The Goods and Services Tax is now going to complete almost two years in our country. Hon’ble Prime Minister Sri Narendra Modi and Hon’ble Finance Minister Sri Arun Jaitley had taken a bold step and implemented this tax system in our country from 01st July’2017. This was indeed a difficult endeavor. Today, we have reached at the stage where we have started preparing for annual return and GST audit. As per the GST law, the original date for filing Annual Return for the year 2017-18 was fixed 31st December 2018 which was later on changed or extended by the Government to 30th June 2019. I remember that in a press release where the Government announced that the GST annual forms will be made available on portal to taxpayers in the month of January’2019. But the fact is that these forms were put on the portal in the month of April’2019 only. As the due date of 30th June’2019 is coming nearer, the complexities of taxpayers and tax professionals are increasing.
The year 2017-18 was the first year of GST implementation and in the very first year where everybody was at learning stage so the mistakes in GST returns are inevitable. The annual return is the only last chance or way to correct the previous mistakes committed. As the professionals and tax payers now started filling up the forms they find certain flaws and discrepancies at every stage. There is a situation of complete confusions and dilemmas in all the sections of society. Although the Government has clarified certain points by issuing a press release on 03.06.2019 but it is rather creating some more confusions. Now, the new Finance Minister, Smt. Nirmala Sitharaman has joined the office so it is requested to her to take note of the undernoted difficulties and resolve the matter in the forthcoming GST Council meeting by simplifying the annual forms. The main points are as follows:
The Govt. has notified GSTR- 9 form along with some instructions to fill the same. As per such instructions it was stated that in some parts of GSTR- 9 the figures are to be taken from GSTR-3B and in some parts from the form GSTR- 1.So the Govt. mentioned only two sources of data flow in GSTR-9. But in the press release dated: 03.06.2019 the Government has also disclosed the third source of data flow in GSTR-9 which could be our books of accounts. Now, the confusion arises that taxpayers have three sources of data for filing annual returns- GSTR-3B, GSTR-1 and Books of accounts. Where the figures of these three sources are the same or matching then there is no problem at all. But when these three sources do not match with each other for some reasons or other, the real challenge before tax payer in such a situation is that from where to put the data in GSTR-9? Some taxpayer and tax practitioners are considering GSTR-3B as base for preparing annual return whereas some others are considering the data as per books of accounts only. So still there is no clarity on the matter. Therefore, the Government should make it clear that what would be the exact source for filling up data in GSTR-9.
Further the form GSTR-9 does not contain separate field to correct or rectify the mistakes committed while filling form GSTR-3B and GSTR- 1during the year 2017-18. In such a situation, the government should resolve the problems by suitable modifications in the form.
In Form GSTR-9 the Government has sought break ups of input tax credit in three parts. These three parts are – Input on Capital Goods, Input on Services and Input on Inputs. Earlier the Government never asked such reporting in any of the forms notified. So the business communities were maintaining a common ledger of Input Tax credit irrespective of its nature. Suddenly, the GSTR-9 form is asking separate details which are really a cumbersome task for the tax payers to ascertain details and report within limited time frame. All the inward supplies bills need to be re-checked by digging the old records. The problem does not end here. One item which is capital goods and if some installation charges are also paid on it which is a service then under which category a tax payer would classify such item? It is not clear yet that whether the Input on both the expenses (Capital goods + Installation Charges) will be reported as Input on Capital Goods or the installation charges are to be reported as input on services separately. So the government should make it clear properly. Further by asking such separate breakups of input tax the Govt. is not going to gain much so it should be done away with immediate effect.
The Government has sought the HSN Wise Summary of Inward Supply in the Form GSTR- 9, which has been a cause of the problem of taxpayers. However, the Government has demanded such information only for those assessees having turnover of more than 1.5 Crores. Further inward supply which independently accounts for more than 10 percent of the total Inward supply should only be reported HSN wise. But in applicable cases it is really a daunting task to calculate it and report in a true way. The Government had never expressed such intention in any form earlier. Now suddenly, taxpayers find it difficult to demonstrate this by checking out the old inward supply documents. The problem further added where a taxpayer has received inward supply from such other taxpayer whose annual turnover is below 1.5 Crores and who need not even require to show the HSN code in its invoice. In such cases, the taxpayer (recipient) will have to find all such HSN himself and report it in his annual return. This is absolutely an unnecessary burden on tax payers. Therefore, the Government should think seriously about this issue and it should be eliminated.
In one part of the annual return form GSTR-9 the Government wants the tax payers to match the input tax credit availed in form GSTR-3B with the input reflecting in form GSTR-2A. In true sense, there is no legal backing of form GSTR-2A as on date. When the government has removed or suspended form GSTR-2 itself, there remains no base for GSTR-2A. But even though the Government has given much importance to this so it is made necessary to match the inputs taken by taxpayers. Now the problem arises is that the input shown in form GSTR-2A differs from the figures of input as auto-populated in form GSTR-9. In some cases in form GSTR-2A, inward supply bills are appearing twice. Thus in such a situation there will always be some differences in the figures of ITC appearing in form GSTR-2A and the figures actually claimed by the assessee. Taxpayers will have to answer such differences as and when tax dept. issues notices to them. Therefore, the Government should look for a simple solution for such problems.
