New GST return system for taxpayers. Simplified! is it?

New GST returns

The GST council recently announced the new return system for taxpayers in its 31st Council Meeting. In May 2019, they had shared a prototype of the offline tool on the GST Portal allowing users to use it and feel the difference.

New GST return system Background

The Goods and Service Tax Act has come with many compliances in the form of return filing. Apart from monthly/quarterly return filing, the taxpayer will also have to file the annual return. To ease the process of routine return filing form, GST Council introduced the new simplified returns system for taxpayers. The new GST return system will be operational as per the CGST Act- Section 43A.

What is Section 43A About?

Section 43A of CGST Act was recently added into the GST framework to simplify the procedures related to GST return filing and availing Input Tax Credit (ITC). Despite the announcement of it being effective from 1st February 2019, there is a slight change as now it will be implemented with the new return filing system and which is all set to operationalize these changes in the return reporting sphere. This section will replace the provisions of Section 16(2), Section 37 and Section 38 of the CGST Act which handles individually with the conditions to avail ITC, details of outward supplies, and details of inward supplies.

Small & Large Taxpayers in New GST return.

Taxpayers will be considered as small if their turnover is up to Rs 5 crore in the preceding financial year, otherwise, they will be considered as large taxpayers.

Basic Structure

There are three types of return proposed to be introduced based on turnover limit and type of transactions as follow:

  • GST RET 1- Normal Return
  • GST RET 2- Sahaj
  • GST RET 3- Sugam
  • ANX-1- Annexure to above returns for details of Outward Supplies
  • ANX-2- Annexure to above returns for details of auto drafted Inward Supplies.

Detailed Discussion

  • What is FORM ANX-1?

FORM GST ANX-1 is an annexure to the main return that was introduced under the new filing system of simplified returns under GST. This annexure is said to have all the details of outward supplies, inward supplies responsible to reverse charge and import of goods and services. One needs to report each detail in this annexure invoice-wise (except for B2C supplies) based on the constant uploading facility to be made available on the GST portal. The reporting can be done on a real-time basis and will be available for the recipient of supplies to take necessary action in their FORM GST ANX-2.

  • Important information for taxpayers when they file their FORM GST ANX-1
  1. The supplier can upload invoices one-after-another and on a real-time basis.
  2. The recipient will receive input tax credit during a tax period based on documents uploaded by the supplier till the 10th of the month following the month for which the return is being filed for, or the10th of the month following the quarter in case of quarterly filers.
  3. The details of the invoices uploaded by the supplier will be available to the recipient in FORM GST ANX-2 to take necessary actions such as to accept, reject or to keep the document pending.
  4. Supplies that attract reverse charge need to be reported only by the recipient and not by the supplier in this annexure.
  5. Wherever supplies are reported net of debit/credit notes, even if the values become negative in any case, the same can be reported as it is.
  6. All suppliers with an annual aggregate turnover over Rs 5 crores, and in relation to imports, exports, and SEZ supplies have to upload HSN-level data., whereas other taxpayers (with annual aggregate turnover up to Rs 5 crores) can report HSN codes on an optional basis in the relevant table, or leave the same blank. 
  7. Any documents rejected by the recipient shall be conveyed to the supplier only after filing of the return by the recipient.
  8. Documents belonging to the previous period prior to the current return filing system can be uploaded in the relevant tables of this annexure. Only those details will be allowed to be uploaded which have not been included in the previous FORM GSTR-1.
  • What is FORM ANX-2?

FORM GST ANX-2 is an annexure to the main return and will have all the details of inward supplies, for the recipient of supplies to take necessary action such as to accept or reject the invoices or keep them as pending, for action to be taken later. If the recipient accepts these documents, it indicates that the supplies reported in these invoices by the suppliers in FORM GST ANX-1 are correct. 

