FAQ on the GST in India

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New GST Returns

What are New GST returns?

The GST Council has approved a simplified return filing process on the 21st of July this year. Besides attempting to increase tax compliance, it also makes the filing process easier, takes less time than the standard return filing process, and allows taxpayers to make changes to their returns by filing an amendment return.

The simplified return process is expected to be implemented in six months.

What is an amendment return?

An amendment return is a return that is filed to fix incorrect entries in a previously submitted tax return. Two amendment returns can be filed for each tax period, and they must be filed within the time period mentioned in section 39(9) of the CGST Act of 2017. If an amendment return results in a change in liability of more than 10%, a higher late fee may be issued to make sure that taxpayers have an incentive to report appropriately in their regular returns. Payments can be made through an amendment return to help reduce interest liability of the taxpayer. Available ITC can also be used to make the payment. Any negative liability remaining in an amendment return shall be carried forward in the usual return for the next tax period. 

Who is required to file New GST returns on a monthly basis?

Every registered taxpayer is required to file one return each month, except: 

  • ISD (Input Service Distributor) providers 
  • Small taxpayers (those who have a turnover of less than Rs. 5 crore)
  • Composite dealers 
  • Non-resident registered tax payers 
  • Taxpayers who are liable to deduct tax at source under sections 51 and 52 
How do the New GST returns work?

The new returns will have two tables. One is to report any outward supplies and inward supplies subject to reverse charge. The other is to avail ITC (Input Tax Credit) based on the supplier’s uploaded invoices.

By answering a questionnaire, taxpayers can create a profile based on the nature of the supplies and purchases they made for business purposes. Creating a profile makes it easier to file returns, because only the fields that still need to be filled in will appear in the returns. 

Taxpayers can now view invoices uploaded on the common portal, regardless of whether they are a small taxpayer or not.

The date of filing returns is based on the taxpayer’s turnover, which is calculated using the reported turnover for the last year (2017-2018).

Taxpayers who haven’t made any purchases and have no output tax liability or input tax credit to avail can file one quarterly Nil return. This can be done through SMS.

Newly registered taxpayers are classified based on their estimated turnover, which they need to declare.

Can composition dealers file new returns?

Yes, composition dealers, along with dealers who have zero transactions, can file quarterly returns.

How do new returns work for small taxpayers?

Small taxpayers (those who have a turnover of under Rs. 5 crore) can file any one of the following returns: quarterly returns, Sahaj, or Sugam. Sahaj is used only for B2C outward supplies, and Sugam is used for both B2B and B2C outward supplies. Small taxpayers may choose between filing quarterly returns with monthly tax payments, or filing monthly returns like other taxpayers.

What is a payment declaration form?

Small taxpayers use a payment declaration form to pay their taxes. The payment declaration form includes self-assessed liability and self-declared ITC. This simplification lowers the compliance cost for small taxpayers, since the payment declaration form is not exactly a return and negligible errors on it will not lead to any legal issues.

When are taxpayers who have a turnover above Rs. 5 crore required to file their returns?

Taxpayers with a turnover of above Rs. 5 crore are required to file their monthly returns by the 20th of the following month. For example, the monthly returns for January must be filed by the 20th of February.

How are quarterly returns different from monthly returns?

Quarterly returns are similar to monthly returns, except that they are simplified. The following information is not required to be filed in the quarterly returns:

  • Missing or pending invoices of small taxpayers.
  • Supply such as non-GST supply and exempted supply since they do not create any liability.
  • Information with respect to ITC on capital goods is not required to be filed.

All this information must still be filed in the annual return, however. Small taxpayers who wish to file missing or pending invoices may do so in the monthly return.

What is the offline IT tool for?

An IT tool has been provided to match invoices downloaded from the viewing facility with the invoices stored in the buyer’s accounting software. The tool matches these invoices based on:

  • The to and from dates on the invoice.
  • The date when the invoice was uploaded on the Common Portal by the supplier.
  • The GSTIN of the supplier.
Why should invoices be uploaded online, and how does that process work?

When invoices are uploaded online by suppliers, it allows the buyers to view and lock them so that they can avail ITC throughout the month. A buyer can only avail ITC using a valid uploaded invoice. Buyers do not have to upload their purchase invoices. 

If a supplier uploads their invoices by the 10th of the following month, the invoices will be automatically populated in the liability table of the main return. Once the due date for filing returns is past, the buyer should be able to view their supplier’s return filing status in the viewing facility of the portal to check if their tax liability has been discharged or not.

Sellers who have not yet paid their taxes due will not be allowed to upload invoices until after they have done so.

What is the due date for uploading invoices?

