GST Council in its 42nd meeting held on October 05, 2020 recommended the introduction of a scheme allowing certain class of taxpayers to file quarterly return instead monthly returns from January 2021. However, the concept itself was visualized by the Government while introducing the Finance Bill 2019 wherein Clause 96 was introduced enabling Government to allow quarterly filing of returns which later on was finally provided by Section 97 of the Finance (No.2) Act, 2019 (hereinafter referred to as the ‘Finance Act 2019’).
Government, in exercise of the powers conferred by Section 1(2) (b) of the Finance Act 2019, has, vide Notification No. 81/2020-CT (Rate) dated November 10, 2020, notified the November 10, 2020 as the date from when the provisions, amending Section 39 of the CGST Act, 2017, as contained under Section 97 of the Finance Act 2019 shall come in force. In other words, the amended provisions of Section 39 of the CGST Act, have become effective from November 10, 2020.
With less than a month remaining for the new scheme to be in effect, it is important to know about the salient features, procedures, actions dues to be taken by the taxpayers and issues involved therein. Through this article an attempt has been made to analyze the scheme in details to help readers know about it and comply with the provisions of the law in true spirit.
Who all are eligible for the scheme?
In terms of the power conferred by first proviso to Section 39(1), Government has, vide Notification No. 84/2020-CT(Rate) dated November 10, 2020, notified class of persons who shall be eligible for opting the scheme. In terms of the said notification, registered persons (other than those referred to Section 14 of the IGST Act i.e. suppliers supplying OIDAR services from outside India) having an aggregate turnover of up to INR 5 crores in the preceding financial year and opting for quarterly return shall file such return on quarterly basis. However, such allowance to file return on quarterly basis shall be subject to fulfillment of conditions as under;
1. As on the due date to exercising the option to file quarterly return, return for the preceding month has been filed.
2. Once such option is exercised, they shall continue to file return as per selected option, unless such option is changed.
Also, in terms of the notification, registered person whose aggregate turnover crosses INR 5 crores during a quarter in the financial year, he shall not be eligible to file quarterly return from the next quarter.
Aggregate turnover clarified
In terms of CBIC Circular 143/13/2020-GST dated November 10, 2020, aggregate turnover for the preceding financial year has been clarified as the one which shall be computed taking into account the details furnished by the taxpayer on the common portal for the tax periods in the preceding financial year. In other words, turnover shall be computed on the basis of GSTR-3B filed by the taxpayer during the preceding financial year.
Exercising quarterly filing option
Consequential amendments in CGST Rules have also been made, vide Notification no. 82/2020-CT (Rate) dated November 10, 2020, to provide for the machinery provisions relating to quarterly filing of returns effective from January 2021. As regards the mechanism to be followed by taxpayer to opt for quarterly filing, Rule 61A has been inserted in the CGST Rules to provide for such mechanism.
In terms of the said rule, registered person intending to file return on quarterly basis shall indicate his preference for furnishing the quarterly return on the common portal. Such preference shall be indicated from the 1st day of the second month of the preceding quarter till the last day of the 1st month of quarter for which such option is exercised. It is pertinent to mention that person before exercising the option must have furnished the last return, as due, on the date of exercising such option.
For example: A registered person intending to avail of the Scheme for the quarter ‘July to September’ can exercise his option during 1st of May to 31st of July. If he is exercising his option on 27th July for the quarter (July to September), in such case, he must have furnished the return for the month of June which was due on 22/24th July. [Example as given under Circular 143]
Deemed exercising of the option [Notification 84/2020-CT(R) dated November 10, 2020]
In respect of the 1st quarter of the scheme i.e. January ~ March 2021 taxpayers, having aggregate turnover of up to INR 5 crores in the FY 2019-20 and who have furnished October 2020 return in GSTR-3B on or before November 30, 2020, shall be migrated on the common portal by default selection of the option as under;
|S. No.||Class of registered persons||Default option1|
|1||Registered persons having aggregate turnover of up to 1.5 crore rupees who have furnished FORM GSTR-1 on quarterly basis in the current financial year||Quarterly return filings|
|2||Registered persons having aggregate turnover of up to 1.5 crore rupees who have furnished FORM GSTR-1 on monthly basis in the current financial year||Monthly return filing|
|3||Registered persons having aggregate turnover more than 1.5 crore rupees and up to 5 crore rupees in the preceding financial year||Quarterly return filing|
Default option has been provided for the convenience of the registered person based on their anticipated behavior. Registered person shall be free to change the option, if they desire, from December 05, 2020 to January 31, 2021.