At present, the Government has made it clear that the turnover which was left out to be shown in the year 2017-18 can be reported in annual return GSTR-9. But simultaneously they also put a condition that output tax on such turnover will have to be paid only through cash ledger. It means that even if someone has got sufficient input tax credit balances still he or she will not be able to utilize it with such output tax payable. Further the Government has made it clear that output tax on missed turnover has to be paid in cash through form DRC-03 only. This condition is not in consonance with the statutory provisions of section-49(4) of the CGST Act, 2017 which allows input to be adjusted with the output tax. If someone has got sufficient input tax credit balance then why he or she would have to pay again in cash? Such a system is putting double burden on taxpayers and is also blocking their working capital. Hence, while framing such condition the Government should have considered the difficulties to be faced by the taxpayers owing to such compliance.
Taxpayers can pay the tax on the missed turnover through form DRC- 03 in cash only on the GST portal. But the improper working of form DRC-03 on the GST portal is also a matter of concern for the tax payers. Further if we read the Press release dated: 03.06.2019 the Govt. has stated that the form DRC-03 will come into play in audit cases. But this clarification is self contradictory inasmuch as the clause (e) and (h) of the said Press release are not in consonance with each other. Thus the clarification given by the Govt. needs further clarification to avoid confusion.
According to the provisions of the GST law, if there is a delay in filing annual return and it is filed after the due date then the Government is empowered to recover the late fees in such cases @ Rs 200 (100 + 100) per day. The maximum limit of this late fee is kept @ 0.25% of the taxpayer’s annual turnover. As the year 2017-18 was the first year of GST and even today, we are struggling to understand the annual forms correctly. In addition, the Government has made available this form on the portal in April’ 2019 only and further final corrected data of GSTR-2A are also updated on the portal only on 01.05.2019. In such a situation, the Government should not recover the late fees, at least in the first year’s delayed filing of annual return. Also the annual return once filed cannot be revised as well. So waiver in late fee will help taxpayers to take their own time and file their annual returns in a correct manner. Hence the Government should re-think on this matter and waive late fee on late filing of annual return.
At present, Form GSTR- 9 demands HSN Code up to 8 digits on Outward Supply whereas in actual the GST the law requires one to report only 2 or 4 digits HSN only depending on their turnover. In such a situation the form GSTR-9 designed with the requirement of 8 digit HSN code is contrary to the GST law. Therefore tax payers who maintained 2 or 4 digits earlier as per GST law are now facing hardship in reporting 8 digits of HSN in the annual return. Therefore, the Government should implement the correct provision of HSN as per law only in the form GSTR-9.
There is confusion amongst the tax payers about the limit of Rs 2.00 Crores for the GST audit. The point of dispute is the period from which the limit of Rs 2.00 Crores will be counted? Some tax payers are of the opinion that the limit of turnover would be counted from 01.04.2017 to 31.03.2018 while others are taking it from 01.07.2017 to 31.03.2018 only. Since GST law came with effect from 01.07.2017 only, so most taxpayers believes that the turnover from 01.07.2017 to 3103.2018 would only be counted. Thus the turnover of pre GST period shall not be counted while calculating the limit of 2 Crores. But the interesting point is that the Govt. very recently in a webinar has taken the view that the turnover of full financial year needs to be considered. This again raised some doubts inasmuch as in absence of any further clarification or notification yet there exists two schools of thoughts on this matter.
If we talk about Section-35(5) of GST, then the word ‘turnover’ is used here. But the corresponding rule 80(3) thereto has used the word ‘aggregate turnover’. So the use of two different words in the context of turnover in these two places has changed the meaning of limit of Rs 2 Crores for GST audit. Now, as per section 35 only taxable turnovers has to be counted but as per rule 80(3) all the turnover will be counted. But as per the law of interpretation section will prevail over the rule. So again, two opinions exist on this matter among the taxpayers. The Government has not issued any explanation on this. Thus a suitable explanation is needed to remove any difference of opinion on this matter.
3. Turnover Limit of Rs 2 Crores should be according to State wise instead of GSTIN wise:
As per existing law, if a taxpayer is operating in multiple States then its turnover in all the states of India is aggregated for the purpose of counting applicability of GST audit limit of Rs 2 Crores. If it exceeded Rs.2 Crores, then he will be liable for GST audit in every such state nevertheless turnover in each State the turnover is far below the limit of Rs 2 Crores. Suppose, a company is doing business in 10 states by obtaining separate registration in each states and turnover of each State is Rs. 25 lakhs per annum only. In such a case, by adding the turnover of all states, the turnover has crossed the limit of Rs.2 Crores and it will be liable for GST audit in all such states. This is a very costly and time consuming affair. Therefore, the Government should amend this provision and turnover limit in each State should be calculated so that only in the state the turnover is crossed Rs. 2 Crores GST audit will be required.
The taxpayers are facing various problems in filling form GSTR- 9C which is the annual GST audit format. Many people are unable to open it properly due to software problem, and many are unable to upload their digital signature. Also, error file is not getting downloaded from the portal in case error is reported. Therefore, such technical flaws should be removed soon so that the compliance can be done timely.
In the annual audit form GSTR- 9C the Government has demanded details of complete expenses as shown by the tax payers in their Profit & Loss account. Further along with such expenses they also asked for the input taxes available and actually availed by the tax payers. This seems to be impossible task in such a short time frame. No taxpayer has maintained their accounts so accurately with details of ITC on expenses available and actually availed. To fill this part, once again, one by one bills of expense needs to be sorted out which is a cumbersome task demanding time also. Therefore, the Government should clarify its intentions clearly and take some decision immediately.
Note: The author is a practicing chartered Accountant at Guwahati. During his practice he come across some issues in GST annual filing and audit. Further based on inputs received from tax payers this writes up has been prepared. The views expressed above are strictly the personal views of the author and has got no relation with any person, organization and political party.
– CA Manoj Nahata, B.Com ( Hons.), FCA, DISA ( ICAI)