OCTOBER 01, 2018

By Pritam Mahure, CA

WHILE the GST Council continues to take steps to iron out the interpretation/legal aspects, still, compliance challenge seem to be either ignored or missed out and this is proving to be fatal as it is building up an unprecedented compliance burden on GST taxpayer.

This article intends to highlight few of the macro level compliance challenges, which if addressed have potential to bring 'ease of compliances' for GST taxpayers.

Focus on critical details

At present, GST taxpayer is required to upload various details in GSTR-1 (monthly), GSTR-3B (monthly), ITC-04 (quarterly), Annual return (annual), GST Audit (annual), E-way Bill (real-time). It is observed that either multiple details are required for same period (such as in GSTR-1, GSTR-3B and e-way bills) or consolidated details are required again (in Annual return or GST audit). Even when one peruses the details required for outward supplies in GSTR-1, its apparent that more that more than ten columns need to be filled in.

To ensure lesser burden as well as simplicity in GST returns, either fewer details could be requested or only certain details can be requested in annual return.

Avoid duplication of requested details

GST payer is required to furnish details with respect to export supplies at the time of filing shipping bills and once again in GSTR-1 (Table 6A) and further at GSTR-3B [Table 3(b)]. Further, details with respect to imports are furnished at the time of filing Bill of Entry (BoE) are once again required to be furnished at GSTR-3B [Table 4 A (1)]. Similarly, details are uploaded for e-way bill (for supplies above prescribed threshold for intra-State and inter-State movement) and are again confirmed at the time of GSTR-1.

If certain details are auto-populated in other returns (for e.g. details of import can be collected by GST portal directly from ICEGATE). It is pertinent to note that facility (of auto-population of GST amount in importer return) is presently available in United Arab Emirates (UAE). Thus, by linking (ICEGATE with GST portal) and by reducing duplication, ease of compliance can be introduced.

Reduce number of reconciliations

The aforesaid requirement to fill in same details two or three times inherently creates a situation of reconciliation. Currently, GST payer is required to prepare the reconciliation of GSTR 1 vis-a-vis GSTR 3B, GSTR 2A vis-a-vis GSTR 3B, GSTR 3B vis-a-vis financials, financials vis-a-vis annual return etc. Further, reconciliation could be required as time of supply as per GST (based on accrual or receipt etc.) and financials (based on accrual system of accounting) is different.

GST council should certainly think about streamlining the compliances to ensure that the reconciliations are reduced.

Alternate (but equally effective) mechanism to invoice-level matching could be explored

At present, the GST law requires GST payer to claim credit based on details uploaded by vendors (i.e. through GSTR-2A). It is pertinent to note that even in other law such as Income Tax law, Tax Deduction at Source (TDS) details are tracked at PAN level (rather than at invoice level). Even in Maharashtra VAT, the matching earlier was on 'TIN' (i.e. VAT registration no.) level.

Thus, while the matching may continue, GST council can explore it at GSTIN level (so if a supplier has issued 800 invoices to a buyer in a month, only total GST for the month will be compared than 800 invoices). This process will tremendously reduce the load on the system as well as irrelevant mismatches.

Further, if possible, the matching can take place quarterly/ annually, as most financials are closed quarterly/annually and submitted to other Authorities (such as Income Tax Department along with confirmed closing balances of debtors and creditors). If not to all taxpayers, this facility (annual matching) at least could be extended to large taxpayers like AEO in Customs.

Make the controls in GST return/ portal as exception based than restrictive

At present there are data validation controls placed at the time of filing GST returns. In certain cases, these controls prevent the GST payers from filing appropriate return. For e.g. in case of 'intermediary' service to non-resident customer, the GST levy as per GST return is 'intra-State' whereas there is also alternate view that this transaction will qualify as 'inter-State' transaction. However, the GST return utility prevents the GST payer in mentioning the details as 'inter-State'.

Similarly, though the aforesaid transaction falls under Business-2-Business category (B2B), it can't be disclosed in GSTR-1 as under 'B2B Invoices' as one of the controls for disclosing transaction in B2B is to provide GSTIN of the recipient (which will not be available as the customer is non-resident). Given this, the GST payer is compelled to report it under B2C (Others).

Given aforesaid challenges, it is advisable that instead of restrictive controls, 'pop-up' based suggestions could be provided so that the taxpayer is not prevented from filing return.

Way forward

It is apparent that the genuine GST payer is continuously reeling under pressure of GST compliances. Further, even after fifteen months, tools are yet to be made available to enable GST payer meet GST compliances. Additionally, GST payers are struggling to find better tool/ utility which can help in meeting GST compliances.

The Government needs to appreciate that the GST payer is not only required to file returns under GST but also Income Tax, TDS/ TCS, Transfer Pricing, Company Law, Profession tax, RERA, Labour laws etc. Thus, making GST compliances cumbersome has potential to put off even genuine GST payers.

The GST Council should, therefore, brainstorm whether various app developers like ASP/GSP/fintech entities can be invited to make GST compliances easier.

Though till now GST council's focus seemed to be more on ironing out legal challenges, now, its time to focus on bringing 'ease of compliances' in GST.

(The Author is a Chartered Accountant and has authored books on GST and Gulf VAT)