is needed.

Minimum refund (s 54(14))

No refund under s 54(5) or (6) if amount < ₹1,000

This is a floor on payment, not on filing.

Interest on late payment (general approach)

Interest = Tax unpaid × rate % × days of delay ÷ 365

Use the rate given in the question. The rate is prescribed by notification, so do not rely on memory.

Withholding of refund (s 54(10))

Refund may be withheld or set off against unpaid dues

Applies where return is defaulted or tax, interest or penalty is unpaid beyond the last date for filing an appeal.

Self-assessment

Section 59: every registered person self-assesses tax and files a return for each tax period under section 39

The starting point of all GST assessment.

Scrutiny of returns

Section 61: notice of discrepancies, explanation, then action if no satisfactory explanation within 30 days or such further period as the officer permits

The 30 days run from being informed by the proper officer. Action may be under section 65, 66 or 67, or determination under section 73, 74 or 74A.

Provisional assessment order

Section 60(1): order within 90 days from receipt of the written request

Needs reasons for being unable to determine value or rate.

Provisional assessment safeguards

Section 60(2): bond with surety or security; section 60(3): final order within 6 months of the order

Extension: Joint or Additional Commissioner up to a further 6 months; Commissioner for a further period up to 4 years, on sufficient cause with reasons recorded.

Interest on provisional assessment

Section 60(4): interest at the section 50(1) rate from the first day after the due date till actual payment

Payable whether payment is made before or after the final order.

Inspection

Section 67(1): officer not below Joint Commissioner has reasons to believe; authorises another central tax officer in writing

Covers taxable persons, transporters, and owners or operators of warehouses or godowns.

Search and seizure

Section 67(2): reasons to believe goods liable to confiscation or useful documents are secreted; written authorisation

Where seizure is impracticable, a prohibitory order not to remove or deal with goods may be served.

Return of documents and goods

Section 67(3): documents not relied on returned within 30 days of notice; section 67(7): goods returned if no notice within 6 months

The 6 months may be extended by the proper officer up to a further 6 months on sufficient cause.

Arrest

Section 69(1): Commissioner has reasons to believe; authorises a central tax officer by order

Applies to offences in section 132(1)(a) to (d) punishable under clause (i) or (ii) of section 132(1), or section 132(2). Section 69(2): inform grounds and produce before a Magistrate within 24 hours for offences under section 132(5).

Minor breach test

Breach is minor if tax involved < ₹5,000

Section 126(1), Explanation (a). Exactly ₹5,000 is not less than ₹5,000, so it is not a minor breach under this test.

Easily rectifiable omission

Easily rectifiable = error apparent on the face of record

Section 126(1), Explanation (b). The mistake must also be without fraudulent intent or gross negligence.

Proportionality

Penalty ∝ degree and severity of breach, depending on facts of each case

Section 126(2).

Hearing

No penalty without an opportunity of being heard

Section 126(3).

Speaking order

Order must specify nature of breach + applicable law, regulation or procedure

Section 126(4).

Voluntary disclosure

Disclosure before discovery by officer → may be a mitigating factor

Section 126(5). Discretionary, not a right to waiver.

Exclusion

Section 126 does not apply if penalty is a fixed sum or a fixed percentage

Section 126(6).

General penalty

Contravention with no separate penalty: up to ₹25,000

Section 125. Section 126 discipline applies to such penalty, since it is a maximum, not a fixed sum.

Who may be rated

Every registered person may be assigned a GST compliance rating score by the Government (section 149(1))

Basis is the person's record of compliance with the Act. The word is 'may', so it is an enabling power.

Parameters

Score may be determined on such parameters as may be prescribed (section 149(2))

The Act does not list the parameters. Do not invent them; say they are prescribed.

Updating, intimation and publication

Score may be updated at periodic intervals, intimated to the registered person and placed in the public domain in the prescribed manner (section 149(3))

Three actions: update, intimate, publish.

Quick revision

• Section 20 of the IGST Act applies the CGST procedures to integrated tax, mutatis mutandis.
• Under IGST, tax deducted at source is at two per cent from the payment to the supplier.
• A credit note may be issued where tax invoice value or tax exceeds what is payable, goods are returned, or supply is deficient.
• A credit note must be declared in the return for the month of issue, not later than 30 November following the financial year of the supply, or the annual return date, whichever is earlier.
• No reduction in output tax by credit note is allowed if the tax and interest incidence has been passed on to another person.
• A debit note is required where the invoice shows less than the correct taxable value or tax; it includes a supplementary invoice.
• Cash ledger is credited by deposits; credit ledger by self-assessed input tax credit.
• Credit ledger may be used only for output tax, not for interest, penalty or fees.
• Integrated tax credit is used first for integrated tax, then central tax, then State or Union territory tax.
• Central tax credit cannot pay State or Union territory tax, and State or Union territory tax credit cannot pay central tax.
• Dues are discharged in order: earlier-period self-assessed dues, current-period self-assessed dues, then other amounts.
• Under Section 126, a breach is minor if the tax involved is below ₹5,000, and no penalty can be imposed without a hearing.

Common mistakes

• Registering at exactly ₹20 lakh turnover Fix: Section 22 says 'exceeds'. Turnover must be more than the limit.
• Counting only own supplies in aggregate turnover Fix: Include supplies made on behalf of all principals, as the Explanation states.
• Saying a supplier may issue a debit note when the invoice undercharged tax. Fix: Remember section 34(1) says 'may' for credit notes and section 34(3) says 'shall' for debit notes.
• Applying the 30 November limit to the financial year in which the credit note is issued. Fix: The limit is counted from the end of the financial year in which the original supply was made.
• Counting the 72 months from the end of the financial year or the date of filing. Fix: Start from the due date of furnishing the annual return for the year of the records, as Section 36 says.
• Saying all accounts must be kept only at the principal place of business. Fix: Where the certificate specifies more than one place, accounts of each place are kept at that place.
• Treating GSTR-1 and GSTR-3B as the same return. Fix: GSTR-1 gives invoice-wise outward supply details under section 37. GSTR-3B is the summary return under section 39 where tax is paid and credit is claimed.
• Applying the ₹5,000 cap to the annual return. Fix: Section 47(2) caps the annual return late fee at 0.25% of turnover in the State or Union territory. The ₹5,000 cap is only for section 47(1).
• Counting the two years from the date of supply or invoice Fix: Always identify the relevant date from the Explanation to section 54. For export of goods by sea it is the date the ship leaves India.
• Claiming that all unutilised ITC is refundable Fix: Remember the two cases only: zero-rated supplies without payment of tax, and inverted duty structure. Also remember the drawback bar.

Exam tips

• Quote the section number and the word 'exceeds' in every threshold answer.
• Learn the section 22(3) and 22(4) dates separately; examiners like to test them side by side.
• For cancellation answers, give both sides: grounds under section 29(1) and 29(2), then the consequences in 29(3) and 29(5).
• Mention the hearing requirement every time cancellation or rejection of revocation is discussed.
• Where the question needs prescribed time limits or forms, say 'as prescribed' unless you are sure of the rule.
• Write section 34 in every answer on credit or debit notes. Examiners expect the section number.
• Learn the contrast: credit note 'may', debit note 'shall'. It is a favourite short question.
• Present the difference between credit note and debit note as a short list: trigger, who issues, effect on liability, time limit.