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TOTAL MARKETING SOLUTIONS

INDIA PRIVATE LIMITED


Review
© Economic Laws Practice 2017

April , 2018

1
Objectives
§ Identification of issues
Ø Review of sample transaction documents, Returns related working and identification of
areas/issues where there is non-compliance with GST provisions

§ Remedial Steps
Ø Providing suggestions as regards mitigating/remedying the non-compliance

• This review has been undertaken on the basis of transaction documents and details provided by TMS
representative i.e. Vistra Corporate Services (India) Pvt. Ltd.
• This review has been undertaken to ensure that going forward, all transaction documents of TMS as well as
the Returns filed are in compliance with provisions under GST law

2
Background
• Total Marketing Support India Private Limited (‘TMS’) is engaged in purchase and sale
of certain marketing products to Mondelez India Foods Private Limited (‘Mondelez’)
• The products are purchased from suppliers in Maharashtra and outside Maharashtra,
and, in turn sold to Mondelez
• Transaction pattern being followed:
• Supply by supplier to TMS
• Supplier’s invoice mentions TMS, Mumbai as “bill to” location and Mondelez depot where the
goods are to be delivered as “ship to” location
• Goods are delivered by TMS’ supplier at its factory gate to ‘star logistics’, a transporter engaged
by Mondelez
• Supply by TMS to Mondelez
• TMS raises the invoice on Mondelez, Mumbai and shows Mondelez depot where goods are to be
delivered as per Mondelez’s instructions as its “ship to” location

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REVIEW

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Review

§ Review undertaken in relation to the following:


Ø Outward supplies
Ø Inward supplies
Ø Filing of Returns

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Tax position to be followed for outward supply
transactions
Transaction Place of supply Nature of supply Time of supply
type and tax to be
charged
Supply by TMS to § It is necessary to determine place of supply to ascertain the nature of As the location of The time of supply determines
when the GST liability arises
Mondelez where transaction and tax to be charged supplier (i.e. TMS) and and when consequential
the goods are sent § As per Section 10(1)(b) of IGST Act, where goods are delivered by place of supply (i.e. compliance are carried out.
For example, where the goods
to Mondelez supplier to any other person (than recipient) on direction of a third Mondelez office) is are removed for movement on
depot within person, before or during the movement of goods, it is deemed that within the same State, it 15th April 2018, invoice will
have to be issued on or before
Maharashtra the third person has received the goods and place of supply would be is intra-State transaction 15th April 2018 and time of
principal place of business of such third person supply would be such date (
i.e date of invoice or date of
§ Under GST, Mondelez Maharashtra and Mondelez depot location in SGST+ CGST to be removal, whichever is earlier)
other States would be treated as distinct persons and will be required charged
Tax will be payable in the
to have different GST registrations return to be filed for the
§ As on the basis of PO raised by Mondelez, Mumbai the goods are month in which time of supply
becomes applicables
delivered to Mondelez depot in Maharashtra or outside
Maharashtra, the place of supply would be Mondelez, Mumbai

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Tax position to be followed for outward supply
transactions
Transaction type Place of supply Nature of supply and tax to be Time of supply
charged
Supply by TMS to § Mondelez Mumbai, as per provisions mentioned As the location of supplier (i.e. TMS) and As mentioned above, time
Mondelez where above place of supply (i.e. Mondelez office) is of supply would be Earliest
goods are sent to within the same State, it is intra-State of the following :
Mondelez depot transaction Date of issue of invoice; or
outside Maharashtra
SGST+ CGST to be charged Last date on which invoice
should be issued i.e. at the
time of removal of goods
for supply to receipient; or

Date on which supplier


receives payment

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Outward supply
No. Comment
1 The nature of tax payable is
CSGT+SGST as the transaction is an
intra-State transaction
2
2 Invoice should be generated before or
at the time of removal of goods, which
in the present case is the time at which
goods are delivered by TMS’ supplier
to ‘star logistics’. Accordingly, when
‘star logistics’ issues letter of receipt of
goods, TMS should raise its invoice
3 The invoice shall be signed or digitally
signed by TMS or its authorized
representative
3 1

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Outward supply
Nature of tax
• TMS has wrongly charged IGST instead of SGST + CGST on invoices raised in
July-September 2017 for supply to Mondelez
• We understand that with effect from 1 st October 2017, TMS has not raised yet
raised any invoices for supply to Mondelez
• We understand that GSTR-3B has been filed only for the month of July 2017
and payment of tax has been made to the Government
• Accordingly from 1 st August 2017 onwards, TMS has not filed returns or paid
output tax liability eventhough same might have been collected from
Mondelez

