GST data and Cost Records Annexures to be maintained
GST data & Cost Records/Cost Audit Annexures to be maintained as per the headings of Customs Tariff Headings: Four Digit Level or Eight Digit Level
MCA has issued one notification issued on 20th Dec 2017 which is going to pave the way for alignment of Cost Records with GST records after the implementation of GST. The Companies Cost Records & Audit Rules 2014 (CCRAR) earlier referred to CETA whereas in the GST regime, presently most of the chapters of Central Excise Act do not exist except for few Chapters. Now with the issue of the notification on 20th Dec 2017, the CETA Headings have been replaced with Customs Tariff headings (Refer Extract 1)
It also needs mention that ‘heading’, in respect of goods, means a description in list of tariff provisions accompanied by a four-digit number and includes all sub-headings of tariff items the first four-digits of which correspond to that number and tariff item means a description of goods in the list of tariff provisions accompanying eight-digit number.
A question is being raised by different quarters that whether the cost data is required to be maintained at four-digit level (heading) or at eight-digit level (tariff item). It needs mention that for the year 2016-17, the costing data was required to be maintained at eight-digit level of CETA. Also, the revised business rules for XBRL had mandated eight-digit codes. The concerned rule reads like ‘The concatenated “CETA Code of Manufactured Product” and ‘Subheading of CETA Code’ shall be a valid 8-digit CETA code’. Under the GST regime also the maintenance of cost records may be kept at eight-digit level and reporting at four-digit level.
For the 2017-18, the data to be reported to MCA will be from two different indirect tax regimes, April 2017 to June 2017 from Excise/VAT and from July 2017 to Mar 2018 from GST regime. The back up of the data need to be kept separately and then consolidated for the purpose of reporting to Ministry of Corporate Affairs under CCRAR 2014, wherever applicable.
One need not forget that any organization dealing in export or import is required to keep the data at eight-digit level as per the Customs Tariff Act.
Under GST for the sake of convenience initially, the government may have allowed the data to be maintained at four-digit level, but in future GST authorities may ask for the data at the eight-digit level as the reference to the Customs Tariff has been made in the GST notifications.
Suggestion: The companies which have to follow Companies Cost Records and Audit Rules 2014 are required to maintain the data at the product level and then at tariff heading level for reporting to MCA, these companies should keep maintaining the data at Eight Digit Level also.
GST regime also referred to Customs Tariff Act as given below (Extract 2) for the purpose of imposition of rates on various types of commodities. Though, the GST rates notification have shown four digits and GST rates have been mentioned at the four-digit levels i.e. headings but it needs mention that a reference to the ‘Tariff item’, ‘sub-heading’ ‘heading’ and ‘Chapter’ has also been made in the same notification.
Extract of Notification no. G.S.R. 1526(E). dated 20th Dec 2017 issued by Ministry of Corporate Affairs is given below:
In the Companies (cost records and audit) Rules, 2014 (hereinafter referred to as the principal rules), in rule 2, for clause (aa) the following clause shall be substituted and shall be deemed to have been substituted with effect from the 1st day of July, 2017, namely:-
(aa) ‘Customs Tariff Act Heading’ means the heading as referred to in the Additional Notes in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975).
3. In the principal rules, in rule 3, for the words ‘Central Excise Tariff Act Heading’, occurring at both the places, the words ‘Customs Tariff Act Heading’ shall be substituted and shall be deemed to have been substituted with effect from the 1st day of July, 2017.
4. In the principal rules, in the Annexure, in Form CRA-2, Form CRA-3 and Form CRA-4, for the words ‘CETA Heading’, wherever it occurs, the words ‘CTA Heading’ shall be substituted and shall be deemed to have been substituted with effect from the 1st day of July, 2017.
Extracts from Notification No.1/2017-Integrated Tax (Rate) New Delhi, the 28th June, 2017 & Notification No.1/2017-Central Tax (Rate) New Delhi, the 28th June, 2017
(iii) ‘Tariff item’, ‘sub-heading’ ‘heading’ and ‘Chapter’ shall mean respectively a tariff item, sub-heading, heading and chapter as specified in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975). (iv) The rules for the interpretation of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), including the Section and Chapter Notes and the General Explanatory Notes of the First Schedule shall, so far as may be, apply to the interpretation of this notification. 2. This notification shall come into force with effect from the 1st day of July, 2017.
Explanatory/Additional Notes of the First Schedule of The Customs Tariff Act
The Additional Notes in the First Schedule of The Customs Tariff Act 1975, explains the different terms as follows:
(a) ‘heading’, in respect of goods, means a description in list of tariff provisions accompanied by a four-digit number and includes all sub-headings of tariff items the first four-digits of which correspond to that number;
(b) ‘sub-heading’, in respect of goods, means a description in the list of tariff provisions accompanied by a six-digit number and includes all tariff items the first six-digits of which correspond to that number;
(c) ‘tariff item’ means a description of goods in the list of tariff provisions accompanying eight-digit number and the rate of customs duty;