Proposed Monthly Goods and Services Tax Return System
The GST Council plans to introduce a new monthly Goods and Services Tax (GST) return system, with a prototype released in May 2019 and implementation set for October 2020. This system aims to streamline tax filing by defining terms like uploaded, accepted, rejected, pending, missing, and amendment invoices, along with amendment returns. It outlines eligibility criteria, details the return preparation and amendment processes, and explains procedures for reporting missing invoices, exports, imports, and nil returns, offering a comprehensive comparison with the current system.
During its 31st meeting, the GST Council determined that a new Goods and Services Tax (GST) return mechanism would be implemented to assist taxpayers. In May 2019, a prototype of an offline tool was made available on the GST Portal, allowing users to experience its interface. This offline tool's design and functionality mirror that of the online portal.
As of March 14, 2020, the new GST return framework is scheduled for launch in October 2020. The existing return filing procedure, involving GSTR-1, GSTR-2A, and GSTR-3B, will remain in effect until September 2020. This timeline is contingent on notifications from the Central Board of Indirect Taxes and Customs (CBIC).
Understanding Key Terminology
Uploaded InvoicesInvoices submitted by a supplier to the portal are termed Uploaded Invoices. These documents are considered valid for a recipient to claim input tax credit. Suppliers can continuously upload invoices, and recipients can view them through a dedicated 'Viewing Facility'.
Accepted or Locked InvoiceInvoices confirmed by recipients after review are designated as Accepted Invoices, forming the basis for input tax credit. Any invoice not explicitly 'rejected' or categorized as 'pending' will automatically be treated as an Accepted Invoice.
Rejected InvoiceIf a supplier incorrectly enters a GSTIN on an invoice, it may appear in the viewing facility of an unintended taxpayer who is not eligible for the credit. In such instances, the recipient will reject these invoices, classifying them as Rejected Invoices.
Pending InvoiceInvoices uploaded to the portal fall under the 'Pending' category if:
- The recipient has not yet received the supply.
- The recipient believes the invoice requires modification.
- The recipient is currently undecided on whether to claim the input tax credit for that specific invoice.
Missing InvoicesInvoices that were not uploaded by the supplier but for which the recipient has claimed input tax credit are known as Missing Invoices. The supplier must report these invoices in the main return for any tax period, subject to applicable interest or penalties.
Amendment InvoiceA supplier can amend an invoice only if the recipient has not yet claimed input tax credit on it and has neither accepted nor locked it. If these conditions are not met, the invoice cannot be amended.
Amendment ReturnAn amendment return differs from a regular return. If a taxpayer has made errors in their initial return, they can rectify them by filing an amendment return. Its format is comparable to Table 9A of the GSTR-1.
Eligibility for Monthly GST Return Filing
All taxpayers registered under GST laws are required to file GSTR-monthly returns, with the following exceptions:
- Small Taxpayers: Those with an annual turnover up to Rs. 5 Crore in the preceding financial year who have not opted for quarterly filing.
- Composition Dealers.
- Input Service Distributors (ISD).
- Non-Resident Registered Persons (NRI).
- Individuals responsible for deducting or collecting tax under the CGST Act.
These exempted taxpayers will either continue with their current return filing procedures or fall into the category of taxpayers required to file quarterly GSTR.
Comprehensive Guide to the Monthly Return Procedure
Monthly GST Return Due Dates
All taxpayers, except those explicitly exempted, must file their monthly GST returns by the 20th of the subsequent month.
Steps to Prepare Monthly GST Returns
- Most fields within the GST Returns will be automatically populated. There will be a continuous system for suppliers to upload invoices and a viewing facility for recipients to accept or reject them.
- Invoices uploaded by the 10th of the following month will be automatically reflected in the supplier's main return.
- Only invoices uploaded by the supplier are considered valid documents for claiming Input Tax Credit (ITC).
- Eligible invoices uploaded for ITC will be posted in the recipient's ITC table by the 11th of the next month.
- Invoices uploaded by the supplier and made available to the recipient will be considered locked if not rejected or marked as pending after the recipient has filed their return for the relevant tax period.
- An accidentally locked invoice can only be unlocked by the recipient, but this action requires reversing the claimed ITC.
- All pending invoices must be reported by recipients, and no ITC can be availed on them.
- Uploaded invoices on which no ITC has been claimed and which are not locked by the recipient can be amended. However, locked invoices cannot be amended; instead, a credit or debit note can be issued for rectification.
- Amendments to missing invoices later reported by the supplier must be processed through an amendment return corresponding to the original tax period of the invoice. For example, an invoice from April uploaded in September would be amended via the April return.
- The first six months will serve as a transitional period, allowing recipients to claim ITC based on self-declaration, even if suppliers have not uploaded invoices by the 10th of the next month or later.
- The supplier's return filing status will be visible to the recipient after the return filing due date. This transparency will inform recipients whether the supplier has fulfilled their tax liability on purchases.
- To safeguard recipient interests, newly registered taxpayers and those who have previously defaulted on tax payments will only be permitted to upload invoices up to a specified threshold amount or after resolving their prior defaults.
Amending Monthly GST Returns
- Yes, taxpayers have the option to file an amendment return. Furthermore, a specific process for reporting missing invoices is outlined within the main return itself.
- Should any incorrect entries be made in the main return, these can be corrected by filing an amendment return. Taxpayers are permitted to file an amendment return twice for each tax period.
