A Guide On New GST Returns

A Guide On New GST Returns

In this article, we will discuss the wave of developments in the GST regime  proposed under new returns and as reemphasized in the Union Budget of FY 2020-21. This article will help the taxpayer in understanding the implications of new returns and key areas impacting compliances under the GST regime.

In this article, we shall cover the following topics:-
1. Legislative background
2. Current Returns in GST
3. Need for new returns
4. New Returns
5. Distinguishing factors between new returns and current returns
6. Way Forward

1. Legislative background on GST returns

GST returns are the first step of data transmission between the taxpayer and the tax authorities. Furnishing of returns facilitates communication of the transaction details of sales, purchases, taxes paid, input tax credit and such information which is required by the department to ascertain the liability of the taxpayer.

Section 37 to Section 43 of the Central Goods and Services Tax, 2017 (hereinafter referred to as the ‘Act”) mandates the requirements, forms and due dates of the existing returns.

The government vides CGST (Amendment) Act, 2018, dated 30 Aug 2018 introduced Section 43A to the Act which has an overriding effect on the current laws and regulations relating to the procedure of furnishing return and availing input tax credit. Section 43A is the parent section for new returns. However, it is pertinent to note it is in abeyance as the rules have not been prescribed.

2. Current Returns in GST: –

Currently, the number of returns and the type of return to be filed by the taxpayer depends on the type of taxpayer. If the taxpayer has opted for a composition scheme then the current system requires quarterly returns in the form GSTR 4 and an annual return whereas the normal taxpayer has to file 2 monthly returns in the form GSTR 1 and GSTR 3B along with the annual return. Thus a composition taxpayer files 5 returns ( 4 quarterly returns and 1 annual return) whereas normal taxpayer files 25 returns (12 GSTR -1, 12 GSTR 3B and 1 annual return)
Types of returns in the current system are tabulated in brief below: –

Return Form Particulars Frequency Due Date

 

GSTR-1

 

Details of outward supplies of taxable goods and/or services affected

 

Monthly

11th* of the next month with effect from October 2018

*Previously, the due date was 10th

 

GSTR-3B

 

Simple Return in which summary of outward supplies along with Input Tax Credit is declared and payment of tax is affected by taxpayer

 

Monthly

 

20th of the next month

 

GSTR-4

 

Return for a taxpayer registered under the composition levy

 

Quarterly

 

18th of the month succeeding quarter

 

GSTR-5

 

Return for a Non-Resident foreign taxable person

 

Monthly

 

20th of the next month

GSTR-6

Return for an Input Service Distributor

Monthly

13th of the next month

 

GSTR-7

 

Return for authorities deducting tax at source.

 

Monthly

 

10th of the next month

 

GSTR-8

 

Details of supplies effected through e-commerce operator and the amount of tax collected

 

Monthly

 

10th of the next month

 

GSTR-9

 

Annual Return for a Normal Taxpayer

 

Annually

 

31st December of next financial year*

 

GSTR-9A

 

Annual Return a taxpayer registered under the composition levy anytime during the year

 

Annually

 

31st December of next financial year*

 

GSTR-10

 

Final Return

 

Once, when GST Registration is cancelled or surrendered

Within three months of the date of cancellation or date of cancellation order, whichever is later.

 

GSTR-11

 

Details of inward supplies to be furnished by a person having UIN and claiming a refund

 

Monthly

28th of the month following the month for which statement is filed

The current system of return filling though based on ideations proposed on 1st Jul 2017 with the introduction of GST are different than actual Go Live of return filling process which is tabulated below: –

GST return filling process

The ideation of the return filling on 1st July 2017 was to have GSTR 1 wherein the details of outward invoices were to be submitted by the taxpayer. The details of inward supplies were to be auto-populated in GSTR 2A basis the GSTR 1 filed by the vendors of the taxpayer. The taxpayer could accept/reject/keep pending/add or modify the details auto-populated in GSTR 2A and basis his actions the taxpayer was expected to file GSTR 2 confirming the amount of ITC. Basis the liability declared in GSTR 1 and ITC from GSTR 2, the system would provide auto-filled GSTR 3 and payment liability of the taxpayer.

