After a long wait for around 16 years now we are certain that this significant tax reform will see lights of the day by April 1 2017 or mid of F.Y 2017-18. First time in the history of taxation reforms a number of documents have been issued by Govt. before actual implementation of law. Last year in October 2015 draft process note on GST returns was issued which contained basic framework of returns under proposed GST Law. As we know that a SPV was formed by previous Govt. called GSTN which is responsible for all IT related task and procedures. This is going to be one of the largest IT network in the history of Indian taxation system which will process 50000 entries per second and 3 billion vouchers per month. Now in this article an attempt has been made to make you understand each and every thing about returns under GST. This article will also outline 7 specific issues which is a matter of representation before Govt. authorities.
Types of returns under GST:
This table will outline the number of returns which will be filed by a taxable person under GST along with its due date.
Type of Return
|GSTR-1||Details of outward supplies||By 10th of next month|
|GSTR-2||Details of inward supplies||By 15th of next month|
|GSTR-3||Monthly return under GST||By 20th of next month|
|GSTR-4||Quarterly return for composition taxpayer||By 18th of the next month for the quarter ending|
|GSTR-5||Return by non resident foreign taxpayer||Last day of registration|
|GSTR-6||Return for ISD||By 15th of next month|
|GSTR-7||Return for TDS deduction||By 10th of next month|
|GSTR-8||Annual Return||By 31st December of next F.Y.|
Comparison of returns under GST with existing law:
|1.||Number of returns||2 half yearly returns in form ST-3||4 quarterly returns for VAT and CST||Minimum 37 returns in form GSTR-1, 2, 3 and GSTR-8.|
|2.||Mode of filing||Online filing without hard copy submission||Online filing with hardcopy submission||Complete online without hardcopy submission|
|3.||Due date of payment of tax||On or before 6th of next month or quarter as the case may be.||On or before 21st of next month in all cases.||On or before filing returns under form GSTR-3 i.e. 20th of next month.|
|4.||Mismatch in details of outward and inward supply of goods and services.||No such mechanism exists.||Concept of 2A/2B mismatch is already under use.||Concept of matching will be used in GST also.|
|5.||Use of HSN codes in return.||No such codes used in return under service tax.||Concept of commodity codes is made applicable from Ist quarter return of 2016-17||HSN codes of 8 digits, 4 digits and 2 digits will be introduced in GST.|
Process flow for filing returns under GST:
As we discussed that returns under GST will be filed by login into the website of GSTN which is a common platform for filing returns under GST for all states. This network is working from 2013 to develop the software for registrations, returns etc. In this portion of my article I will discuss with you the practical process flow for filing the return under GST.
Step-1: The supplier of goods/services shall upload details of outward supplies on monthly basis in form GSTR-1 by the 10th of next month. This detail can be submitted on daily basis also which will help to minimize last day burden on system.
Step-2: The GSTN system will auto populate GSTR-2 of counter party on the basis of GSTR-1 filed in step-1 by 15th of next month. This is detail of inward supply of goods and services of counter party.
Step-3: The recipients will accept/delete/modify the provisional GSTR-2 as uploaded by counter-party if there is disagreement over the information uploaded. New invoices can also be added where copy of invoices is in possession with recipient.
Step-4: The taxable person will finalize his GSTR-3 auto populated from GSTR-1&2 and make payment of tax liability by debiting ITC ledger or Cash ledger as the case may be up to 20th of next month.
Step-5: Post filing of GSTR-3 mismatch will be generated by GSTN on very next day i.e. 21st of next month which can be rectified by making follow-up with counter party.
7 specific issues in returns under Model GST Law
The Annual return (GSTR-8) needs to be filed annually, based on financial records. GSTR-8 needs to be filed separately for each state where registration is obtained by the company.
Since the annual accounts by the company normally drawn on the basis of pan India operations hence it is impossible to reconcile the state wise annual return in form GSTR-8 with consolidated profit & loss account.
It is requested to prescribe annual return as whole on the pan India operations otherwise the taxable persons has to maintain state wise financial records i.e. P&L Account etc.
Credit of ITC in case goods has been received on lot basis. As per model law if an invoice is raised for certain quantity of goods but delivery is made in lots then ITC shall be taken by recipient when last lot is received.
As we go through form GSTR-1 & 2 there is no option given for such kind of situation where supplier shows the invoice in month when it is actually issued but credit taken by recipient in the month when last lot has been received. The credit should be allowed to recipient in the same month when invoice is issued or forms should be amended.
