How you will file tax returns under GST from July 1
Small businesses are the backbone of Indian economics. They drive the velocity of country’s economics, industrial growth, and catalyst for job creation. However, a large number of businesses in the country are unorganized and irregular in filing returns and paying taxes.
This could be due to knowledge gap, situational issue or perception among businessman small business small in size, operations and earnings, and it is okay to miss the deadline.
As a result, they end up getting a notice from the tax department demanding tax payment, interest, late fee and penalties for non compliance. Especially in case of VAT dealers, the consequence in terms of monetary impact is lesser to extent of additional cash outflow to the extent of default.
GST, a comprehensive indirect tax system is all set to subsume a host of existing indirect taxes and its implementation, compliance will be a key factor for the success and credibility of a business. GST works on a selfmonitoring mechanism, which is matching the concept of invoice between supplier and recipient of goods and services. After cross check of invoices and payment of tax by the supplier, the input tax credit will be available to the recipient.
Thus, a customer will always want to do business with vendors who are compliant. This results in a change of relationship between supplier and recipient from ‘customer cum emotional relationship to compliance relationship’.
Hence under GST, non compliance will not only affect your cash outflow in paying fines, interest, and penalties but also affect the continuity your business and compliance rating.
Let us understand the various returns to be furnished under GST and things to be taken care of during return filing.
10th of Subsequent Month Form GSTR1
In Form GSTR1, you need to declare the details of all the outward supplies of goods and/or services effected during the month. Invoice wise details of outward supplies made to registered dealer and aggregate taxable value of supplies made to consumer are required to be declared. In case, taxable value of supply made to consumer is more than Rs 2.5 lakh and if it is interstate supply, you need to declare invoice wise details.
11th of Subsequent Month Form GSTR2A
On 11th, the visibility of inward supplies is made available to the recipient in the auto populated GSTR2A. This is generated based on the outward supplies declared by your supplier in Form GSTR1.The period from 11th to 15th will allow for any corrections (additions, modifications and deletion) in Form GSTR2A.
This is the most critical phase of filing of your return, as any omission or correction not reconciled as per the statement in Form GSTR 2A with your inward supplies register, will impact your Input Tax credit eligibility. To save time, quicker and accurate reconciliation, technology will play a key role in your compliance.
15th of Subsequent Month Form GSTR2
After reconciling, any additional claim or correction as per Form GSTR2A needs to be incorporated and submitted in Form GSTR2 by 15th of subsequent month. Based on the claim reported in Form GSTR2, ITC will be credited to your E-credit ledger on provisional basis and post matching of invoice, it will be finalized.
16th of Subsequent Month Form GSTR1A
The corrections (addition, modification and deletion) reported by you in Form GSTR2 will be made available to your supplier in Form GSTR1A. The supplier has to accept or reject the adjustments made by the customer by verifying with suppliers outward supply register.
20th of Subsequent Month Form GSTR3
On 20th, based on the Form GSTR1 and Form GSTR2, an autopopulated return GSTR3 will be available for submission along with the payment.
Final Acceptance of Input tax credit in Form GST MIS1
After the due date of filing the monthly return in Form GSTR3, the inward supplies will be matched with the outward supplies furnished by the supplier, and then the final acceptance of input tax credit will be communicated in Form GST MIS1.The following details will be considered in the matching of invoices:
GSTIN of the supplier
GSTIN of the recipient
Invoice/or debit note number
Invoice/or debit note date
Taxable value and
The claim of input tax credit will be considered as matched, if the amount of input tax credit claimed is equal to or less than the payment made for output tax paid on such tax invoice or debit note by the corresponding supplier.
Also, the mismatch input tax credit on account of excess claims or duplication claims will be communicated to recipient in Form GST
MIS1 and to supplier in Form GST MIS2. Discrepancies are not ratified will be added as output tax liability along with interest. However,
there will be some breathing space since the law provides a window of two months to ratify the discrepancies before reversing the ITC
claim on provision basis.
Compliance is ‘No More a One Day Activity. The return cycle under GST will put an end to the existing practice. Today, most of the small business prepare their returns in a day by summarizing their purchase and sales transactions. This will no longer be relevant since GST Return cycle is spread across the month.
Secondly, the businesses need to move from offline data recording to online data recording to file the return. Today, most of the small businesses port the data from their books to offline tools and file their return. This will prove to be a costly affair since, under GST inward supplies and outward supplies will be autopopulated by GSTN and need to be reconciled with books.
Technology will play a important role for businesses under GST as GST is highly transaction based compliance system. The technology should help you to seamlessly prevent, detect and correct the exceptions before the filing of return and reconcile your books with GSTN.
By using the right technology, businesses will have timely compliance, manage cash flows better and adding up to compliance credibility.