The GST Council in its 28th meeting held on 21 July 2018 had approved the key features and a new format of GST returns. Now, the GST Council has released the salient features of the new return format and the business process for information of trade and industry and other stakeholders.

Return filing process

  1. Outward Supplies

    • Facility for continuous uploading of invoices by the supplier and viewing of such invoices by the recipient on the GST common portal.
    • These would be auto populated as 'Annexure of outward supplies' in the main return.
  1. Inward Supplies and ITC

    • Annexure of inward supplies - To be auto drafted based on invoices uploaded by suppliers.
    • Credit mechanism:

      • Recipient to avail Input Tax Credit (ITC) only on the basis of invoices uploaded by supplier.
      • ITC pertaining to invoices uploaded by supplier by tenth of the subsequent month to be available in the same month. Invoices uploaded by the supplier after the tenth of the subsequent month shall be available to the recipient only in the return of the next month. For example, if an invoice of April 2018 is uploaded by the supplier on 11 May 2018, the recipient can claim ITC available in respect of such invoice in its return for the month of May 2018 and not of April 2018 resulting in working capital blockage.
    • Provisional ITC in transition phase

      • The ITC availment mechanism would be relaxed in the transition phase of six months after the new system of return filing is implemented.
      • In the transition phase, the recipient would be able to avail provisional ITC on self-declaration basis even in respect of invoices not uploaded by the supplier by the tenth of the next month.
      • A 'missing invoice' facility would be available for this purpose. Reporting of 'missing invoices' can be delayed by the recipient for up to two tax periods to allow him time to follow up and get the missing invoices uploaded from the supplier.
  1. Main return

A monthly return for all registered persons to be called as "monthly return" in form GSTR to be filed by 20th of the subsequent month. Most of the details of outward and inward supplies to be auto-populated. Certain fields would be required to be entered manually by the taxpayer such as:

  • Advances;
  • Exempt and non-GST supply;
  • ITC reversal; and
  • Amount of tax, interest or late fee.

Key issues and recommended action vis-à-vis the current compliance system

Comments Recommended action for businesses
Annexure of supplies to main return
This annexure is similar to the current GSTR-1.
The key deviations from GSTR-1 are:
  1. Supplier has been provided a facility to continuously upload invoices.
  2. The ITC of the recipient is dependent on the invoices uploaded by the supplier here.
  3. Invoices accepted by the recipient would be locked. Such invoices cannot be amended by the supplier. In such a situation, the supplier would have to raise a credit note or debit note, as applicable.
  4. Details of outward supplies would be auto-populated on the basis of invoices uploaded by the supplier.
  1. Businesses should determine the feasibility of continuous uploading of invoices in view of budgetary and manpower constraints.
  2. Suppliers should ensure accuracy while uploading invoices as the ITC of the customers is dependent on the same.
  3. Suppliers should also ensure timely uploading of invoices, as the recipient can avail ITC for a month only in respect of invoices uploaded by the supplier till the tenth of the succeeding month. Delay in uploading invoices, may have an impact on the working capital of the recipient.
Annexure of inward supplies
This annexure would be auto-drafted on the basis of invoices uploaded by the suppliers, as stated above.
The key deviations from existing system are:
  1. Currently, the businesses have to manually insert their ITC in GSTR-3B. Now, the recipient would have to accept invoices uploaded by the supplier, post which they will be locked. Invoices which are neither rejected nor kept pending would be deemed to be accepted.
  2. Invoices can be rejected by the recipient, typically in cases where the invoice is marked to a wrong taxpayer due to a mistake by the supplier in mentioning GSTIN of the recipient.
  3. Recipient may mark 'pending invoices' in cases where the recipient believes that one of the three situations exist:
    • Supply has not been received by the recipient;
    • Invoice needs amendment;
    • Recipient is not able to decide whether to take ITC for the time being. On the basis of the above, available ITC would be determined.
  1. Businesses should devise a system to ensure that the invoices are accepted, rejected or kept pending, as the case may be, within a fixed time frame.
  2. A standard operating procedure should be devised to ensure there is no delay in availing ITC and ensure there are timely follow ups with suppliers in case of delays in uploading invoices.
  3. In the initial six months, provisional ITC would be available to the recipient on the basis of self-declaration. This timeframe should be utilized to remove any gap between the supplier and recipient in complying with the process as laid for the purpose of availing ITC.
Main Return (Form GSTR)
The main return would be mostly auto drafted.
The key deviations from existing system are:
  1. Currently, the businesses have to manually prepare GSTR-3B with no system based correlation with GSTR-1 and GSTR-2A. The main return would now be heavily dependent on accuracy of the assessee's own declaration of outward supplies and vendor's uploading of invoices.
  2. Manual field are limited to ITC reversals, interest, advances, etc.
  1. Businesses should expect lesser compliance burden in view of details being auto populated.
  2. Manual fields such as ITC reversals are critical and it should be given due attention.

Other key points

The new return filing procedure has certain additional key aspects such as:

  • Amended return filing facility;
  • Offline IT tool to be provided by the government for matching of invoices;
  • Nil return filing facility through SMS;
  • Small taxpayer (annualized turnover for year 2017-18 up to INR 50 million) can opt for quarterly filing with monthly payment of taxes - Forms SUGAM and SAHAJ.

SKP's Comments

The GST council has undoubtedly proposed a major overhaul of the compliances under the GST regime. It is imperative for businesses to undertake systemic changes, undertake business impact/ readiness analysis to ensure readiness. Vendor-customer relationships would have to be strengthened in view of their inter-dependency in determining GST liability. Systems should be put in place to ensure smooth and timely compliances.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.