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Outward supply
Nature of tax
§ In relation to invoices raised by TMS, following remedial measures should be taken:
Ø TMS to raise a debit note on Mondelez for charging the SGST + CGST liability in respect
of the invoice
Ø TMS to raise a credit note on Mondelez for reducing the IGST liability in respect of the
invoice
§ Details of such debit notes and credit notes will have to be shown in column 9 of GSTR-1
return of TMS for the month in which such credit notes and debit notes are issued
Ø The details of credit notes and debit notes will have to be reflected latest by the due date for
filing the return for September 2018
§ Details to be shown in credit note/debit note are mentioned at slide ___
A Credit Note under Section 34(1) of the CGST Act, 2017, is required to be issued by a registered person when a tax invoice has been
issued for supply of any goods or services or both and the taxable value or tax charged in that tax invoice is found to exceed the taxable
value or tax payable in respect of such supply, or where the goods supplied are returned by the recipient, or where goods or services
or both supplied are found to be deficient
A Debit Note (as per under Section 34(3) of the CGST Act), is required to be issued by the supplier when a tax invoice has been issued
for supply of any goods or services or both and the taxable value or tax charged in that tax invoice is found to be less than the taxable
value or tax payable in respect of such supply.
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Outward supply
§ The impact of credit note and debit note will have to be given in the GSTR-3B
of the month in which such credit note and debit note are raised
Ø Such payment will have to be made along with interest @18% p.a. from the date on
which tax should have been paid i.e. from the due date for filing of return of such supply

§ Mondelez will also have to revise the ITC details against the invoices
corresponding to which credit notes and debit notes have been issued

Once the credit mis-match system becomes functional, the process of adjustment of output tax liability by
raising of credit note and debit note will become more tedious

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Outward supply
§ In respect of outward supply, TMS has erroneously paid additional
IGST for the month of July
Ø TMS can claim refund of such excess payment by filing refund claim
• Refund of the said amount by filing a refund claim under GST RFD 01 as per
Rule 89(1) of CGST Rules, for excess payment of tax
• As per Annexure 1 to Form GST RFD 01, the tax period, application reference
no. of return, date of filing of return and tax payable have to be specified

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Inward supply

No. Comment
1 Place of supply for TMS’ suppliers would be principal place of business of TMS i.e. TMS, Mumbai
In this case, since supplier is showing place of supply as per Mondelez depot where goods are to be delivered, where the supplier and
Mondelez depot are in same State, SGST + CGST would have been charged, therefore, wrong credit would have been taken by TMS where
the supplier is located outside Maharashtra
2 As per Rule 46 of CGST Rules, where place of supply and place of delivery are different, address of delivery should be mentioned
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Inward supply
§ Where supplier has shown incorrect place of supply, TMS will not be able to
claim input tax credit
§ When the credit mis-match system becomes functional, the GST portal will
not allow TMS to take input tax credit where incorrect place of supply has
been entered by the supplier
§ Presently, in cases where supplier and Mondelez depot are in the same State,
supplier would have charged SGST + CGST instead of IGST. Following measures
should be taken:
Ø Supplier to raise a debit note on TMS for charging the IGST liability in respect of the
invoice
Ø Supplier to raise a credit note on TMS for reducing the SGST+ CGST liability in respect of
the invoice
§ TMS will have to reverse it’s input tax credit towards SGST+CGST and take
input tax credit towards IGST
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Input tax credit - TRAN-1 filed by TMS
S. No Nature of credit Observation
1 Transitional credit – • Dispute may arise regarding the excess credit of May 2017
Credit balance in Maharashtra VAT return carried forward in TRAN-1 balance but not shown in June
(under Section 140(1) of SGST) 2017 MVAT return as the provision under GST allowed carry
forward of excess credit as available in the last MVAT return
• Balance carried forward in TRAN-1 is INR
86,49,505 • Following credits have not been transitioned
• Closing balance as per June 2017 MVAT Ø Credit balance as per April 2017 return – INR 1,302
return is INR 83,19,909 Ø From the MVAT returns for 2017-18, it is observed that
• Difference of INR 3,29,596 pertains to excess credit balance of previous month is not carried
balance of May 2017 not brought forward in next month’s return
forward in June 2017 - Credit balance (if any available) as per March 2017
return/Audit report not carried forward
- Section 50(2) of MVAT allows carry forward of excess
credit balance upto INR 5 lakhs in next financial year

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REVERSE CHARGE MECHANISM

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Reverse charge mechanism
§ In relation to expenses made by TMS, for certain transactions, TMS
may be required to pay GST under reverse charge
Ø Inward supply of certain nature of services where the Government has
specifically notified that tax has to be paid under reverse charge (eg. Legal
services, sponsorship services etc.)
Ø Inward supply of services or goods for unregistered person
• Liability to pay upto 12 th October 2017
• With effect from 13 th October 2017 to 30 th June 2018, operation of this
provision has been deferred (Notification No. 38/2017 of the CGST
(Rate) Notification dated 13 th October, 2017)

