Krishna (Fictional Character): Arjuna, currently there are many indirect tax laws in our country. There is a wide variety of return types and ways to file returns. GST is called as “One Nation One Tax”. Initially many people are thinking of GST law as very difficult and complicated. GST is totally dependent on technology. This reduces paperwork and increases the number of online transactions. Let’s see how traders can handle GST.
Arjuna: Krishna, how many returns are to be filed by traders in GST?
Krishna: Arjuna, every registered person has to file three returns per month under GST. This equals to a total of 36 returns and one annual return each year i.e. 37 returns will have to be filed in a single year. If registered in different states then 37 returns are to be filed in each state. Even if no transactions are conducted in a particular month, filing of NIL return is still compulsory. The three returns are GSTR-1 (Outward Supply), GSTR-2 (Inward Supply) and GSTR-3 Final Returns (Original Return). All are online on GSTN.
Arjuna: Krishna, Explain the process for filing returns with the help of an example. How and when is the first return to be filed?
Krishna: Arjuna, let’s discuss the interpretation of the returns with the help of an example. ‘Luv’ is a registered person, who is a wholesaler of readymade garments and ‘Kush’ is a registered person, who is a retailer of readymade garments. ‘Kush’ has purchased ready-made clothes from ‘Luv’ on the 3rd of July, 8th of July and 20th of July. ‘Luv’ gave the tax invoice to ‘Kush’. After the completion of the month of July, ‘Luv’ has to file return giving details of sales made by him in the month of July in form GSTR-1 till 10th August. ‘Luv’ will have to take bill-wise information i.e. GSTN number, Date of Invoice, Invoice Number, Quantity, Rate of Tax, Total transaction value, GST amount, etc.
Arjuna: Krishna, when should the return of purchases be filed and how will it be done?
Krishna: Arjuna, every purchaser can access the Information given by the seller relating to the transactions done by him in the return filed, on the 10th of next month. That means ‘Kush’ will get information of bill-wise purchases made from ‘Luv’. This information will appear on GSTN. “Kush” will have to tally all the bill-wise information i.e. GSTN number, Date of Invoice, Invoice Number, Quantity, Rate of Tax, Total transaction value and GST amount. GSTR-2 is to be filed till 15th August if the information provided is correct and acceptable. If there are any changes, it means that ‘Luv’ has given information of the transaction made on the 3rd of July and 8th of July but forgotten to give information of the transaction made on the 20th of July. Now ‘Kush’ has to file GSTR-2 giving the information about the transaction made on the 20th of July till the 15th of August. ‘Kush’ will get full credit (Input Tax credit) only if the information of purchases is tallied.
Arjuna: Krishna, what steps are to be taken by ‘Luv’ after ‘Kush’ has filed GSTR-2?
Krishna: Arjuna, if ‘Kush’ changes the information of some bills or more and updates it on GSTR-2 then changes made will be available to ‘Luv’ on GSTN. ‘Luv’ will have 2 days i.e. upto 17th August to accept or reject the changes made by ‘Kush’. If ‘Luv’ accepts the changes then he has to file Revised GSTR-1 till 17th August. In this way, there will be matching of the sale and purchase by ‘Luv’ and ‘Kush’ both.
Arjuna: Krishna, how and when GSTR 3 will have to be uploaded?
Krishna: Arjuna, as per the information on GSTN, GSTR 3 will be auto generated and will be available to both Luv and Kush. Following this, both will have to fill the details of the ITC taken on sales and purchases made, upload GSTR 3 before 20th August and make the payment of GST.
Arjuna: Krishna, what will happen if the Input tax credit does not match?
Krishna: Arjuna, if the Input Tax Credit fail to match, then the seller has shown less sale and the purchaser has shown more purchases leading to a difference between GST and Input Tax Credit. If this happens, GSTN will generate an ITC report which will show that excess credit has been claimed by ‘Kush’. This will be added in the next month’s liability and ‘Kush’ will have to pay with interest.
Arjuna: Krishna, what will happen if ‘Luv’ does not pay the tax?
Krishna: Arjuna, if ‘Luv’ does not pay the tax or does not revise the changes then ‘Kush’ will receive a notice for the amount worth the difference in the month of August. Also, ITC of ‘Kush’ will be reduced and he will have to pay the tax on 20th of September with interest which will be calculated from the month of July.
Arjuna: Krishna, what will be the time limit for ‘Luv’ and ‘Kush’ to clear the mismatches?
Krishna: Arjuna, ‘Luv’ and ‘Kush’ can clear the mismatches before the 30th of September at the end of the financial year or by filling of annual return; whichever is earlier.
Arjuna: Krishna, what lesson can be learnt from the process of return filling in GST?
Krishna: Arjuna, in GST interdependency is going to increase, on GSTN, on Recipient, on Accounting Software, GSP, etc. every Trader has to understand the return filling procedure under GST. Small traders will have to make changes in Accounting software, Goods and Services Provider, internet, etc. Details of sale and purchase will have to be updated regularly and proper accounting is to be done. If there is any kind of discrepancy it will make business very tough, because not updating the information about the sales will not give the buyer it’s credit. Further Compliance rating of GST is also there. Due to this the Trader will lose this customer. Also, if purchases are not updated, then ITC which could have been available, now cannot be claimed.