Proposed Quarterly GST Filing System for Small Businesses

A new Goods and Services Tax (GST) return mechanism was scheduled for implementation in October 2020. However, its launch was postponed, and enhancements were instead made to the existing GSTR-1 and GSTR-3B return frameworks. In May 2019, a preliminary version of the new GST return system's offline utility was released on the official GST Portal, offering users a preview of its interface, which mirrored the online platform. This article explores these proposed changes in detail. As of the latest update on March 14, 2020, the new GST return system was slated for an October 2020 rollout, with the current GSTR-1, 2A, and 3B filing system remaining active until September 2020, pending further notification from the Central Board of Indirect Taxes and Customs (CBIC).

Understanding Key Terminology in the Proposal

Uploaded Invoice

These are invoices uploaded to the portal, serving as the sole valid documents for claiming input tax credit. Uploaded invoices are consistently visible to the recipient.

Accepted or Locked Invoice

Invoices that have been accepted by the recipient are considered accepted or locked. Recipients can claim credit corresponding to these invoices. Invoices that are neither rejected nor left pending are automatically deemed accepted.

Rejected Invoice

If a supplier incorrectly enters the GSTIN, the invoice will appear in the viewing facility of a taxpayer not eligible for the credit. In such instances, the recipient should report these as rejected invoices.

Pending Invoice

An invoice may be marked as pending for one of three reasons:

• The supply has not yet been received.
• The recipient believes the invoice requires amendment.
• The recipient is currently undecided about claiming input credit.

Missing Invoices

These are invoices where the recipient has claimed credit, but the supplier has not uploaded them. Missing invoices must be reported by the supplier in the main return for the relevant period, incurring applicable interest or penalties. For example, if a recipient claims input tax credit in April 2019 for purchase invoices not uploaded by the supplier, the recipient must report these missing invoices by the June 2019 return, filed in July. Information regarding such missing invoices reported by the recipient will be made available to the supplier.

Small Taxpayers and Their GST Filing Obligations

• Small taxpayers are defined as those with an annual turnover of up to ₹5 crores in the previous financial year.
• They have the option to choose between filing quarterly or monthly main returns.
• If a taxpayer opts for quarterly filing, they can select one of three return types:
  • GSTR-Quarterly
  • GSTR-Sahaj
  • GSTR-Sugam

Overview of the Quarterly Returns Filing Process

Small taxpayers file returns quarterly, but tax payments are required monthly using a payment declaration form-cum-challan. They are offered the flexibility of continuously uploading invoices and documents, with a cut-off date of the 10th of the month following the tax period. A 'viewing facility' on the portal allows recipients to review all uploaded invoices, aiding in self-assessed liability and input tax credit claims. For Business-to-Business (B2B) supplies, only uploaded invoices are considered valid for input tax credit claims by recipients of small taxpayers, ensuring they can claim credit against invoices uploaded by any taxpayer. However, a six-month grace period allows recipients to provisionally self-declare ITC, which helps in assessing their monthly tax liability.

Small taxpayers choosing quarterly filing can utilize one of these three return types:

• GSTR-Quarterly: Suitable for taxpayers with all types of supplies, including exports, Special Economic Zone (SEZ) supplies, Business-to-Consumer (B2C), and/or B2B transactions.
• GSTR-Sahaj: Designed for taxpayers exclusively making B2C outward supplies.
• GSTR-Sugam: Intended for taxpayers with both B2C and B2B outward supplies.

Small taxpayers will have the option to establish a profile within the quarterly return system, with Sahaj and Sugam returns representing common and simplified pre-defined profiles for quarterly filings. These quarterly returns will necessitate the inclusion of four or more digit HSN (Harmonised System of Nomenclature) details, similar to previous return formats. Notably, these quarterly returns will not require compliance regarding:

• Missing and pending invoices
• Declaration of non-GST or exempted supplies
• Input tax credit on capital goods

However, these specifics will be required in the annual return. Taxpayers can switch to monthly main returns mid-year if they need to incorporate or resolve issues with missing or pending invoices, but this switch is permissible only once per financial year. Small taxpayers will remit their taxes monthly. During the first and second months of each quarter, they will make tax payments using a payment declaration form. This form will reflect self-assessed liability and input tax credit based on self-declaration. Full payment of liability derived from uploaded invoices will only be allowed through this payment declaration form, and late payments will incur interest. The option to choose quarterly return filing must be exercised at the beginning of the year. Any switch to monthly main returns can only occur once during the year and must be done at the start of any quarter.

Comparison: Proposed vs. Existing Return System

Detailed Formats for Sahaj, Sugam, and GSTR-Quarterly Returns

While the specific graphical representations of the payment challan form, GSTR Sahaj, GSTR Sugam, and GSTR-Quarterly forms are not displayed here, the conclusion highlights that with pending clarification on ITC availability for missing invoices, small taxpayers are expected to benefit from reduced compliance costs due to the simplified quarterly returns.