SEPTEMBER 18, 2018

By Arun Kumar Khowala, CA

THE GST Council in its 28th GST Council Meeting has approved the new return formats. CBIC has placed Note on draft GST simplified returns and return formats in public domain for perusal and feedback of stakeholders. The Note on draft format of GST simplified return, inter alia, contains brief note which lists the salient features of the new return format and business process for the information of trade and industry and other stakeholders in two parts i.e. Part – A which specifies the Key features of Monthly Return and Part-B which specifies the Key features of Quarterly Return in GST.

As proposed in Key features of Monthly Return a taxpayer is required to file (1) Annexure of supplies to main return by 10th of the following month (2) Annexure of Inward supplies after taking action between 11th to 20th of following month (3) GSTR Monthly Return by 20 th of the following month.

Although the forms have been redrafted and requirement of certain information have been done away, the proposed scheme is similar to the existing system of GSTR1 (for Outward supplies), GSTR 2 (for Inward supply) and GSTR 3 ( Monthly Return).

The Government expects that any new scheme of return filing should have at least two important features (1) Invoice matching (2) Reversal of ITC of unmatched Invoice. Trade & industry wants that there should be only one simple return per month .Both these objectives can be achieved by making returns simpler and incorporating certain changes in scheme of draft returns and formats.

A. Changes in the proposed Scheme of draft Returns and Formats

1. Uploading of invoice and matching of invoice should not be linked with filing of returns and should be treated as a business process for all B2B transactions. It is provided in Para 3 of key features that there would be facility for continuous uploading of invoice by the supplier anytime during the month and such uploaded invoices will be continuously visible to the recipient. Invoices uploaded absorptive 10 th of succeeding month shall be auto populated in the liability table of main return of supplier. There should not be any due date for uploading of invoice as envisaged in Para 4 .Uploading of invoice should be a continuous process and the liability for a tax period will be determined on the basis of invoices uploaded up to 10 th of the succeeding month.

2. In place of recipient taking action from 11th of the succeeding month he should be allowed to take action on uploaded invoice on continuous basis . As the uploaded invoices are visible to him he will be in a position to take action like accept/reject/keep pending on an invoice on real time basis. Once the invoice is accepted by the recipient it will be locked as provided in Para 11. The recipient will be eligible to claim Input Tax Credit for invoices uploaded by the supplier and accepted by him up to a date prior to due date of filing of return . For example it can be 15 th of succeeding month. Acceptance of invoice should be a continuous process and the eligibility of ITC will be determined as per invoices accepted up to 15 th of the next month.

3. Table 3A& 3L, Table 4 and Table 5 of Annexure of supplies to main return should be shifted from this annexure and included in GSTR Monthly Return. Similarly Table 4 of Annexure of Inward supplies should be shifted from this annexure and included in GSTR Monthly Return.

4. Small tax payers who have B2C transaction only should use “SAHAJ”. For all other tax payer there should be a common single monthly return wherein certain table/information should be made invisible/inapplicable to small tax payer.

In the above proposed system uploading of invoice and acceptance thereof will be a part of normal business process and no return will be required to be filed for the same. Output liability and eligibility of input tax credit will be determined on the basis of uploaded invoice and accepted invoice. By shifting of tables from Annexure of supplies to main return& Annexure of Inward supplies to main return the required information can be captured in Monthly Return. There will not be any requirement of filing Annexure of supplies & Annexure of Inward supplies to main return and the main return will become “Single Monthly Return”. This will also help large tax payers to claim Input tax credit on supplies from small tax payer who will be filing return on quarterly basis.