Person obtaining registration during a quarter or registered person opting out from composition scheme during any quarter shall be able to opt for the scheme for a quarter for which the facility to make such option is available as on the date of exercising the option.
Opting for the scheme GSTIN-wise, allowed [CBIC Circular 143 dated November 10, 2020]
It has also been clarified that the option to file quarterly returns under QRMP scheme is GSTIN-wise and therefore distinct persons as defined in Section 25 of the CGST Act (different GSTINs on same PAN) have the option to avail the QRMP Scheme for one or more GSTINs. In other words, some GSTINs for that PAN can opt for the QRMP Scheme and remaining GSTINs may not opt for the Scheme.
Furnishing details of outward supplies i.e. GSTR-1
Rule 59 of CGST Rules, providing for form and manner of furnishing details of outward supplies, have been substituted by a new ‘Rule 59’ effective from January 01, 2021. In terms of the said rule, registered person opting for the scheme shall be required to furnish the details of outward supplies in Form GSTR-1 on quarterly basis.
Invoice Furnishing Facility (IFF) [Rule 59]
For each of the first and second month of the quarter, registered person shall have the Invoice Furnishing Facility (IFF) to furnish the details of such outward supplies to a registered person between the 1st day of the succeeding month to 13th day of the succeeding month. It is pertinent to mention here that availing such facility is purely optional on the part of the supplier and hence, is not mandatory.
Details of outward supplies, as furnished using IFF, shall, however, not exceed INR 50 lakh per month in aggregate. Hence, invoices aggregating up to INR 50 lakh a month may be furnished using IFF. Further, after the 13th day of the succeeding month, invoice relating to the previous month shall not be allowed to be uploaded.
For example, a registered person who has availed the Scheme wants to declare two invoices out of the total ten invoices issued in the first month of quarter since the recipient of supplies covered by those two invoices desires to avail ITC in that month itself. Details of these two invoices may be furnished using IFF. The details of the remaining 8 invoices shall be furnished in FORM GSTR-1 of the said quarter. The two invoices furnished in IFF shall be reflected in FORM GSTR-2B of the concerned recipient of the first month of the quarter and remaining eight invoices furnished in FORM GSTR-1 shall be reflected in FORM GSTR-2B of the concerned recipient of the last month of the quarter. The said facility would however be available, say for the month of July, from 1st August till 13th August. Similarly, for the month of August, the said facility will be available from 1st September till 13th September. [Example as given under Circular 143]
Details of outward supplies as furnished using IFF shall not be required to be furnished again while filing GSTR-1 on quarterly basis. However, details of outward supplies made during a quarter shall consist of both, invoices reported during first two months using IFF and details of invoices furnished in Form GSTR-1. Registered person, at his option, may choose to furnish details of outward supplies made during a quarter through GSTR-1 only, without using IFF.
