ITC 04 Filing - Process, Benefit, Exemption and Penalties

Compliance
17 Aug 2023
itc-04-filing-process-benefit-exemption-and-penalties

In the realm of Indian taxation, the introduction of the Goods and Services Tax (GST) has brought about a significant transformation. Among the various facets of GST compliance, the filing of Form ITC-04 holds a crucial place for Micro, Small, and Medium Enterprises (MSMEs). This form pertains to the declaration of goods that have been sent to job workers or received back from them, ensuring a seamless flow of inputs and capital goods in the supply chain. In this blog, we will delve into the details of the ITC-04 filing process, its benefits, turnover limits, exemptions, penalties, and how MSMEs can effectively streamline their transitions of inputs and capital goods.

What is GST ITC-04 Form?

GST ITC-04, also known as the ‘Goods Sent to Job Work and Received Back’ form, is a return that MSMEs need to file periodically to provide information about the movement of goods to job workers and the subsequent receipt of those goods. Job work involves sending raw materials or semi-finished goods to another party for processing, assembly, or any other form of work. Job workers are individuals or entities that perform these specific tasks on the goods. It’s an integral part of various manufacturing processes, and the ITC-04 form helps in tracking the movement of goods to and from these job workers.

ITC-04 Filing Process

The process of filing Form ITC-04 involves the following steps:

  1. Collecting Information: MSMEs must gather all relevant details regarding the goods sent to job workers during the reporting period. This includes details of the goods, their quantities, and other particulars.
  2. Compiling Data: The collected information needs to be accurately compiled to ensure correctness in the filing process. MSMEs can maintain proper records and documentation to facilitate this step.
  3. Filing the Form: MSMEs can log in to the GST portal (https://www.gst.gov.in/) and navigate to the ‘Services’ tab. From there, they can select ‘Returns’ and choose the ITC-04 form. The required information is then entered into the form.
  4. Verification: After filling in the necessary details, the form needs to be verified. This can be done using a digital signature or an Aadhar-based OTP.
  5. Submission: Once verified, the form is submitted on the GST portal.

ITC-04 Turnover Limit and Exemption

The ITC-04 turnover limit is Rs. 5 crore. This means that taxpayers with an annual aggregate turnover of more than Rs. 5 crore need to file ITC-04 half-yearly, i.e., for the April-September and October-March quarters. The due dates are 25th October and 25th April, respectively.

Taxpayers with an annual aggregate turnover of up to Rs. 5 crore need to file ITC-04 yearly, i.e., for the financial year. The due date is 25th April.

There is no exemption from filing ITC-04. However, there are some cases where the ITC may be partially or fully restricted. For example, the ITC may be restricted if the goods sent for job work are used for exempt or non-taxable supplies.

If you are unsure whether you need to file ITC-04, you should consult with a GST expert.

Realted topic:- Threshold Limit for GST Registration

Here are some of the cases where the ITC may be restricted:

  • If the goods sent for job work are used for exempt or non-taxable supplies.
  • If the goods sent for job work are not returned to the principal within 12 months.
  • If the goods sent for job work are damaged or destroyed during the job work.
  • If the job worker fails to pay the GST on the services provided.

If the ITC is restricted, the taxpayer will need to adjust the ITC in their next ITC-04 return.

ITC-04 Penalties for Non-compliance

There are no specific penalties or late fees prescribed for the delay in filing GST ITC-04. However, Section 125 of the GST Act provides for a general penalty of up to Rs. 25,000 for contravention of the provisions of the Act and rules made thereunder.

This means that the GST authorities can levy a penalty of up to Rs. 25,000 for non-filing of ITC-04, even if there is no specific penalty or late fee prescribed.

In addition, the GST authorities may also initiate other enforcement actions, such as demanding the payment of taxes and interest, or suspending the taxpayer’s registration.

It is therefore important to file ITC-04 on time and in the correct manner to avoid any penalties or enforcement actions.

Here are some of the things you can do to avoid ITC-04 penalties:

  • File ITC-04 on time. The due dates for filing ITC-04 are as follows:
    1. Half-yearly: 25th October and 25th April
    2. Yearly: 25th April
  • File ITC-04 correctly. Make sure that you fill in all the required details correctly.
  • Keep proper records. Keep records of all the goods sent for job work, including the GSTIN of the job worker, the description of the goods, and the date of receipt of the goods back from the job worker.
  • If you are unsure about anything, consult with a GST expert.

Benefits of ITC-04 Filing

Filing the ITC-04 form offers several advantages for MSMEs:

  1. Compliance: It ensures compliance with GST regulations by accurately reporting the movement of goods to and from job workers.
  2. Input Tax Credit (ITC): Proper filing allows MSMEs to claim ITC on the goods sent for job work, leading to reduced tax liabilities.
  3. Supply Chain Efficiency: By tracking the movement of goods, MSMEs can streamline their supply chain, reduce bottlenecks, and enhance production efficiency.

Steps to Streamline ITC-04 Filing for MSMEs

  1. Record Keeping: Maintain comprehensive records of all goods sent to job workers and received back. This will facilitate accurate data entry during the filing process.
  2. Regular Updates: Ensure timely updates of all transactions related to job work to avoid last-minute rushes during the filing period.
  3. Automation: Consider using accounting and GST software to automate the tracking and recording of job work transactions. This reduces the chances of manual errors.

Relaxation Granted under Rule 45 (3) of the CGST Rules

Rule 45(3) of the CGST Rules, 2017 provides for the filing of a statement in FORM GST ITC-04 by a registered person who has sent goods for job work. The statement must be filed on or before the 25th day of the month succeeding the said quarter.

However, the Central Government has granted relaxation to taxpayers whose annual aggregate turnover in the preceding financial year is up to Rs. 5 crore. These taxpayers are allowed to file ITC-04 annually, i.e., for the financial year, instead of half-yearly.

The relaxation is available for the quarters commencing on or after 1st October, 2021.

To avail of the relaxation, the taxpayer must mention the following in the ITC-04 statement:

  • The annual aggregate turnover of the taxpayer in the preceding financial year.
  • The fact that the taxpayer is availing of the relaxation.

The taxpayer must also keep proper records to substantiate the claim of relaxation.

Conclusion

The GST ITC-04 form is a vital component of GST compliance for MSMEs engaged in job work. Proper filing not only ensures adherence to regulations but also offers benefits like input tax credit and improved supply chain efficiency.

By understanding turnover limits, exemptions, penalties, and following the steps mentioned in this guide, while also leveraging the relaxations provided under the CGST Rules, MSMEs can streamline their ITC-04 filing process. This contributes to a smoother flow of inputs and capital goods, ultimately enhancing their business operations.

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