B. Other Simplification Measures.

1. Input Tax Credit :- As per Annexure of Inward supplies attached to the "Note on simplified returns and return formats" credit of ITC is to be claimed by the recipient (Table 3 Column 17,18,19 & 20) for each line item of an invoice. It means eligible /ineligible credit has to be calculated invoice wise-Tax rate wise which is very difficult. This system should be discontinued. For example, in case of a hotel having a restaurant there are purchases from a general store for supply of food items like tomato sauce, ghee, butter etc. and toiletries like soap, shampoo etc in the same invoice. The recipient is not eligible for ITC on food items however ITC on toiletries will be available. As per the present system he will have to identify ineligible ITC on each line item of tax rate wise details appearing for invoices in the Annexure of Inward supplies. This is very tough and time consuming job. This can be simplified by deleting the requirement of calculating ineligible credit or eligible credit at invoice level and allowing deduction of total amount of ineligible credit for a tax period in Table 4 (B) for Details of reversal ,rejection, pendency and adjustment of credit . Only eligible ITC will be transferred to Credit Ledger. As per instruction no. 5 of GSTR Sugam,ineligible credit by small tax payers has to be reported in reversal column. This facility should be extended to large Tax payers also.

2. Outward Supplies details and Invoice uploading :- The supplier is required to upload Tax rate wise break up of same invoice in Table 3 of Annexure of supplies to main Return. This needs lot of calculation for tax payers where a single invoice contains supplies of different rates. The object of Government is matching of invoices not tax rate wise matching of invoices. It is suggested that Column 7 of Table 3 of the Annexure of supplies to main Return should be omitted . This will reduce burden of tax rate wise calculation of a particular invoice and make uploading of invoices very easy. Supplier should upload taxable value of an invoice and tax thereon . Since tax rate wise line item of an invoice will not be uploaded, it will also reduce burden on GSTN . This can be explained by example of following three invoices:

As per Annexure of supplies to main Return the details to be uploaded by the supplier will be as follows:

As per suggested changes in the proposed scheme if requirement of tax rate wise breakup is omitted then the details to be uploaded by supplier will be as follows:

The supplier will upload total amount of an invoice as one line item and Total output liability as per uploaded invoice will be the output liability of the supplier.

3. In order to capture tax rate wise and tax type wise details of supplies by the supplier during a tax period a new table should be inserted in monthly/quarterly return (GSTR) for tax rate wise and IGST, CGST, SCGST/UTGST and CESS wise taxable value of outward supplies for the tax period in the following format :-

C. Other Issues in proposed Simplified Returns and Formats

Monthly Returns

1. Recovery of Input Tax Credit from recipient on account of non payment by supplier as per Para No 10. should be made only in case of connivance between supplier and recipient.

2. HSN - As per present provision HSN wise detail is to be reported by tax payers whose turnover exceeds Rs 1.5 crores. As per Para no.17 of monthly & 9 of quarterly return sit appear that in the new scheme every Taxable person is required to provide HSN details irrespective of his turnover. It should be made applicable to large tax payers only.

3. Higher late fee for amendment return as proposed in Para no. 25 should be deleted.

4. Supply side control ( Para No. 30) – It will not be possible for a recipient to know at the time of entering transaction whether the supplier is covered by any such control. Denying the credit for purchases from such supplier will be too harsh for recipient.

5. As per Sl. No.11 of Table specific instruction of instructions to Annexure of supplies to main return all credit note and debit note will be furnished in Table 3. Further as per Para No. 16(i) the credit note and debit note will be linked to invoices but there is no provision for such reporting in the return format. Suitable provision for capturing such information should be made .Further as per amended Act single credit note and debit note can be issued for multiple invoices. This requirement is not in consistency with amended Act.

Quarterly Returns

1. As per Para no.3 Small Tax payers will not have facility to upload missing invoices. it should be made available to them.

2. It should be clarified whether the details of Annexure of supply to return (GSTR Sugam) is to be filed on monthly basis or quarterly basis. If required to be filed on quarterly basis then how large Tax payer will claim ITC for such supplies.

3. Provision should be made for amendment returns of Small Tax payers.

4. Requirement of filing Form GST PMT for the months in which no supplies have been made should be deleted.

(The views expressed are strictly personal.)