However, due to technical glitches, the return filing system which was active was only GSTR 1 and GSTR 2A. A new return – GSTR 3B was introduced which was a summarized version of GSTR 3 wherein the taxpayer was required to submit the outward details and ITC.

The governance in terms of ITC availed by the taxpayer sup moto was through issuing notices wherein there was a difference in terms of value auto-populated in GSTR 2A and  ITC claimed by the taxpayer in GSTR 3B.

The numerous notices in reference to the above variance lacked uniformity in the process and robustness. This led to challenges for the taxpayer as well as the government authorities which pawed the way for an introduction to Rule 36(4) to the Central Goods and Services Tax Rules 2017 which initially restricted the ITC to 120% of Eligible ITC appearing in GSTR 2A of the taxpayer which was further restricted to 110%

The above restriction mandated a requirement for a comprehensive reconciliation tool to authenticate the amount of ITC claimed.

3. Need for New Returns: –

The need for new returns emerges from three broad angles as under: –

Legal Governance Business
  • Alignment with the broad legal framework
  • Better compliance
  • Transparency of Revenue collection
  • Curb inaccurate tax credits through fake invoices
  • Simplicity and ease in compliance
  • Leveraging technology and minimizing tax departmental interventions

4. New Returns

New returns are having one main return and two annexures that are Anx -1 and Anx – 2. Periodicity of return filing is depending upon the turnover of the taxpayer. If the turnover is up to INR 5 Crores (in the preceding financial year), the taxpayer may opt to file returns quarterly and if the turnover is above INR 5 Crores then the taxpayer has to compulsorily file returns monthly. Considering the diversity of taxpayers in the country, there are three types of returns notified for ease of taxpayers depending upon the nature of transactions as tabulated below:-
RET – 1 (NORMAL) RET – 2 (SAHAJ) RET – 3 (SUGAM)
  • Any type of transactions

Type of transactions restricted to -

  • B2C
  • Inward supplies attracting RCM

Type of transactions restricted to -

  • B2B
  • B2C
  • Inward supplies attracting RCM

Taxpayers opting for Sahaj / Sugam shall not have any transaction apart from those listed in the above table along with Nil rated or exempted or Non-GST supplies. Such taxpayers cannot make supplies through e-commerce operators on which TCS under section 52 of the Act is applicable.

Such taxpayers shall not be entitled to claim ITC on missing invoices which is explained in details of ANX 2

If the turnover of the taxpayer is more than INR 5 Crores then he has to file RET -1 only and shall not have the option of Sahaj or Sugam.

The taxpayers filing quarterly returns are given an option to switch between the type of returns as below: –

  • Normal to Sahaj / Sugam – Once a financial year at the beginning of any quarter
  • Sugam to Sahaj – Once a financial year at the beginning of any quarter
  • Sahaj to Sugam / Normal – More than once in a financial year at the beginning of any quarter
  • Sugam to Normal – More than once in a financial year at the beginning of any quarter

The above mechanism allowing the taxpayer to switch between the type of return provides the ease to the taxpayer in terms of rolling back any decision in terms of the position adopted for the type of return filing.

Annexure to the main return: –

ANX 1: – Details of outward supplies, imports, and inward supplies attracting RCM

 

This annexure is similar to GSTR 1 of the current return filling systems wherein the taxpayer is required to furnish the details of outward supplies. However, in ANX 1 the taxpayer is also required to furnish details of imports and inward transactions attracting RCM which are not required in the current GSTR 1.

The E-invoicing is expected to ease the entire new returns as the above details will be auto synched when the invoice reference number (IRN) and the QR code from the designated portal.. E-invoicing is an enabler to achieve silk and smooth transition to new returns and is expected to make the compliance process simpler.

