India: Format Of Annual Return Notified, Changes In Form GST ITC-04, Rationalization Of Refund Formula, Key Clarifications On Principal-Agent Relationship And Refund Related Issues

Last Updated: 24 September 2018
Article by SKP  

Amendment to CGST Rules

The government vide Notification No. 39/2018 - Central Tax dated 4 September 2018 has made certain key amendments to the CGST Rules as mentioned below:

  • The format of GST annual return notified

    Our key preliminary observations in respect of the annual return are as given below:

    • Input Tax Credit (ITC) - To be trifurcated into ITC on inputs, capital goods and input services.
    • ITC of IGST availed on imported goods - To be reported along with IGST paid on imports.
    • HSN wise summary of inward supplies - Although GSTR 2 remains suspended, this needs to be disclosed separately in annual return.
    • Adjustments of any errors - Contrary to industry expectations, the annual return does not provide an option to adjust/amend any errors made at the time of filing periodical returns. Hence, it should be ensured that any pending adjustments/amendments on account of such mistakes are made in the return filing for September 2018, especially taking credit for the amounts remaining unavailed.
    • Credit notes - Only the credit notes declared (where GST is adjusted) through Table 9B of GSTR-1 have to be disclosed in the annual return.
    • Transactions related to previous financial year (i.e., July 2017 to March 2018 in this case) disclosed in returns for the period of April 2018 to September 2018 - This would have to be disclosed separately along with the differential tax paid on account of such disclosures.
  • Changes in GST ITC-04 - Goods dispatched to or received from a job worker

    Additional disclosures

    • Losses and wastages - The details of losses and wastages (if any) in the process of job work would be required to be furnished in GST ITC-04 from the period of July 2018 onwards.
    • Goods received from some other job-worker - The details of goods received back from job worker other than the job worker to whom such goods were originally sent.
    • Goods supplied from premises of job-worker - Goods sent to job worker and subsequently supplied from the premises of the job worker.

    Facility of multiple entries against a single challan

    Earlier, only a single entry of items was allowed against a unique challan number. Now, the facility of multiple entries of items against a single challan number would be allowed.

  • Relaxation in invoicing requirements to avail ITC Chapter VI of CGST Rules lays down a detailed list of particulars, which a tax invoice should contain. Furthermore, as per Rule 36(2), ITC can be availed in respect of a document only if details, as specified in Chapter VI, are contained in such a document. Now, a proviso has been inserted to provide that ITC can be availed if the relevant document contains the following particulars:

    • Amount of tax charged;
    • Description of goods/services;
    • Total value;
    • GSTIN of the supplier and recipient;
    • Place of supply in case of inter-state supply.
  • Change in definition of 'adjusted total turnover' for computing refund The definition of 'adjusted total turnover' to calculate the GST refund in case of refund of unutilized ITC in case of the service provider has been amended.

    Provision before amendment Provision after amendment Impact
    "Adjusted Total turnover" means the turnover in a state or a union territory, as defined under clause (112) of Section 2, excluding:
    1. The value of exempt supplies other than zero-rated supplies; and
    2. The turnover of supplies in respect of which refund is claimed under Subrules (4A) or (4B) or both, if any, during the relevant period.
    "Adjusted Total Turnover" means the sum total of the value of:
    1. The turnover in a state or a union territory, as defined under Clause (112) of Section 2, excluding the turnover of services; and
    2. Theturnover of zero-rated supply of services determined in terms of Clause (D) above and non-zero-rated supply of services, excluding:
      1. The value of exempt supplies other than zero-rated supplies; and
      2. The turnover of supplies in respect of which refund is claimed under Subrule (4A) or Subrule (4B) or both, if any, during the relevant period.
    In the adjusted total turnover formula,

    instead of turnover of services during the relevant period,

    zero-rated supply of services as per Clause 'D' (i.e., payments received in foreign exchange) will be considered to determine adjusted total turnover.


Total turnover in relevant period - INR 15,000

Turnover of export of services in the relevant period - INR 10,000

Remittance received in relevant period - INR 5,000

ITC - INR 2,000

Before amendment - Refund amount = (5000/15000)*2000 = 666.67

After amendment - Refund amount = [(5000/ (15000-10000+5000)]*2000 = 1,000

Clarifications issued through circulars

The government has issued various circulars to clarify certain key aspects of the GST law. Key points regarding the same have been encapsulated in the table below:

Circular reference Clarification issued
No. 57/31/2018-GST dated 4 September 2018 The principal-agent relationship in the context of entry in Schedule I of CGST Act, 2017
  • Under Schedule I of the CGST Act, 2017 activity of supply of goods between a principal and agent is to be treated as a 'supply' even if it is made without consideration.
  • Now, it has been clarified that the said entry refers only to a situation wherein, the invoice for further supply, i.e. supply from the agent to a third party is being raised by the agent in his name.
No. 59/33/2018-GST dated 4 September 2018 Refund related issues
  • Submission of GSTR-2A

    In case of refund claims concerning accumulated ITC, it has that the claimant should provide a printout of GSTR-2A for the relevant period. Also, it has further that the proper officer should not insist on submission of the invoices that under the said GSTR-2A. For the invoices not visible in GSTR-2A, the claimant is required to submit copies of invoices and statement in the prescribed format.
  • Rejection of refund claim on account of ineligibility

    In case of of refund claim on account of of the said credit, the rejected amount would be re-credited in the Electronic Credit Ledger (ECL) of the claimant. Subsequently, a demand notice would to the claimant for recovery of such ineligible ITC.
  • Rejection of refund claim on account of other reasons In case of of refund claim on account of other than eligibility of credit, the rejected amount would be re-credited in the ECL of the claimant, provided that the claimant gives an undertaking that he will not file an appeal against the said rejection order. In case he decides to file , the amount will be re-credited to the ECL when the said appeal against the claimant.
  • No refund in certain cases

    Rule 96(10) has been amended retrospectively by Notification No. 39/2018-Central Tax, dated 4 September 2018, to provide that taxpayers directly purchasing/importing supplies on which the benefit of reduced tax incidence or no tax incidence (e.g., Advance Authorization, Export Promotion Capital Goods scheme, etc.) under certain specified notifications has been availed, shall not be eligible for refund of integrated tax paid on export of goods or service. Furthermore, it has that such restriction would apply only to purchasers/importers who are availing benefit of notifications.

SKP Comments

  • The notified annual return format is broadly an aggregation of the disclosures made in the periodical returns, i.e., GSTR 1 and GSTR 3B. However, in view of certain additional requirements such as trifurcation of inputs, HSN summary of inward supplies, etc., it is advisable to begin preparation in advance to meet the annual return due date of 31 December 2018.
  • Earlier, the formula for adjusted total turnover was resulting in an anomaly whereby, the refund amount was getting restricted because of the numerator (remittance received) and the denominator (amount invoiced) not being comparable. The amendment has rectified this error, and going forward exporters should be eligible for the correct amount of refund of ITC.

The clarification provided in respect of the principal-agency relationship should substantially restrict the scope of entry under Schedule I of the CGST Act.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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