Comparing GST Return Systems for Outward Supplies and Tax Liabilities: Old vs. New
This article details the shift from the old to the new GST return filing system, specifically focusing on outward supplies and tax liabilities. It compares the GSTR-1 and GSTR-3B with the new GST ANX-1 and RET-1, highlighting changes in reporting mechanisms like RCM, HSN summary, and imports. Additionally, it outlines new features such as continuous invoice uploading, provisional ITC management, and amendment returns, alongside discussing potential compliance challenges for taxpayers.
Comparing GST Return Systems for Outward Supplies and Tax Liabilities: Old vs. New
This article examines the distinctions in reporting outward supplies and tax liabilities between the previous and current GST return frameworks. Key modifications and new features within the updated system are detailed.
Latest Update As of March 14, 2020, the revised GST return system was scheduled for implementation in October 2020. The existing return process, involving GSTR-1, GSTR-2A, and GSTR-3B, would remain in effect until September 2020, pending official CBIC notification.
Under the Old Return Filing System
Under the previous system, taxpayers filed GSTR-1 to report outward supplies and declare the associated tax liabilities. Input Tax Credit (ITC) for imports was claimed in GSTR-3B as eligible ITC. Taxpayers with an annual turnover exceeding Rs.1.5 crore were required to file GSTR-1 monthly, while others could file it quarterly. GSTR-1 covered the following particulars:
| S No | Particulars |
|---|---|
| 1 | Supplies made to registered persons, excluding reverse charge mechanism (RCM) supplies and those made via e-commerce operators |
| 2 | Supplies subject to the reverse charge mechanism |
| 3 | Supplies processed through an e-commerce operator |
| 4 | Interstate supplies to unregistered persons with an invoice value exceeding Rs.2.5 lakh |
| 5 | Zero-rated supplies and deemed exports |
| 6 | Nil-rated, exempted, and non-GST outward supplies |
| 7 | Amendments to taxable outward supplies |
| 8 | Advances received or adjusted during the tax period |
| 9 | HSN-wise summary of outward supplies |
| 10 | Documents issued during the tax period |
Under the New Return Filing System
In the updated system, GST ANX-1 is used to report sales and declare tax liabilities. Imports are also reported in GST ANX-1, and the ITC on imports is automatically populated in GST RET-1. Taxpayers are categorized based on annual turnover: large taxpayers (over Rs.5 crore) file monthly GST ANX-1, while small taxpayers (up to Rs.5 crore) have the option to file monthly or quarterly. GST ANX-1 includes the following details:
| S No | Particulars |
|---|---|
| 1 | Supplies made to consumers and unregistered persons |
| 2 | Supplies made to registered persons (excluding RCM supplies) |
| 3 | Exports, with or without tax payment |
| 4 | Supplies to SEZ units or developers, with or without tax payment |
| 5 | Deemed exports |
| 6 | Inward supplies attracting reverse charge |
| 7 | Import of goods and/or services |
| 8 | Import of goods from SEZ units or developers via a bill of entry |
| 9 | Missing invoices that recipients are required to upload |
| 10 | Information regarding supplies made through e-commerce operators |
| 11 | Amendments to various types of supplies |
Comparison: Old vs. New GST Return System
While GST ANX-1 in the new system bears resemblance to GSTR-1 from the old, several key distinctions exist:
- Reporting of Supplies Under Reverse Charge Mechanism (RCM): Under the old system, B2B outward supplies subject to RCM were reported in GSTR-1. This requirement has been eliminated in the new system because recipients are now responsible for reporting inward supplies liable under RCM at the invoice level within their GST ANX-1. Suppliers, however, must still provide an aggregate figure in their GST RET-1.
- HSN Summary Reporting: The previous system mandated a separate summary for Harmonized System Nomenclature (HSN) codes. The new system requires suppliers to report HSN codes at the invoice level, determined by their turnover. Consequently, taxpayers can access HSN data via their GST ANX-2 when the supplier was obligated to declare HSN.
- Reporting of Imports: Previously, only ITC on imports needed to be reported in GSTR-3B. The new framework requires taxpayers to report both goods and services imports in GST ANX-1.
- Reporting of B2C Large Sales: The mandate to report large B2C sales (interstate sales to unregistered individuals exceeding Rs.2.5 lakh invoice value) has been removed. This is because all B2C sales are now reported invoice-wise under the new GST returns system.
- Reporting of Documents Issued: The new return system no longer requires the reporting of documents (such as invoices, debit/credit notes, vouchers, or delivery challans) issued during the tax period, along with their serial numbers.
Additions Under the New System
The new GST return system introduces several new features:
- Continuous Invoice Upload: A new interface allows suppliers to continuously upload invoices into their GST ANX-1. Monthly filers must upload B2B invoices by the 10th of the following month and B2C invoices by the 18th. Quarterly filers have until the 23rd of the month after the quarter to upload their invoices.
- Missing Invoice and Provisional ITC: If a supplier fails to upload an invoice in their GST ANX-1 by the due date, it will not appear in the recipient's GST ANX-2, preventing the recipient from claiming ITC. Such an invoice is termed a "missing invoice." However, the recipient can claim provisional ITC in their GST RET-1.
- Reporting Missing Invoices and Reversal of Provisional ITC: Recipients must diligently follow up with suppliers to ensure missing invoices are uploaded within a specified period (T+2 for monthly filers or T+1 for quarterly filers). If the supplier fails to upload the missing invoice within this timeframe, the recipient must report it in Table No. 3L of GST ANX-1. Subsequently, the recipient must reverse the provisional ITC previously claimed in GST RET-1.
- Amendment Return: This feature enables taxpayers to modify details reported in GST RET-1/ANX-1. Taxpayers can file up to two amendment returns per tax period and can also use them to pay tax liabilities. Amendments for missing invoices, reported later by the supplier, can also be processed through an amendment return.
- Shifting of Documents: A facility will be provided to move a document from one table to another if a taxpayer has correctly entered the document but placed it in the wrong table.
Expected Hardships Faced by Taxpayers
The government's focus on a more transparent system means the new GST return system places greater responsibility on taxpayers.
- The emphasis on invoice-level transaction matching in the new GST return system demands significant time from taxpayers for compliance. Some business owners feel this distracts them from core business activities, forcing them to constantly adapt to GST changes.
- Suppliers must ensure accurate and timely invoice uploads in GST ANX-1. Errors or omissions can create additional work for both the supplier and the recipient. Recipients must continuously follow up with suppliers to rectify erroneous invoices or upload missing ones.
- The introduction of "missing invoices" means recipients must report them in Table No. 3L of GST ANX-1 if a supplier fails to upload an invoice within the T+2 or T+1 timeframe. This constitutes an extra, burdensome task for recipients, often due to supplier oversight.
- After reporting a missing invoice in GST ANX-1, the recipient is required to reverse the provisional ITC claimed earlier in GST RET-1. This reversal necessitates the recipient paying the corresponding tax amount, which can negatively affect business transactions between the supplier and recipient.
Despite over two years since GST implementation, taxpayers have encountered various compliance challenges. While some issues have been addressed by the government, others remain complex. To mitigate these, the government released prototype returns for the new system, intending to familiarize taxpayers and professionals with its mechanics. However, these prototypes do not enable all features, meaning a complete understanding of the forms will only be possible once the new GST returns system is fully operational.