There is no specific due date to upload invoices. Invoices uploaded by the 10th of the following month can be used to avail ITC in the buyer’s return. Invoices uploaded after the 10th of the following month will be posted in the relevant fields of the next return. For example, suppose a seller uploads invoice number 1 of April on the 8th of May and invoice number 2 of April on the 15th of May for the same buyer. The buyer can avail ITC for invoice number 1 with the April return (filed during May) and for invoice number 2 he can avail input tax credit with the May return (filed during June).

 What is a missing invoice?

A missing invoice is an invoice or debit note that has not been uploaded by the supplier, but has been used by a buyer to avail ITC. If such missing invoices are uploaded by the supplier within the prescribed time period, the customer can retain their availed ITC, but if not, the credit shall be recovered from them. Missing invoices can be changed by filing an amendment return.

Must missing invoices be reported?

Yes, missing invoices must be reported by the supplier in their main tax returns, during any tax period. Buyers, however, must report missing invoices within the following two tax periods. This is to allow the buyer time to get the supplier to upload the invoice. For example, if an invoice issued in the month of April, the recipient has until the June return (which is filed in July) to report the missing invoice. For taxpayers that file quarterly returns, missing invoices must be reported in the next quarter. Suppliers will be able to access information about any missing invoice that has been uploaded by the buyer.

 What is the invoicing process for B2B dealers?

B2B dealers should include details regarding invoices for supplies they have made while filing their returns. Their tax liability will be calculated based on these details along with the invoices uploaded by their sellers.  All invoices for B2B transactions are required to have a HSN number of 4 digits or more.

If a seller has not paid their taxes due, will their buyer’s ITC be automatically reversed?

When a seller has not paid their taxes due, their buyer’s ITC cannot be automatically reversed. For cases such as a missing taxpayer, closure of business by the supplier themselves, or when a supplier possesses inadequate assets, reversal of the buyer’s ITC is determined by a tax authority, after they have sent a notice and issue of order. This entire process is managed online.

What must be done when no return is filed for an uploaded invoice?

When no return is filed after invoices have been uploaded online by the supplier, the supplier must treat that case as a self-admitted liability. Recovery proceedings are to be initiated against the supplier after they have filed returns and paid their taxes.

What is locking of invoices?

When a buyer locks an invoice, it serves as a virtual handshake or agreement between the buyer and supplier for a transaction. Buyers may lock invoices before they file returns to avail ITC. Note that suppliers will not be allowed to make changes to locked invoices. When buyers have several invoices against them, they may not be able to lock individual invoices. For such cases, they can use deemed locking, in which every invoice that is not marked as either pending or rejected is locked and accepted.

Can invoices be unlocked?

If a buyer has mistakenly locked an invoice, they can unlock it online with a confirmation. Note that by unlocking an invoice, the buyer is subject to reversal of ITC.

Can buyers reject invoices?

Yes. If a supplier mistakenly enters an incorrect GSTIN in place of their buyer’s GSTIN, the invoice will end up going to the wrong taxpayer. Since this invoice does not apply to this taxpayer, they cannot avail any ITC using it and must reject it.

What are pending invoices?

Pending invoices are invoices that have been uploaded online, but have not been locked and accepted. There are three possible reasons for this:

  • The buyer is yet to receive their supply.
  • The buyer wants the invoice to be changed.
  • The buyer is debating whether they should avail ITC for the supply.

The recipient can reject pending invoices later, when they have made up their mind about all of the above.

Buyers must report pending invoices and cannot avail ITC for them. 

How have pending invoices been simplified?

Pending invoices have been simplified in order to reduce the number of pending invoices that need to be reported. Now, when a buyer has received their supply before filing a return, and the corresponding invoice has been uploaded by the supplier (by the 10th of the next month), the buyer can avail ITC in their return. This may allow the buyer to avail additional credit, because supplies received after the 1st of the month and before the 20th become eligible for ITC.

For example, the buyer can now avail ITC for an invoice issued in April and uploaded on the 10th of May by the supplier, even if they only receive the supply on the 20th of May. Before this simplification, the buyer would have needed to receive their supply by the 30th of April in order to be eligible for ITC.

When can an invoice be changed?

Invoices that have neither been used to avail ITC nor locked by the buyer can be changed by the supplier. After an invoice has been locked, it cannot be directly changed. Instead, a credit or debit note can be issued by the supplier to make changes to the tax rate, quantity, or amount of tax payable. 

When a change is being made to an invoice, the IT tool will make sure of the following:

  • To prevent the buyer from taking excess credit when a credit note is issued for an invoice that is marked as pending, both the credit note and the original invoice are linked in the system.
  • When a credit note is issued for an invoice that has already been locked and used to avail ITC, the reduction in the supplier’s tax liability is subject to the reduction in the buyer’s ITC.
What must be done with invoices or supplies that the buyer does not use to avail ITC?

Any invoices or supplies that a buyer does not use to avail ITC, and which are marked as pending or rejected, must be reported separately in the annual return.