17
GST Returns
Period GSTR-3B along with GSTR-1 Penalty for delay in filing
payment Taxpayers with annual GSTR – 3B GSTR – 1
aggregate turnover more (INR 50/day) (INR 50/day)
than Rs 1.5 Crore
July 2017 25th August 2017 10th January 2018 X √
August 2017 20th September 2017 10th January 2018 X √
September 2017 20th October 2017 10th January 2018 X √
October 2017 20th November 2017 10th January 2018 √ √
November 2017 20th December 2017 10th January 2018 √ √
December 2017 22th January 2018 10th February 2018 √ √
January 2018 20th February 2018 10th March 2018 √ √
February 2018 20th March 2018 10th April 2018 √ √
March 2018 20th April 2018 10th May 2018 √ √
April 2018 20th May 2018 31st May 2018 √ √
May 2018 20th June 2018 10th June 2018 √ √
June 2018 20th July 2018 10th July 2018 √ √
Maximum penalty can be INR 10,000 per return (Section 46) 18
GST Returns of TMS – status
§ GSTR – 3B for the months of July 2017- September 2017 is being filed in April 2018

§ For delay in payment of tax and filing of return interest at 18% P.A. will have to be paid by
TMS from due date for filing return for each month till the date of payment

§ We understand that for the month of July 2017, GST portal was showing the tax liability after
giving effect to transitional credit,
Ø the same should not have been utilized for payment of July 2017, considering that TRAN-1 has been filed on
27th December 2017
Ø Accordingly, interest would be applicable on the entire GST liability i.e. tax payable after utilizing credit
availed in the month of July 2017 (amount paid in cash + TRAN-1 credit utilized for payment of tax)

§ Till date GSTR-1 has not been filed for any month, hence the same will have to be filed along
with late fee

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COMPLIANCE

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Systems overview – revenue booking

PO raised by Mondelez on TMS

TMS supplier uploads letter issued by


Star logistics on TMS system, which is
reviewed by job manager and bill
ready instructions are given once
entire quantity in PO is delivered by
Invoice generated based on suppliers to Star logistics
entry in lockit system –
generated once “bill ready”
instructions are received from
job manager

2
Systems overview – expenses/ procurements

Lockit
system Generation
Raising of PO
of PO
on vendor

Supplier issues invoice


to TMS and delivers
the goods to Star
logistics

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System compliance
§ We understand that at present, TMS is not raising its invoice at the time of
removal of goods (i.e. when goods are delivered by TMS’ supplier to star
logistics)
Ø Invoices are raised once all supplies against a particular Mondelez PO are delivered by
TMS’ suppliers to star logistics, and, the same are approved by job manager and marked
as “bill ready”
Ø This is not in compliance with Section 31 of CGST Act, and, TMS should equip its system
to raise invoices at the time of removal of goods by TMS’ supplier to star logistics

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Purchase order of TMS

S.No Comments
1 Always ensure GSTIN of TMS Mumbai is mentioned on PO
2 Details of previous laws (such as VAT No.) should be removed

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Purchase order of Mondelez

S.No Comments
1 GSTIN of Mondelez Mumbai should be mentioned as TMS is raising bill on Mondelez Mumbai
2 Mondelez is raising its PO on TMS Delhi whereas all invoices are issued on Mondelez by TMS
Mumbai and revenue is also booked under TMS Mumbai, hence Mondelez should be
instructed to raise its PO on TMS Mumbai

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MUMBAI NEW DELHI AHMEDABAD
109 A, 1st Floor 801 A, 8th Floor 801, 8th Floor
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Mumbai 400 021 Nr. Minto Bridge Ahmedabad 380 006
T: +91 22 6636 7000 New Delhi 110 002 T: +91 79 6605 4480/1
F: +91 22 6636 7172 T: +91 11 4354 8400 F: +91 79 6605 4482
© Economic Laws Practice 2017

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Credit Note/ Debit Note requirements
§ Debit Note/ Credit note is raised as per Section 34 read with Rule 53 of the CGST Rules, 2017 and the
respective State Rules. The particulars that are required in a Debit Note are:
a) name, address and GSTIN of the supplier;
b) nature of the document;
c) a consecutive serial number not exceeding sixteen characters, in one or multiple series, containing
alphabets or numerals or special characters -hyphen or dash and slash symbolised as “-” and
“/”respectively,, and any combination thereof, unique for a financial year;
d) date of issue of the document;
e) name, address and GSTIN or UIN, if registered, of the recipient;
f) name and address of the recipient and the address of delivery, along with the name of State and its
code, if such recipient is un-registered;
g) serial number and date of the corresponding tax invoice or, as the case may be, bill of supply;
h) value of taxable supply of goods or services, rate of tax and the amount of the tax credited or, as the
case may be, debited to the recipient; and
i) signature or digital signature of the supplier or his authorized representative

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Outward supply

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