Furnishing of returns [Rule 61 effective from January 01, 2021]
Registered person required to file GSTR-3B on monthly basis shall file such return for a month or part of the month, on or before 20th day of succeeding month. However, registered person opting to file quarterly returns (in terms of the Scheme) shall file such returns in terms of the below table;
|S. No.||Class of registered persons||Due date to file GSTR-3B|
|1||Registered persons whose principal place of business is in the States of Chhattisgarh, Madhya Pradesh, Gujarat, Maharashtra, Karnataka, Goa, Kerala, Tamil Nadu, Telangana, Andhra Pradesh, the Union territories of Daman and Diu and Dadra and Nagar Haveli, Puducherry, Andaman and Nicobar Islands or Lakshadweep||22nd day of the month succeeding such quarter i.e. within 22 days from the close of the concerned quarter|
|2||Registered persons whose principal place of business is in the States of Himachal Pradesh, Punjab, Uttarakhand, Haryana, Rajasthan, Uttar Pradesh, Bihar, Sikkim, Arunachal Pradesh, Nagaland, Manipur, Mizoram, Tripura, Meghalaya, Assam, West Bengal, Jharkhand or Odisha, the Union territories of Jammu and Kashmir, Ladakh, Chandigarh or Delhi.||22th day of the month succeeding such quarter i.e. within 24 days from the close of the concerned quarter|
Payment of taxes
Registered person required to file return on monthly basis, shall, in terms of Section 39(7) of the CGST Act, 2017, pay to the Government the tax due as per such return not later than the last date on which such return is required to be furnished. In other words, taxes due as per the return shall be paid on or before the due date to file such returns.
Registered person opting for quarterly return filing shall be required to follow special procedure for payment of tax for the first two months of the quarter as prescribed by Notification No. 85/2020-CT (Rate) dated November 10, 2020.
In terms of the said notification, registered persons opting to file quarterly return may deposit in electronic cash ledger, for each of the first two month, an amount equivalent to;
1. 35% of tax liability paid by debiting the cash ledger in the return for the preceding quarter, where such return was filed quarterly. In other words, 35% of the net cash liability paid in the preceding quarter shall be deposited in cash ledger, when returns are being filed quarterly.
2. Tax liability paid by debiting cash ledger in the return for the last month of the immediately preceding quarter, where the return is furnished monthly.
Amount as above said shall be deposited in Form GST PMT-06 by 25th day of the next month wherein the taxpayer shall select ‘Monthly payment for quarterly taxpayers’ as the reason for generating the challan for depositing the said amount.
No deposits in cash ledger required
No amount shall be required to be deposited;
1. For the first month of the quarter, where the balance in electronic cash ledger or credit ledger is sufficient for the tax liability for the said month or there is Nil tax liability;
2. For the second month of the quarter, where the balance in electronic cash ledger or credit ledger is sufficient for cumulative liability for the first and second month or there is Nil tax liability
Manner of deposit in cash ledger
In terms of Circular 143 dated November 10, 2020, it has been clarified that the registered person can use any of the following methods, in any of the two months, for the purposes of monthly deposit of amount in cash ledger for first two months of the quarter;
1. Fixed sum method; where a pre-filled challan in Form GST PMT-06, for an amount equivalent to 35% of tax paid in cash in the preceding quarter (where such return was filed quarterly) or for an amount equivalent to tax paid in cash in the last month of preceding quarter (where such return was filed monthly) shall be made available. However, monthly tax payment under this method shall not be available to those who have not furnished return for a complete tax period preceding such month.
For ease of understanding, please see the below; [Example as given under Circular 143]
In case where return was filed on quarterly basis for quarter ending March 31, 2021
|Tax paid in cash in Quarter (Jan ~ Mar 2020)||Tax to be paid in April 2021 and May 2021*|
*Computed at the rate of 35% of net cash paid during the preceding quarter
In case where return was filed on monthly basis for the month March 2021
|Tax paid in cash in March 2021||Tax to be paid in April 2021 and May 2021*|
*Computed at the rate of 100% of net cash paid during the month of March 2021
2. Self-assessment method: In this case, the registered person can pay the tax due by considering the tax liability on inward and outward supplies and the input tax credit available. To facilitate the ascertainment of ITC available, auto-drafted input tax credit statement shall be made available in Form GSTR-2B on monthly basis within such time and manner as prescribed.
Refund from cash ledger
Where any refund is to be claimed in respect of the amount deposited during the first two months of the quarter, the same shall be permitted only after filing of GSTR-3B for the concerned quarter. Also, the amount deposited during the first two months cannot be used by the taxpayer for any other purposes till the filing of GSTR-3B for the said quarter.
