Key Features of Proposed GST New Returns

Government intends to introduce GST New Return System from 01-04-2020. Explaining the key features a PPT is prepared and the same can be downloaded here.

GST New Return System

New Return or New System

2.0 ?

> For implementing the new return system Section 43A is inserted in CGST Act in August, 2018. But the Section is not yet notified.

> Draft Return Formats and procedures are released for public consultation in July 2018. Download here:
http://www.cbic.gov.in/resources//htdocs-cbec/draft-circ/GST_Returns_3007.pdf

> New System is proposed to be implemented from 1st April 2020.

To implement the new system:

1) Section 43A is to be notified

2) Corresponding Rules and Forms also to be notified and they should functional in GST Portal.

Sec 43A completely modifies the existing procedure of return filing and ITC availment

43A will override

• Sec 16(2) — Conditions to avail ITC
• Sec 37 — Furnishing details of outward supplies
• Sec 38 — Furnishing details of inward supplied
• Sec 41 — Claim of Input Tax
• Sec 42 — Matching, reversal & reclaim of ITC
• Sec 43 — Matching, reversal & reduction of output tax liability

Sec 43A doesn’t override Sec 39, 40, 44 & 45

New GST Return System

Applicable to

• Regular Dealers

Not Applicable to

• Composition Dealers
• Input Service Distributor
• TDS Deductor
• Non-Resident Taxable Person

Sec 43A

• Sec 43A authorizes the Government to frame rules and forms. It does not contain detailed procedures New Return System. It simply gives blanket power to the Government to notify the same.
• However 2 limits are prescribed in Sec 43A:

1. In case supplier doesn’t upload invoices, Govt can prescribe the % (not exceeding 20%) upto which recipient can claim ITC.

2. Recovery proceedings will not be initiated if tax due is upto Rs.1,000/-

Snapshot of New Return System

• First dealer uploads his sales & RCM transactions in Anx-1
• Second dealer confirms his purchase transactions in Anx-2
• Third dealer files his monthly return RET-1

Difference between existing and new system

• In existing system:

–there is no link between liability declared in GSTR-1 and 3B.

–even 3B can be filed without filing GSTR-1.

–there is no link between amount of ITC available in 2A and amount of ITC claimed in 3B.

• In the proposed system in RET-1:

–the tax liability declared in Anx-1 and RET-1 should be same. In fact the liability will be auto drafted from Anx-1.

–IT confirmed in Anx-2 and ITC claimed in RET-1 should be same. In fact ITC claimed will be auto drafted from Anx-2.

• RET-1 can be filed only after filing Anx-1 and Anx-2.

Key features of New Return System

Type 1: Large Tax Payer

Taxpayers who have turnover more than Rs.5.00 crores in the preceding financial year:

– Have to file monthly returns

– Anx-1, Anx-2 and RET-1 are applicable 15-02-2020

Type 2: Small Tax Payer B2C

Taxpayers who have turnover not more than Rs.5.00 crores in the preceding financial year and having only B2C outward supplies:

–Option to file monthly or quarterly

–Once monthly option is selected, he has to file Anx-1, Anx-2 and RET-1.

–If quarterly option is selected, he can:

1.File in Anx-1, Anx-2 & RET-1(Quarterly)

or

2. File simple return SAHAJ

Type 3: Small Tax Payer B2C & B2B

Taxpayers who have turnover not more than Rs.5.00 crores in the preceding financial year and having only B2C & B2B outward supplies:

– Option to file monthly or quarterly

– Once monthly option is selected, he has to file Anx-1, Anx-2 and RET-1.

– If quarterly option is selected, he can:

1. File in Anx-1, Anx-2 & RET-1 (Quarterly)

or

2. File return Anx-1(Sugam) & Sugam

Key features of New Return System

• Supplier can upload the Tax Invoices on real time basis in Anx-1.
• Recipient can view his purchase Invoices on near real time basis.
• Recipient can also view whether supplier has filed his return or not.
• Supplier has to upload the Tax Invoices latest by 10th of Next Month.
• Example: Tax Invoice issued on 1-4-2020 is upload in Anx-1 on 08-05-2020. Then the recipient can avail ITC for April 2020.
• If the Tax Invoice dated 1-4-2020 is uploaded on 11-5-2020, then recipient cannot claim ITC on this invoice in April 2020. He will be able to claim it in May 2020 only.
• However it is proposed that recipient can claim ITC on missing invoices also subject to certain conditions.
• Invoice uploaded by the supplier in Anx-1, but RET-1 is not filed. Uploading of invoices in Anx-1 will be treated as self admitted liability and recovery proceedings will be initiated.
• Recipient has to pay the amount of ITC availed on missing invoices after specified period. (Missing invoices means, invoices not uploaded in Anx-1)
• To find out missing invoices, Offline IT Tool will be provided for matching invoices in Anx-2 with invoices in the accounting system of recipient.
• Payment of tax shall be discharged full at the filing of RET-1 or SAHAJ or SUGAM itself.
• In case of default in payment of tax by the supplier, recovery proceedings will be initiated on supplier. However in the following cases, recovery proceedings can be initiated on recipient who has claimed ITC:
  • Missing Tax Payer
  • Closure of business by tax payer
  • Supplier not having adequate assets
  • Connivance between recipient & supplier
• Recipient can do the following actions on the invoices appearing in Anx-2 (auto drafted Purchase Invoice)
  • Accept also called as locking
  • Reject (eg. Invoice not related to the recipient)
  • Pending.