- An amendment return must be filed on or before the due date for filing the September return following the end of the financial year, or the actual date of furnishing the annual return, whichever comes first.
- If an amendment return results in a liability change exceeding 10%, a higher late fee may be imposed to ensure accurate reporting.
- Once an invoice is approved or locked by the recipient, or if credit has been availed on it, no further invoice amendments are permitted. In such cases, the supplier can issue a credit or debit note.
Procedure for Reporting Missing Invoices and Claiming ITC
- Suppliers are required to report missing invoices in any tax period, along with applicable interest and penalties. Additionally, recipients can report missing invoices up to the next two tax periods.
- For example, if a recipient receives goods in July and claims credit, but the supplier fails to upload the invoice, the recipient must report it no later than the September return filed in October.
- Information regarding missing invoices uploaded by the recipient will be made available to the supplier.
- Taxpayers who file quarterly returns will report missing invoices in their subsequent quarterly return.
Reporting Exports and Imports
- A dedicated table within the return will contain shipping bill details. Taxpayers can enter this information either at the time of filing the return or afterward.
- If a registered person inputs the shipping bill information after filing the return, it will not be considered an amendment return filing.
- Once shipping bill details are entered, they are transmitted to ICEGATE. A separate facility will be available for exporters to transmit any subsequent amendments to shipping bill information to ICEGATE.
- Credit on imports and supplies from Special Economic Zones (SEZ) can be claimed on a self-assessment basis until the information from ICEGATE is transferred to the input tax credit section of the return.
Filing Nil Returns
- A Nil Return can be filed once per quarter. However, in the first two months of a quarter, such taxpayers must report NIL transactions by sending an SMS. An alternative SMS facility for quarterly NIL return filing will also be available, in addition to online filing.
- This option is applicable only if the taxpayer has no transactions during the tax period, no Input Tax Credit to avail, and no output tax liability to pay.
Comparison of New and Existing Return Systems
| Feature | New Return System | Old Return System |
|---|---|---|
| Monthly Filing Eligibility | Taxpayers with turnover exceeding Rs. 5 crore in the last financial year | Taxpayers with turnover exceeding Rs. 1.5 crore in the last financial year |
| ITC Validity | Only invoices uploaded by the supplier are valid for claiming ITC | No matching concept was present; recipients could claim credit on all invoices in GSTR-3B based on self-declaration, even if not reported by the supplier |
| Supplier Filing Status | Recipient can view the current filing status of the supplier | In GSTR-2A, recipients could see the filed/not filed status for each uploaded invoice by the supplier |
| Document Summary | Not required | Required |
| Main Return Amendment | Taxpayer can amend the main return twice per tax period | Taxpayer could only amend invoices and credit/debit notes that were filed in previous months |
| Invoice Amendment Conditions | Possible only if ITC has not been availed and invoices have not been locked by the recipient | Possible for all types of supplies filed in previous month's returns |
| HSN Summary | Captured at four digits or more in a separate table, similar to the old return | Captured at four digits or more in a separate table |
| Return Format | Includes "Annexure" of invoices, which auto-populates the output liability table in the main return | Data populated directly from invoices uploaded by the supplier; no "Annexure" was required |
| Higher Late Fee for Amendments | A higher late fee may be prescribed for liability changes exceeding 10% through an Amendment Return | Not applicable |
| Export Shipping Bill Details | Taxpayer can fill "Shipping Bill" information at the time of filing or afterward, at their option | Taxpayer had to fill shipping bill details at the time of filing the return |
| Separate Export Facility | Separate facility for uploading shipping bill details at a later date will be provided to exporters | No separate facility was available for exporters |
| Profile-Based Return | Possible | Not a concept in the present system |
| Supply Reporting | Taxpayer must submit all outward and inward supplies, with tax payments, in a single return | GSTR-3B (Summary Information for all sales and purchases), GSTR-1 (For Outward Supplies), GSTR-2 (For Purchases), GSTR-3 (For settlement of liability) |
| Invoice Matching Tool | An IT tool/facility for matching invoices downloaded in XL format will be available from the "Viewing facility" | No IT tool for invoice matching was present |
| Missing Invoice Reporting by Supplier | Missing invoices not previously reported by the supplier must be reported in the main return for any tax period, with applicable interest and penalty | If ITC claimed by a recipient exceeded tax declared by supplier or outward supply was not declared, the discrepancy was communicated to both persons |
| Delayed Missing Invoice Reporting by Recipient | Reporting of missing invoices can be delayed by the recipient up to two tax periods; quarterly filers report in the next quarter | Not applicable |
| Invoice Locking Facility | Facility for locking invoices by the recipient will be available before filing the return | Not applicable |
| Incorrect GSTIN Entry | If the supplier wrongly enters recipient's GSTIN, such invoices will be reflected on the 'viewing facility' of the incorrect taxpayer, who can accept or reject them | If the supplier wrongly entered recipient's GSTIN in GSTR-1, invoices appeared in auto-generated GSTR-2A of the wrong taxpayer, but taxpayers could not take action on GSTR-2A |
| Invoice Unlocking | Recipient can unlock invoices that were previously locked | Not applicable |
| Tax Payment via Amendment Return | Facility for tax payment is available through an amendment return, which helps save on interest liability | Not applicable |
| Negative Liability Carry-Forward | Negative liability arising from an amendment return will be carried forward to the next return | Not applicable |