  • Important information for taxpayers as they file their FORM GST ANX-2
  1. The supplier can upload invoices continuously and on a real-time basis in FORM GST ANX-1 which will be auto-populated in this annexure i.e. FORM GST ANX-2.
  2. The details of the invoices uploaded by the supplier shall be available for the recipient in FORM GST ANX-2 to take necessary action such as to accept, reject or to keep the document pending.
  3. If an invoice is accepted by a recipient, it means that the document has been received before the recipient has filed his return and that the details reported by the supplier are correct. 
  4. If a recipient marks a document as pending, this means he has deferred his action on the said document for a later date, of either accepting or rejecting the document. Input tax credit on these documents will not reflect in the main return i.e. FORM GST RET-1.
  5. A separate functionality will be available to search for and reject an accepted document, on which credit has already been availed. This credit will be shown under reversal in table 4B (1) of FORM GST RET-1, which can be adjusted in table 4A(11) of the same return, in order to arrive at the amount of input tax credit that has been availed. 
  6. FORM GST ANX-2 will be deemed filed based upon the filing of the main return i.e. FORM GST RET-1 relating to the tax period.
  7. If invoices have been uploaded by a supplier in his FORM GST ANX-1, but he has not filed his return for the previous two consecutive periods, then the recipient will not be able to take credit on these invoices even if the same is made available to him in his FORM GST ANX-`2. However, the option will be available to reject or keep these documents pending.  For suppliers who file their returns quarterly instead of monthly, then the term ‘two consecutive periods’ are replaced by ‘one quarter’.
  • What is GST RET-1 Normal Return?

    A normal taxpayer making B2C supplies, B2B supplies, inward supplies attracting reverse charge mechanism, NIL rated, zero-rated or supplies through e-commerce operators can file GST RET-1. Large taxpayers (i.e. with turnover > Rs 5 crore in the previous FY) will have to file this return monthly, whereas small taxpayers (i.e. with turnover up to Rs 5 crore in the previous FY) can opt to file the return on a quarterly basis.
  • What is GST RET-2 Sahaj?

GST SAHAJ is a simplified one-page GST summary return that is to be added from October 2019 onwards.  Taxpayers having a turnover of up to Rs.5 crores in the last financial year and who are in the B2C supplies (supplies to consumers and un-registered persons) can choose to file this return. However, payments of tax must be made on a monthly basis through a challan (PMT-08). Small taxpayers having a turnover of up to Rs 5 crores and engaged only in B2C supplies can opt to file the quarterly returns in the GSTR SAHAJ form.

  • What is GST RET-3 Sugam?

A taxpayer with a turnover of up to Rs. 5 crores in the financial year will get an option to file this return. This form will be made available to only those small taxpayers engaged in both B2B (Business to Business – supplies to GST registered persons), and B2C (Business to Consumer – supplies to consumers and unregistered persons under GST) supplies in India. However, the tax is to be paid monthly via a challan (PMT-08).

Flow of Returns

Profile Updation

  • Periodicity will be monthly unless quarterly selected
  • Option to select Normal, Sahaj and Sugam before filing 1st return
  • Taxpayers filing the Quarterly (Normal) return can switch over to Sugam or Sahaj and those filing Sugam can switch over to Sahaj only once in the financial year
  • Taxpayers filing Sahaj can switch to Sugam or Quarterly(Normal) and those filing Sugam can switch over to Quarterly(Normal) more than once in a financial year.

Transition Plan

  • From October 2019, FORM GST ANX-1 will need to be filed compulsorily by the large taxpayers (annual turnover more than Rs 5 Crore), and this will replace the GSTR-1 return. In the case of Small taxpayers, they will need to file FORM GST PMT-08, which is the form for the self-declaration and payment of taxes.  Large taxpayers will continue filing their GSTR-3B returns for October and November 2019. 
  • For the month of December 2019, Large taxpayers will need to start filing FORM GST RET-01, which is the main return of the New Return System, and this needs to be filed by the 20th of January 2020. And for the Quarter October to December 2019, Small taxpayers will file their first FORM GST ANX-1 in January 2020.
  • Now as per the latest update of the 37th GST Council meeting held at Goa on 20th September 2019, the implementation of New GST Return has been Deferred to April 2020.

Possible Challenges in New Returns

  • As per the new laws the ERP systems need to be changed and updated.
  • Synchronizing with vendors filing cycle (Monthly/Quarterly) is expected to still be an issue.
  • RCM reporting along with PAN if unregistered.
  • Businesses need to adopt the new system and get their staff trained for the same.

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