Eg. 1. Goods/services not yet received

2. Invoice needs amendment

3. Not able to decide whether to accept or reject

• If no action is taken on a particular invoice, it will be deemed by the system as accepted and ITC will be available against these invoices.
• Generally goods / services must have been received during the month to claim the ITC. However in the proposed system, ITC on goods / services received in the next month before filing the return, can be claimed.
• Once invoice is accepted by the recipient, i.e., locked by the recipient, supplier cannot amend those invoices.
• Locked Invoice should be unlocked by the recipient, for making any amendment by the supplier.
• Supplier will be able to issue Debit Note or Credit Note on locked invoices also.
• If credit/debit note is issued against any pending invoice, then system will club the credit/debit note with pending invoice.
• Missing invoices shall be reported in RET-1 of the current month. System will calculate the interest automatically. Once the tax and interest is paid, the missing invoice will be clubbed with the monthly return to which it relates.
• For amendments, separate Return Form are available.

• Maximum 2 amendments returns can be filed for any one month.
• “NIL” Return can be filed by “SMS”.
• April 2020 return is filed. But one invoice is missed. The same is reported while filing September 2020 RET-1. If he wants to amend that invoice, for which month tax payer has to file amendment return?
• Additional liability can be paid which arises in amendment return, can be paid at the time of return filing itself.
• Negative liability if any shall be carried forward to next month regular return.
• Higher late fee for amendment return if change in liability is more than 10%
• Shipping Bill details also should be entered in Anx-1 by the exporters. If the shipping bill details are not available by the time of filing the return, the same can be entered later on also.
• The export data then will be transmitted to ICEGATE portal for cross verification purposes.
• Until the facility is ready to pull the data from ICEGATE portal, importers can avail ITC on imports and supplies from SEZ can be availed on self declaration basis.
• When supplier is defaulted in payment of tax, he will not be able to upload the invoices in Anx-1.
• For newly registered tax payers also there will be restrictions on uploading the invoices in Anx-1.
• New concept of suspension of registration will be introduced. From the date of suspension till the date of cancellation, tax payer need not file returns and invoice uploading also will not be allowed.
• HSN should be reported at 4 digit level in monthly return.
• The tables in the return will be opened based on the profile of the tax payer.

UPLOAD – LOCK – PAY

• Return filing on quarterly basis
• Payment of taxes on monthly basis
• ITC claim on self-declaration basis for monthly payment
• Small tax payers should choose the option at the beginning of the financial year.
• Change from quarterly to monthly or vice-versa is only allowed once at the beginning of any quarter.
• ITC will be restricted to the auto drafted amount. ITC cannot be claimed on missing invoices. There will be no Anx-2.
• Supplies such as non-GST supply, exempted supply need not be reported in quarterly returns. To be reported in Annual Returns.
• ITC on capital goods need be entered separately.
• Tax Payers who would like to have facility of missing / pending invoices, they may opt monthly returns.
• Quarterly Return filers also can upload invoices on continuous basis.
• In the first 2 months of every quarter, tax will be paid on monthly basis using payment declaration form(PMT-08).
• In the 3rd month quarterly return has to be filed Sahaj or Sugam. Then any short payment of monthly tax would attract interest.
• HSN should be reported at 4 digit level in quarterly return.
• Small Tax Payers who opted for Sahaj have to:
  • Pay tax on monthly basis
  • File Sahaj (RET-2) quarterly basis
• Small Tax Payers who opted for Sugam have to:
  • Pay tax on monthly basis
  • File Annexure of supplies to Return Sugam quarterly basis
  • File Sugam (RET-3) quarterly basis

Annexure of supplies to main return (Anx-1)

Observations –Anx-1

• Table 3A to 3G pertains to outward supplies
• Table 3H to 3L pertains to inward supplies
• In all tables invoice levels details to be entered. Except in case of 3A and 3H i.e., B2C Sales and Purchases liable to reverse charges.
• Sales made through e-commerce operators to be furnished separately in Table -4
• Inward & Outward HSN wise summary to be furnished.
• Format is simple when compared with GSTR-1

Feedback about Anx-1

• Taxable sales only to be reported. No place to report exempted sales. But exports without payment of tax are to be reported.
• No column to enter sales attracting RCM.
• Had there been total columns for sales and purchases in Anx-1, comparison with books would have been easy.
• In case of import of goods, tax will be paid at the time of import. Reporting it again with tax amount, may create confusion.
• No place to enter tax liability on advances received.
• So one cannot arrive the total sales or total tax liability from Anx-1 and then compare with his books to avoid errors/mistakes.

Instructions to Anx-1

A.General 1 to 24

B.Table Specific 1 to 13

Anx-1A is Amendment Return for Anx-1

Annexure of Inward Supplies Anx-2

RET-1

It contains

– Summary of supplies made and tax liability

– Summary of inward of supplies for claiming ITC

– Amount of TDS / TCS credit received

– Interest & late fee liability

– Payment of Tax (Set off of tax)

– Refund claimed from Electronic Cash Ledger

New Return System Trial

• Online version and offline tool trial versions are made available at www.gst.gov.in
• Government has asked all stakeholders to use the trial version and share their feedback/ suggestions.