Interest on delayed deposit in cash ledger
For registered person making deposit through fixed sum method
1. No interest shall be payable where system computed tax liability is deposited in cash ledger on or before the due date i.e. 25th day from the close of the concerned month. In other words, where such fixed sum method is used for deposit of amount in cash ledger and while filing GSTR-3B for the quarter, it is found that in any or both of the first two months of the quarter, net liability is more than the amount deposited, no interest would be charged provided that the entire liability for the quarter is discharged by the due date.
2. Where the amount is not deposited by the due date, interest would be payable at the applicable rate, from due date of furnishing Form GST PMT-06 till the date of making such payment. Further, where GSTR-3B for the quarter is furnished after the due date, interest would be payable as per the provisions of Section 50 of the CGST Act.
For ease of understanding, please refer to the below illustrations, as given in Circular 143 dated November 10, 2020
A registered person, who has opted for the Scheme, had paid a total amount of INR 100/- in cash as tax liability in the previous quarter of October to December. He opts to pay tax under fixed sum method. He therefore pays INR 35/- each on 25th February and 25th March for discharging tax liability for the first two months of quarter viz. January and February. In his return for the quarter, it is found that liability, based on the outward and inward supplies, for January was INR 40/- and for February it was INR 42/-. No interest would be payable for the lesser amount of tax (i.e. INR 5 and INR 7 respectively) discharged in these two months provided that he discharges his entire liability for the quarter in the FORM GSTR-3B of the quarter by the due date.
Illustration 2 –
A registered person, who has opted for the Scheme, had paid a total amount of INR 100/- in cash as tax liability in the previous quarter of October to December. He opts to pay tax under fixed sum method. He therefore pays INR 35/- each on 25th February and 25th March for discharging tax liability for the first two months of quarter viz. January and February. In his return for the quarter, it is found that total liability for the quarter net of available credit was INR 125 but he files the return on 30th April. Interest would be payable at applicable rate on INR 55 [INR 125 – INR 70 (deposit made in cash ledger in M1 and M2)] for the period between due date of quarterly GSTR 3B and 30th April.
For registered person making deposit under self-assessment method
Interest would be payable as per the provisions of Section 50 of the CGST Act for tax or any part thereof (net of ITC) which remains unpaid/paid beyond the due date for the first two month of the quarter and such interest shall be paid through Form GSTR-3B.
Late fee for delayed filing of return
Late fee shall be applicable for delayed furnishing of return/details of outward supply as per provisions contained under Section 47 of the CGST Act. As the scheme envisages quarterly filing of returns/details of outward supply, the delayed filing of such return/details of outward supply would accordingly attract late fee. However, there shall be no late fee in respect of delayed deposit of amount for the first two months of the quarter.
1. The scheme seems to be a double edged sword for small and medium sized businesses. Though it will give a relaxation to MSME’s from compliance perspective but on the same time it will lead to ITC blockage/deferment and cash flow issues for large companies, who shall be required to file return and pay taxes on monthly basis while vendors who would be getting covered under the scheme shall file their return on quarterly basis leading to reporting their supplies in their GSTR-1 on quarterly basis and in turn blockage or deferment of ITC for large companies. Non-availability of ITC even when such invoice has already been paid would compound the problems faced by such large corporations.
2. This may force large companies to re-look at their supply chain and move to those suppliers who are willing to file their returns on monthly basis. Payment to such smaller vendors, covered under the scheme would also get delayed due to reconciliation issues being faced presently.
3. There is not much clarity as to under which provision of the principal enactment, interest shall be leviable where, in case of quarterly return filers, cash is not deposited in the cash ledger within the time allowed, but GSTR-3B is filed well within the prescribed timelines. Would interest leviability really be attracted in terms of Section 50 of the CGST Act, where there is no tax payment as such, but only a deposit in cash ledger?
Views expressed in this article are personal views of the author and are for guidance purposes only. Although care has been taken in compiling and checking the information contained herein, however, we make no representations or warranty of any kind, express or implied, regarding the accuracy, adequacy, validity, reliability or completeness of any information. It is further advised that the information above should not be treated as legal advice and should not be acted upon in business scenarios. An appropriate legal/professional advice should be taken prior to acting upon the above while undertaking business transactions.