As we enter the third year of GST implementation, the 3rd set of GST returns are also set to roll out on a trial basis for three months from July to September 2019, which will help the tax payers to familiarize with the new system of returns.

Initially when GST was to be rolled out back in 2017, GSTR 1, 2 and 3 were to be filed. GSTR 1 was for outward supplies, GSTR 2 for inward supplies and GSTR 3 for the final tax liability for a particular tax period. Inward supplies stipulated in GSTR 2 were to be matched with the input tax credit availment by the recipient. However, due to failed IT issues, this matching concept did not work and GSTR 2 and GSTR 3 were never filed by the tax payers. To ease out the tax payment, government implemented the filing of GSTR 3B which is a summary of the outward and inward supplies and finally the payment of tax. So currently, businesses are filing returns via GSTR 3B and GSTR 1 which entails the outward supply.

The new GST return system will be introduced w.e.f 1st October 2019 for some tax payers and from 1st January 2020 for some. In order to ease transition to these new system, a new plan has been worked out. The demo of the annexures of one of the return is available on the GST portal for the easy transition into the new return system.  While the new purchase and sales forms will be available for trial during July-September, businesses will still have to file returns based on GSTR1 and GSTR3B.

Following is the new return system that is going to be implemented in a phased manner:

Types of return Turnover threshold* Frequency Nature of supplies Effective date
Sahaj 5 Crores or less Quarterly B2C Supplies + RCM 1st January 2020
Sugam 5 Crores or less Quarterly B2B or B2C Supplies +RCM 1st January 2020
RET-1 More than 5 Crores Monthly/Quarterly Detailed supplies 1st October 2019

*Small tax payer: Turnover less than 5 Crores/Large tax payer: Turnover more than 5 Crores

Following table will help to identify the type of return the tax payer has to file basis the nature/type of supply:

Outward Supplies made to:

Particulars RET-1 (Monthly/ Quarterly) Sahaj Sugam
Unregistered dealers
B2C along with debit notes or credit notes

Registered Dealers
B2B Forward Charge

x

B2B Reverse Charge

x

x

Debit Note/Credit Note B2B

x

Export
Export with/without pay

x

x

SEZ supplies

x

x

Deemed Exports

x

x

Other supplies
Exempt/Nil

x

x

Non-GST

x

x

Supplies through E-Commerce

x

x

Advances

 Main components of the new return(s)

  • The new system of returns is not applicable for Composition Dealers, Non-Resident Tax Payer, ISD, persons deducting tax under section 51 (TDS) or persons liable to collect tax under section 52 (E-Commerce Operators)
  • There are three main components to the new return- one main return (Form GST RET-1) and two annexures: (Form GST ANX-1 and Form GST ANX-2)
  • Option for filing monthly or quarterly return shall be adopted at the effective date, thereafter the tax payers would continue to file the return during the year as per the option selected.
  • Small tax payers having turnover up to INR 5 Crore would have option to file one of three forms, namely-quarterly return, sahaj or sugam.
  • Nil Returns can be filed quarterly. Nil transaction shall be reported in the month 1 and 2 of that quarter.
  • Due date of filing of returns is 20th of the following month/quarter

Uploading of Returns: The overall process

  • Supplier can upload the invoices during the tax period on a continuous basis. Recipient can view the suppliers’ invoices on a real time basis.
  • Invoices uploaded by the supplier will be treated as a valid document for availing ITC. These invoices have to be locked by the recipient.
  • After due date of the filing of return, filing status of the suppliers will be shown to the recipient.
  • Invoices which are uploaded by the supplier by 10th of the following month, will be posted in the returns of the recipient of the same month. If the same are uploaded are posted after 10th, the same will be posted in the returns of the recipient in the subsequent month.
  • If the invoices have been uploaded by the supplier, but returns have not been filed, the tax liability will be assumed to be self-admitted basis the invoices uploaded by him.
  • Recipient can upload the invoices which have not been uploaded by the supplier. ITC on these invoices will be available to the recipient on acceptance of these invoices by the supplier. If the same have been rejected by the supplier, ITC availed will be recovered from the supplier.

Way forward

GST council has recommended the introduction of these new returns in a phased manner and has made available the demo for these returns so that the transition through these returns is smooth and easy to cope up with. The existing system of filing of GSTR 1 and 3B will be completely phased out by January 2020. The new returns functionality is intended to track credit at invoice level supplies with a clear mechanism for counter-parties to reconcile the accounts and mismatches and eliminate subjective assessment by tax officials. Currently the tax payers are facing hardships triggered by the tax officials especially in getting the refund of input tax credit, in case that input credit is not appearing in GSTR 2A. It seems that this will be phased out because of the recovery proceedings against supplier in case of non-filing of the outward supplies. Further, to address the problem of human error i.e. the wrong entries made in the return, there would be a facility for filing of the amendment return under the proposed return system. There would be a facility to file two amendment returns for each tax period within the time specified. The simplification process has been proposed in such a way that if the goods or services have been received before filing of return and invoice has been uploaded by the supplier up to the due date i.e. 10th of the next month, input tax credit for the same can be availed by the recipient. This is likely to make additional credit available to the recipient as goods or services received after 1st of next month but before 20th become eligible for availing input tax credit (presently he is eligible for ITC only if goods or services have been received by the end of the tax period). The new functionality is programmed considering parameters like ease of compliance, alignment to the business process and alignment to tax administration regulations. The council has so far done a praiseworthy job of driving GST in the right path by keeping economic goals above the divergent political ideologies. Going forward, a lot is expected from the IT to cope up with the matching concept of ITC which was failed earlier. Effective implementation and a decent IT support would go a long way to meet the common goals in the interest of the nation.

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