Time limit to file GSTR-2 and GSTR-6 is 15th of next month. The due date of GSTR-2 should be later than last date of filing GSTR-6.
The due date of both GSTR- 2 and GSTR-6 has been fixed at 15th of next month where data in GSTR-2 shall also to be auto populated from GSTR-6. It will be difficult for the taxable persons where both the returns have been filed on same date causing non auto population of data in GSTR-2.
Treatment of goods in transit i.e. cases where outward supply recorded by supplier in April 2017 but inward supply is booked in the month in which goods/ services have been received.
This situation may cause huge mismatch between the details of supply shown by supplier and recipient on continuous basis. Either the credit should be allowed in the month in which invoice has been raised or forms should be suitably amended to consider such situations.
After 10th of the next month supplier of goods/services cannot make rectification in his own GSTR-1 unless it is intimated by counter party supplier.
This anomaly if not corrected will cause hardship and penal cost on account of interest where an invoice which was not entered in the month of April 2017 by supplier and also remain unaccounted by recipient. Practically mismatch will not arise in April 2017 as both have not entered the same invoice in their respective returns.
As the Annual return (GSTR-8) is required to be filed on or before 31st December of next F.Y which seeks reconciliation of books of accounts with GST returns filed during the year.
The books of accounts are normally prepared using accounting standard (Ind AS) issued by ICAI which may have significant variation in the manner supply of goods and/or services shown in return. Reconciliation again becomes herculean task for professional as well as companies. It further asks a separate statement if the tax audit is also applicable in case of any taxable person.
Compliance burden will increase manifold if decentralized registration is continued under GST law.
Take an example of SBI which has branches in all 29 states and 7 UT’s which means for a single state minimum return per year are 49 and for all 36 places yearly return will go to 1764. This seems against ease of doing business as said by our Hon’ble Prime Minister.
FAQ on Returns under Model GST Law
Q: 1 Can the return in form GSTR-1 is revised if there are mismatch in entries reported therein?
Ans: First of all in GST returns cannot be revised only rectification is possible i.e. only in some cases. All unreported invoices of previous tax period would be reflected in the return for the month in which they are proposed to be included. All the error has to be rectified by way if credit/debit note in the period when error or mistake discovered. Regarding mismatch, it is mismatch of tax credit. If the mismatch of tax credit is not corrected within one month of intimation of mismatch then the recipient of supply has to pay the amount of input tax along with interest thereon, however the same can be claimed back upon correction and matching of input tax credit by the supplier.
Q: 2 in what manner the advance received against supply to be made in future will be reflected in return of both the parties?
Ans: Under GST as per the provisions of time of supply tax has to be paid at the earliest of some events which also include receipt of payment by the supplier. In this case tax is paid by the supplier on advance payment but ITC cannot be taken by recipient unless goods/services have been actually received therefore at the time of payment of tax on advance money a transaction id will be generated which will be used to pass on ITC at time of actual supply of goods/services.
Q: 3 what is the maximum time limit within which rectification in the returns filed under GST can be made?
Ans: Rectification can be made in the returns under GST at the earliest of the following events: 1) Filing of GSTR-3 for the month of September following the end of financial year to which return relates i.e. 20th day of October 2) Filing of annual return i.e. 31st day December of next financial year.
Effectively the return for the month of March 2017 will be revised up to 20th day of October 2017 i.e. maximum time available is 06 months and for April 2016 of same financial year it would be 18 months.
Q: 4 Can a return under GST be furnished without payment of self assessed tax as determined in the return?
Ans: A return can be furnished under GST without payment of tax but it will not be treated as valid return and counterparty cannot claim ITC on the supplies received. The only purpose of allowing submission of return without payment of tax is to get details of self assessed tax to be paid by the taxable person.
As the success of GST all depend upon success of GSTN as a technology partner in the time to come. Looking at the investment done in GSTN, most capable technocrats hired for the job and lastly one of the best IT firm is given the task to develop GSTN I am optimistic about its success. The concept of matching details of inward and outward supply may result in huge revenue to exchequer under GST regime. The system developed by GSTN is an open ended one which means initially it is developed for 12 million users and it can be expanded in time to come. With these words I conclude my thoughts and wish you a happy reading.
By Vinod Kaushik, ACA, B.Com (H)
Disclaimer: Views expressed are strictly personal. The content of this document are solely for informational purpose. It doesn’t constitute professional advice or recommendation. The Author does not accept any liabilities for any loss or damage of any kind arising out of information in this article and for any actions taken in reliance thereon.
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