July 31, 2018

By Pritam Mahure, CA

CONTINUING with the Government's leitmotif, yesterday, a 54 pages booklet containing the new "simplified" GST returns and formats was placed in the public domain.

This article highlights various responsibilities cast on the GST payers in the new return process.

1. Upload invoices on real time!

In new return system, the taxpayer would be able to upload the invoices continuously (anytime during the month). Further, such uploaded invoice shall be continuously visible to the recipient.

Due to this new system, all the buyers are expected to request their respective vendors to upload invoices on immediate basis to enable them to check the same online.

2. Credit to be available only based on details uploaded by supplier

It is proposed that the maximum limit of eligible input tax credit will be based on the invoices uploaded by the supplier upto 10th of the subsequent month. Invoices uploaded by the supplier by 10th of succeeding month shall be 'auto-populated' in the liability table of the main return of the supplier.

Recipient can also see the invoice details uploaded by supplier (referred as 'viewing facility').

It may be noted that if the supplier uploads invoices after due date for September (say on 18th October) then the buyer will be able to claim credit in the month of October (and not September).

However, during the transition phase of first six months after the new system of return is implemented , the recipient would be able to avail input tax credit on self-declaration basis even though the invoices are not uploaded by the supplier by 10th of the next month (or thereafter) using the facility of availing input tax credit on 'missing invoices'.

3. Every month, accept, reject or keep pending the invoices

Typically, by 10th of subsequent month the suppliers would have uploaded their invoice details on GSTN portal. After 11th of the next month the recipient shall be able to accept, reject or keep pending a particular invoice.

The buyer can 'lock' the invoices uploaded by the supplier. In cases where say wrong GSTIN is mentioned, buyer can 'reject' the invoice instead of 'locking'. Amendment of an invoice may be carried out by the supplier where input tax credit has not been availed and the invoice has not been reported as locked by the recipient. Once an invoice is locked by the recipient, no amendment of the same shall be allowed. However, credit note or debit note for the same can still be issued by the supplier to change value, rate of tax, quantity or the tax payable.

A wrongly locked invoice can be 'unlocked' online by the recipient himself subject to reversal of the input tax credit by him and online confirmation thereof.

It may be noted that on filing of the return by recipient, all invoices shall deemed to be accepted except invoices kept pending or rejected. In certain cases such as non-receipt of supply (this means even GST payer is required to track receipt of goods/services), invoice needs amendment , unable to decide (to claim credit or not), the buyer can keep the invoice as 'Pending' and no input tax credit shall be availed by the recipient on such pending invoices.

Once new return system is implemented, it seems that more than 1 crore registered GST payers will be busy in checking their procurement details from 11th to 20th!

4. Match all your procurements with your financials!

At present, one of the biggest challenges of GST payers is to match the invoices appearing on GST portal (as the invoice details are not freely downloadable in excel format). In new return system, for matching of invoices, a tool/facility will be made available.

Using the tool/ facility, a taxpayer will be able to filter invoices downloaded on the basis of Dates of invoice, date on which the invoice was uploaded and GSTIN of the supplier.

5. Report 'missing invoices' within two tax periods

Missing invoices of supplier can be reported by buyer. However, buyer will get maximum two tax periods to report 'missing invoice' (i.e. invoice for January can be reported as missing maximum by March return). In case any 'missing invoices' are uploaded by buyer then the supplier will be notified about the same.

It is pertinent to note that if a buyer claims credit on 'missing invoices' (i.e. invoices which are not uploaded by supplier) but the supplier does not upload the same,then after prescribed time period, such credit will be recoverable from the recipient . Also it may be noted that amendment of missing invoices reported later by the supplier shall be carried out through the 'amendment return' (discussed in subsequent paras) of the relevant tax period to which the invoice pertains.

6. Track whether return is filed by all the suppliers!

At present, the buyer can see on GSTN portal whether the vendor has uploaded the invoices. However, whether the said GST amount is deposited by the supplier cannot be tracked. Now, it is proposed that buyer shall also be able to see the return filing status of the supplier.

This effectively mean that all the GST registered buyers will be required to check whether their vendors are uploading the invoices (on daily basis!) and whether the said vendors are paying taxes and filing returns (on monthly basis!).

Additionally, for newly registered taxpayer and a taxpayer who has defaulted in payment of tax beyond a time period and/or above a threshold, uploading of invoices shall be allowed only upto a threshold amount or only after the default in payment of tax is made good respectively.

It seems all GST payers, will now be un-paid GST Officers keeping real-time check on all their respective vendors!

