In the existing GST return filing system, dealers with Turnover up to Rs.1.5 crore in the previous year or anticipating turnover up to Rs.1.5 crore in the current financial year, are eligible to file their GSTR 1 – returns on a Quarterly basis. The due dates being 31st July, 31st October, 31st January, 30th April.
Rule 36 (4) of CGST w.e.f 09/10/2019 allows dealers to claim provisional ITC can be claimed only to the extent of 20% (Now 10% as per 38th GST Council Meeting concluded on 18th December 2019)of eligible of ITC reflected in the GSTR-2A .
Thus a taxpayer filing monthly GSTR-3B will not be able to see ITC of those vendors who file quarterly GSTR-1. As a result, one has to verify the provisional credit limit of 10%.
Thus even if he has paid Rs. 100 as GST to a quarterly vendor, he might not be immediately getting a full credit of the GST paid. Hence, the NET cash outflow towards GST would increase severely impacting Working Capital of the Business.
Thoughts to Ponder :
1. Does it mean monthly return filers should stop purchasing goods/availing services from quarterly filers ? That’s definitely not the probable solution as our small & medium enterprises would face business discontinuity and sustainability issues.
2. Should more human resources be allotted in the accounts/compliance department to take care of additional GST Compliances, verification of 10% ITC working or following up with vendors to determine why their invoices are not getting reflected in GSTR-2A or check the return filing history of vendors from the GST portal
NONE OF THEM
All Professionals/ GST practitioners must bridge this expectation by encouraging clients to opt for monthly filing of GSTR-1. This is of course possible from the next financial year beginning April 2020 only.
The clients generally have finalized details of the sales invoices by end of the month.
It must thus become our endeavor to advise them for opting to monthly GSTR-1. I believe such small important advices go along way for the continuity of their business & the economy at large. This Advisory will hold relevance even in the new return filing system of RET-1 , ANNX-1 etc.
The Author Mr. Raj C Doshi is a CA in Practice and Proprietor at R C D & Co., Chartered Accountants, Mumbai.
(Author can be reached at firstname.lastname@example.org)