Comparing Monthly and Quarterly GST Return Filing for Small Taxpayers
The new GST return system aims to simplify compliance for taxpayers. This article compares the monthly and quarterly filing options available to small taxpayers, detailing their respective return types, deadlines, and implications for input tax credit. It also examines how each frequency affects document editing and dispute resolution between suppliers and recipients. Ultimately, the optimal choice depends on a business's operational complexities and priorities.
The new Goods and Services Tax (GST) return system was designed to simplify compliance for taxpayers. It began on a trial basis in July 2019, with full implementation originally planned for April 2020 after an initial push from October 2019, as discussed in the 37th GST Council meeting on September 20, 2019. This new system, however, was further postponed to October 2020. Key innovations included streamlined return forms for smaller taxpayers, real-time access to input invoice details, and the ability to amend returns.
Understanding GST Return Types and Filing Frequencies
Small taxpayers, defined as those with an aggregate turnover up to INR 5 crore in the preceding financial year, have the option to file GST returns either quarterly or monthly. In contrast, large taxpayers, whose aggregate turnover exceeds INR 5 crore, are mandated to file returns monthly. The table below outlines the various return types and their respective filing frequencies:
| Frequency | Return Name | Details Reported |
|---|---|---|
| Quarterly (due by the 10th of the month following the quarter) | Sahaj | Allows declaration of B2C outward supplies and inward supplies subject to reverse charge. This form does not permit declaration of supplies made through e-commerce operators where tax collection is required, nor does it allow claiming credit on missing invoices. |
| Sugam | Enables declaration of both B2B and B2C outward supplies, along with inward supplies attracting reverse charge. Similar to Sahaj, it excludes supplies from e-commerce operators requiring tax collection and does not allow credit for missing invoices. | |
| Normal (Quarterly) | This comprehensive return covers all supply types without any restrictions. | |
| Monthly (due by the 10th of the following month) | Normal (Monthly) | This return also covers all supply types without any limitations. |
Comparative Analysis: Quarterly vs. Monthly Returns for Small Taxpayers
A small taxpayer must select their preferred filing frequency (quarterly or monthly) only once per financial year, specifically when submitting their first return. Below is a detailed comparison of the two options:
| Aspect | Quarterly Returns | Monthly Returns |
|---|---|---|
| Filing Frequency | Four times annually | Twelve times annually |
| Available Forms | Quarterly filers can select from Sahaj, Sugam, or Normal (Quarterly) forms, depending on the information they need to report. | Only one form is available: Normal (Monthly). |
| Document Upload Embargo | No document uploads are permitted from the 23rd to the 25th of the month immediately following the relevant quarter. | No document uploads are permitted from the 18th to the 20th of the subsequent month. |
| Time for Input Tax Credit | Recipients can claim credit on supplier-uploaded documents until the 10th of the month after the quarter ends. This provides suppliers more time to submit any missing invoices for the initial two months of the quarter. | Recipients can claim credit on supplier-uploaded documents until the 10th of the subsequent month. |
| Editing Uploaded Documents | Suppliers' uploaded documents can be accepted or rejected by the recipient by the 10th of the month following the quarter. Once accepted, recipients must reset/unlock documents for suppliers to make edits. Quarterly filers have comparatively more time for document editing and finalization. | Suppliers' uploaded documents can be accepted or rejected by the recipient by the 10th of the following month. If accepted, recipients must reset/unlock documents for suppliers to make edits. Monthly filers have less time for editing and finalization because suppliers have until the 10th of the next month once a document is reset/unlocked. |
| Post-10th Editing of Documents | If a document is rejected after the 10th of the month following the quarter, the supplier can only correct it once the recipient files their return for that quarter. | If a document is rejected after the 10th of the subsequent month, the supplier can only correct it after the recipient files their return for that month. |
| Credit Availability for Edited Documents | Credit becomes available to the recipient in the quarter when the supplier files the corrected document. | Credit becomes available to the recipient in the month when the supplier files the corrected document. |
| Credit Unavailability | If a supplier fails to file their return for a specific quarter, the recipient will be unable to claim credit on invoices declared in the subsequent quarter. | If a supplier fails to file their return for two consecutive months, the recipient will be unable to claim credit on invoices declared in the following month. |
Deciding Between Quarterly and Monthly GST Return Filing
The fundamental benefit of quarterly returns lies in their reduced filing frequency. This option is particularly advantageous for taxpayers with a limited number of compliant suppliers and straightforward outward supplies, as they can benefit from the simpler Sahaj and Sugam return forms. Quarterly filing is ideal for businesses with uncomplicated compliance processes.
Conversely, monthly filing fosters greater discipline in addressing complications promptly as they arise. Resolving disputes between suppliers and recipients regarding document uploads can occur monthly rather than quarterly. This approach helps prevent prolonged delays in credit availability and minimizes potential negative impacts on a taxpayer's working capital, especially for businesses managing numerous suppliers and customers.
Ultimately, the choice between quarterly and monthly GST return filing depends on individual business management practices and priorities.