10 Year end Tax Planning Tips – A Guide for GSTPs

| Updated on: August 24, 2021

Year-end is always a crucial period for most businesses. Most businesses will undergo a time-crunch, primarily because they need to close the books of the current financial year, and prepare themselves to start afresh from the new financial year. However, March 31st, 2018 will be more hectic compared to previous year-ends which a business would have faced, because this is the first year end in the GST era. Needless to say, the role of a tax consultant, or a tax return preparer, will become all the more important – since apart from the usual year end practices, they will also need to guide their clients for a few additional things, as they help them to file the last returns and close the books of accounts. In this blog, we will attempt to list out 10 year end tax planning tips, you can tell your client, if you are a tax consultant.

10-year end tax planning tips for your clients

  • Books of Accounts – Books of Accounts should be finalized for two different periods – one pre-GST and one post-GST. Thus one finalization will be from the period 1st April, 2017 to 30th June, 2017, and another finalization will be from the period 1st July, 2017 to 31st March, 2018. Books of Accounts will thus need to be carefully closed.
  • Transitional Credit – The department is going to scrutinize all the cases of Transitional credits of old taxes paid in the previous tax regime, while migrating to the GST regime. The taxpayer who has claimed transitional credit, should ensure that the following activities are completed, as part of year end tax planning:
    • Maintain copy of 6 months returns - From Jan 2017 to June 2017
    • Maintain copy of GST TRAN 1 – while ensuring that the stock as per GST TRAN 1 is matching with the finalized books of accounts i.e. stock as on 30th June, 2017
    • Maintain certified copy of invoices with tax paid bills
    • Maintain certified copy of Stock Summary
    • Check and file GST TRAN 2 before 31st March, 2018, for claiming transitional credit against the sale of stock for which tax paid documents are not available
  • Verification of Purchases – Although Form GSTR 2 has been deferred for the time being, a business can still see the Form GSTR 2A in the GST portal. From the same form, one can take a stock of monthly purchases from made from registered dealers, and verify the same with records of purchases in the books. Doing this will allow businesses to take the necessary steps to reconcile the books properly, as part of year end tax planning.
  • Reconciliation – This would be the right time to reconcile sales and purchases as well as the GST tax liability along with the Form GSTR 3B returns. If there are any differences, the same should be brought into the Form GSTR 3B of March 2018. One should thus reconcile the cash ledger, credit ledger and liability ledger, with the books of accounts, and ensure that all entries are completed before the year ends. At the same time, debit notes, credit notes, rate differences, discounts etc. also have to be accounted for, and the effect of these have to reflect in the returns being filed.
  • Reversal of ITC – As per the Input Tax Credit rules, if the recipient does not make full payment within 180 days of the issuance of the tax invoice, then the ITC taken on that invoice is to be reversed. The ITC will be made available again, only when the payment is made. Thus ageing analysis of the debtors and creditors should be done, and all old invoices which have been issued before 1st October, 2017 should be paid before 31st of March, 2018.
  • GST Turnover Check – Before the new-year starts, taxpayers will need to check their annual GST turnover in FY 2017-18. The turnover under GST, will be an integral part of year end tax planning for the business in FY 2018-19, which are as follows:
    • How many digits should HSN Code have in Invoice? – Taxpayers whose turnover is above INR 1.5 Crores but below INR 5 Crores shall use 2 digit codes and the taxpayers whose turnover is above INR 5 Crores will need to use 4 digit codes. Also, taxpayers whose turnover is below INR 1.5 Crores are not required to mention HSN codes in their invoice at all.
    • Whether to file Monthly or Quarterly GSTR 1 Returns? – Taxpayers whose turnover is above INR 1.5 Crores will have to file monthly GSTR 1 returns, while those taxpayers whose aggregate turnover is less than INR 1.5 Crores will have an option to file quarterly GSTR 1 returns.
    • Whether to go for Composition Scheme? –In Special Category States the turnover limit for Composition Scheme is 75 lakhs, whereas in Rest of India the limit is INR 1.5 Crores. Depending on the turnover, a business may decide to go for Composition Scheme in the new financial year, in which case he will need to apply for the same in Form GST CMP 02 before 31st March, 2018. Similarly, all those who wants to cancel the registration under composition scheme will have to apply for the same in Form GST CMP 04 before 7th April.
    • Cancellation of Registration – In the unlikely scenario, that a business who had taken voluntary registration under GST, does not want to continue, either because of lower turnover or closure of business, they can apply to cancel their registration
  • New Series for Tax Invoice – If anyone wants to change the series for invoicing or billing in the new year, then he can do that from 1st April, 2018.
  • Depreciation on Capital Assets – If ITC has been claimed on the purchase of fixed assets, or capital assets, then a business should not include the same in the cost of the asset, while calculating the value of depreciating assets.
  • Anti-profiteering – As per the directives of the government and the GST Council, businesses are to compare the Gross Profits for the FY 2016-17, FY 17-18 and for the periods April 2017 to June 2017 and July 2017 to March 2018. If the gross profit ratio for March 2018 is higher, then a business will need to check whether the credit for the profit has been passed on to the customer or not.
  • Important Return Filing Dates - There are various important return filing dates in April and May which businesses need to be aware of:
    • 10th April – Monthly GSTR 1 to be filled by Regular Dealer for February 2018
    • 18th April – GSTR 4 to be filled by Composition Dealer for Jan to March 2018
    • 20th April – GSTR 3B to be filled by for March 2018
    • 30th April – Quarterly GSTR 1 to be filed by Regular Dealer for Jan to March 2018
    • 10th May – Monthly GSTR 1 to be filled by Regular Dealer for March 2018

Last but not the least, the e-way bill is going to be rolled out from the 1st of April, 2018. Besides all the important activities listed above for year end tax planning, tax consultants will also need to guide their clients to successfully use the right technology to generate e-way bills, and navigate the e-way bill portal without hassle, to ensure a smooth movement of goods both within and between States.


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