7. Pay the credit availed (in certain cases) if vendor doesn't deposit GST!

In the new system, at the time of filing return, the GST liability is expected to be discharged in full (as presently applicable).

As regards availability of credit of GST to a buyer, if the supplier does not deposit the GST, then there will not be any automatic reversal of input tax credit. First, the GST Authorities will initiate recovery against supplier and in some exceptional circumstances like missing taxpayer, closure of business by the supplier or supplier not having adequate assets or in cases of connivance between recipient and the supplier, etc. recovery of input tax credit from the recipient shall be made through a due process of service of notice and issue of order.

This provision leads to a scenario wherein say a particular supplier is declared as insolvent or is not traceable (though recovery proceedings are initiated by the GST as well as other Authorities), then the genuine buyer, without any fault of his, could be penalised (through denial of input tax credit). Casting such onerous condition on every buyer leads to un-manageable burden on GST payers.

Earlier, the right of excise/ service taxpayer was effectively protected (unless it's a case of fraud/collusion). Seems, in the new return system, right of revenue (i.e. Government) is protected but 'right to credit' is not given equal importance.

8. Large taxpayers to file monthly return!

Multiplicity and complex returns is one of the biggest reasons for aggravation of pains of GST payers in India. Now, the multiple returns are proposed to be replaced with one return  per month for large taxpayers (having turnover of more than INR 5 crore).

The main return shall have two main tables, one for reporting supplies on which tax liability arises and one for availing input tax credit. Return shall have annexure of invoices which shall auto-populate the output liability table in the main return.

The due date for filing of invoice level details (i.e. outward supply) will be 10th of subsequent month whereas the due date for filing GST returns (i.e. both outward and inward supply) by a large taxpayer shall be 20th of the next month. These dates are similar to the due dates of GSTR-1 and GSTR-3B respectively.

9. Small taxpayers - Opt to file quarterly return

Small taxpayers (turnover upto Rs. 5 Cr. in the last financial year) will have 'option' to file quarterly return (with monthly payment). Also, the taxpayer can check on the common portal whether he falls in the category of a small taxpayer.

For small taxpayers, it is proposed that the return filing dates shall be staggered based on the turnover of the taxpayer which shall be calculated based on the reported turnover in the last year i.e. 2017-18, annualized for the full year.

It appears that filing of 'nil' return for registered small taxpayers will be required. Interestingly, it is proposed that a taxpayer can report 'NIL' transaction even by sending a SMS.

10. In case of errors, file amendment return!

To address the problem of human error i.e. wrong entries being made in the return, there would be a facility for filing of 'amendment return'. Amendment return appears to be different than a regular return. GST payers will have a facility to file two amendment returns for each tax period earliest before the date of September or Annual return.

11. Update your profile!

GST payer will be required to update their GST profiles. Based on the profile, requisite details / tables would be made available to the GST payer (for example small manufacturer without exports will see table for details for local supplies).

12. In case of exports, upload shipping bill details!

The registered person can fill information of shipping bill, either, at the time of filing the return or after filing the return. Filing the details of the Shipping bill in the return at a later date shall not be considered as filing of an 'amendment return'.

A separate facility for uploading shipping bill details at a later date is expected to be provided to the exporters.

13. Submit HSN level details monthly

The table for reporting supplies with the tax liability at various tax rates shall not capture HSN but would continue to capture supplies at different tax rates (as is the present methodology).

The details of HSN shall be captured at four digit or more in a separate table in the regular monthly return .

14. Separately report the ineligible credits in annual returns

Invoices/ Supplies on which the recipient does not intend to take input tax credit (such as ineligible ITC supplies) but are kept pending or rejected will have to be reported separately in the Annual return .

Way forward:

As mentioned, the draft GST returns and formats for returns are placed in the public domain and stakeholders have been requested to provide their feedback on the MyGov portal. Special return / timelines will be applicable for composition dealer, Input Service Distributor (ISD), Non-resident registered person, persons liable to deduct tax at source or collect tax at source.

One may recall that till now all the GSTN return processes worked on paper but their real-life implementation faced severe challenges (including crashing of portal multiple times). Thus, the GST Council should ensure that appropriate testing (preferably on 5 large and 5 MSME GST payers from each State) should be carried out before system goes live. Also, results of this testing should be made available to the GST payers at large so that they can understand the challenges/ errors and proactively avoid the said errors.

It seems that with each passing day the compliance burden of GST is increasing and, therefore, it is a bit ironical that the GST return forms are called 'Sahaj' and 'Sugam'?

(The Author is a Chartered Accountant and has authored books on GST and Gulf VAT. The views expressed are strictly personal.)