ANX 2: – Details of inward supplies (Auto- drafted basis ANX 1 / E-invoice of the vendor)

This annexure is similar to GSTR 2 returns which were proposed in July 2017. The details furnished by the vendors in their ANX 1 will be auto-populated in this annexure. Post-E-invoicing the details shall be auto-populated basis the details sent for obtaining the IRN and the QR code.

The taxpayer shall have three options as under –

taxpayer shall have three options as under
  1. Accept:- The taxpayer shall accept all the invoices which are correctly uploaded by the vendors and affirms the conditions for availing input tax credit as per Section 16(2) of the CGST Act. An invoice which is accepted shall be termed to be locked and cannot be amended by the vendor
  2. Reject: – The taxpayer shall reject those invoices which are not pertaining to the taxpayer or are uploaded with incorrect details. The taxpayers are not given an option to modify the details entered by the vendor.
  3. Pending: – The taxpayer can keep the invoice appearing in ANX 2 as pending and avail in any subsequent tax period before the due date of availing ITC as per Section16(2).

If the taxpayer does not take any action on any invoice then that invoice shall be deemed accepted. The taxpayer is expected to take action on every line item, which is impractical to be done manually.

The government has released the prototypes of the new returns on the GSTN portal and the taxpayers are advised to use the prototype to familiarize themselves with the wave of new returns and assess the change requirements in their systems. The taxpayers can parallelly upload their live data used for filing monthly returns in this prototype and assess the difference. The full-fledged system is expected to go live in April 2020.

The transition plan announced by the government in June 2019 was as under: –

5. Distinguishing factors between new returns and current returns

The current system requires the taxpayer to provide details of outward supplies in form GSTR 1 and payment of net liability and summary of tax credits in form GSTR 3B.

GSTR 1 is similar to proposed ANX 1 and GSTR 3B is similar to proposed RET-01. ANX 2 is completely new for the taxpayer. However, ANX 2 can be related to GSTR 2 which was withdrawn in October 2017 and there was no month for which GSTR 2 was mandatory. Since GSTR 2 was withdrawn, taxpayers are not exposed to table requirements and hence to be considered as a completely new requirement.

Table wise bifurcation between GSTR 1 and ANX 1 is tabulated below for better understanding: –

Table No of Anx - 1 Particulars Erstwhile GSTR1 Table No Remarks

3A

B2C supplies

1.5A and 1.7A(1) and 1.7B(1) combined

No bifurcation of small and large

3B

B2B Supplies

1.4A

Earlier at tax rate level, Now expected to be at HSN level

3C

Exports with payment of tax

1.6A

To be split between with and without POT

3D

Exports without payment of tax

1.6A

To be split between with and without POT

3E

SEZ supplies with payment of tax

1.6B

To be split between with and without POT

3F

SEZ supplies without payment of tax

1.6B

To be split between with and without POT

3G

Deemed exports

1.6C

No change

3H

Inward supplies attracting RCM

New

Earlier summarized and reflected in GSTR 3B. Now needs to be provided at line item level in ANX 1

3I

Import of Services

New

Earlier summarized and reflected in GSTR 3B. Now needs to be provided at line item level in ANX 1

3J

Import of Goods

New

Earlier summarized and reflected in GSTR 3B. Now needs to be provided at line item level in ANX 1

3K

Import of goods from SEZ unit on Bill of Entry

New

Earlier summarized and reflected in GSTR 3B. Now needs to be provided at line item level in ANX 1

3L

Missing documents

New

Provisional credit to be availed

4

Supplies made through e-commerce operators

1.4C 1.5B 1.7A(2) and 1.7B(2)

Earlier bifurcated between registered and unregistered

Existing fields of GSTR 1 which are not a part of ANX 1 but are required to be provided at the time of RET 1 are as under:

Table No of Ret 01 Particulars Erst while GSTR-1 Table No. Remarks

3 - C - 3

Advances received

11A

Split of Inter Intra not required

3 - C - 4

Advances adjusted

11B

Split of Inter Intra not required

3 - D - 1

Exempt and Nil rated supplies

8A 8B 8C and 8 D combined

 Split of Inter Intra not required. Exempt and Nil combined

3 - D – 2

Non GST Supplies

8A 8B 8C and 8 D combined

Split of Inter Intra not required

3 - D – 3

Outward supplies attracting RCM

1.4B

Memo information

3 - D – 4

Supply of Goods by SEZ to DTA on BOE

New

Draft returns not clear

6. Way forward

The readiness of the government in the implementation of New returns can be vouched through the prototype released and available for the taxpayers to familiarize and transition to a single return by April 2020 in the phased manner. The way forward for the taxpayer is as under: –

New returns can be vouched through the prototype

Aligning Source Data in the Requisite Format of New Returns: –

The differences in terms of transactions summarized and reported at the tax rate level require to be reported at the HSN level in the new returns will be a key change in terms of source files that form the base for furnishing returns. RCM transactions will now have to be a part of the source file prepared. Multiple changes in table requirements will have to be mapped on the type of transactions to ensure correct reporting in the new returns.

ERP Changes: –

The differences in terms of transactions summarized and reported at the tax rate level require to be reported at the HSN level in the new returns will require a change in ERP systems capturing the additional details. Along with the implementation of new returns, the requirements of E-invoicing will warrant a significant change in the current ERP systems.

ASP / GSP Solutions: –

The new returns provide an option for real-time uploading of outward invoices and locking of inward invoices. Timely locking of inward invoices will secure ITC. If there is an invoice that is paid but is not reflecting in ANX 2 will create a working capital impact and this can be identified through real-time reconciliation. ASP / GSP solutions provide the above real-time requirements and sync with the current ERP systems of the taxpayers, which can avoid the hassle of manual work.

Decision making for availing ITC:-

The new returns provide an option to add the invoices which are not appearing in ANX 2 and the taxpayer intends to avail credit on such invoices. The company has to assess and position needs to be adopted on availing credits on such invoices and reconciliation process for the same. This may also require an addendum to the contracts with the vendors to secure ITC

A pilot run on the prototype:-

The companies should have a migration plan from the old compliance system to the new compliance system. This shall require multiple training and communications across divisions along with cash flow impact assessment and management. Go live with new returns is expected from 1.

Transition and Go Live with new returns: –

The companies should have a migration plan from the old compliance system to the new compliance system. This shall require multiple training and communications across divisions along with cash flow impact assessment and management. Go live with new returns is expected from 1st April 2020.

The differences in terms of transactions summarized and reported at the tax rate level require to be reported at the HSN level in the new returns will be a key change in terms of source files that form the base for furnishing returns. RCM transactions will now have to be a part of the source file prepared. Multiple changes in table requirements will have to be mapped on the type of transactions to ensure correct reporting in the new returns.

The differences in terms of transactions summarized and reported at the tax rate level require to be reported at the HSN level in the new returns will require a change in ERP systems capturing the additional details. Along with the implementation of new returns, the requirements of E-invoicing will warrant a significant change in the current ERP systems.

The new returns provide an option for real-time uploading of outward invoices and locking of inward invoices. Timely locking of inward invoices will secure ITC. If there is an invoice that is paid but is not reflecting in ANX 2 will create a working capital impact and this can be identified through real-time reconciliation. ASP / GSP solutions provide the above real-time requirements and sync with the current ERP systems of the taxpayers, which can avoid the hassle of manual work.

The new returns provide an option to add the invoices which are not appearing in ANX 2 and the taxpayer intends to avail credit on such invoices. The company has to assess and position needs to be adopted on availing credits on such invoices and reconciliation process for the same. This may also require an addendum to the contracts with the vendors to secure ITC

The companies should have a migration plan from the old compliance system to the new compliance system. This shall require multiple training and communications across divisions along with cash flow impact assessment and management. Go live with new returns is expected from 1.

The companies should have a migration plan from the old compliance system to the new compliance system. This shall require multiple training and communications across divisions along with cash flow impact assessment and management. Go live with new returns is expected from 1st April 2020.

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