Exploring the Benefits and Drawbacks of India's Simplified GST Return System

The Goods and Services Tax (GST) Council was set to roll out new simplified return forms starting April 2020. This initiative aimed to streamline the entire tax filing procedure, particularly benefiting small taxpayers who constitute a significant portion of the total tax base. This article examines the various advantages and disadvantages linked to these streamlined return mechanisms.

Key Benefits of the Simplified GST Returns

Several advantages were anticipated with the introduction of the simplified GST return forms:

• Continuous Invoice Uploads: Taxpayers gained the flexibility to upload invoices to the GST Portal at any time, 24 hours a day, seven days a week.
• Real-time Invoice Management: Recipients could instantly acknowledge or dispute invoices as they were uploaded.
• SMS-based Nil Returns: For periods with no sales or purchases, taxpayers could submit Nil returns conveniently via SMS.
• Supplier Status Visibility: Recipients could monitor the return filing status of their suppliers directly on the portal.
• Introduction of Amendment Returns:
  • If an error occurred in a filed return, taxpayers had the provision to submit an amendment return. Each tax period allowed for the submission of two such amendment returns.
  • The new simplified system also enabled taxpayers to modify individual invoices by filing an amended return.
  • Payments could be made through an amendment return, potentially reducing interest liabilities. Input Tax Credit (ITC) available in the electronic credit ledger could also be utilized to settle liabilities arising from an amendment return.
• Customized Profile-Based Returns:
  • Taxpayers were able to create a unique profile based on the types of supplies they made and received. This ensured that the return form displayed only the relevant information fields for their specific profile.
• High Level of Auto-Population:
  • The simplified return forms featured only two primary tables: one for reporting outward supplies and another for claiming ITC based on supplier-uploaded invoices. A significant 80% of the details in these tables would be automatically populated once suppliers uploaded their invoices.
• Offline IT Utility:
  • An offline IT tool was provided, allowing users to filter downloaded invoices using various criteria, including:
    • Specific invoice date ranges (from and to dates).
    • The exact date when the supplier uploaded the invoice to the GST Portal.
    • The Goods and Services Tax Identification Number (GSTIN) of the supplier.

Challenges Associated with the Simplified GST Return System

Despite the intended simplifications, certain limitations were identified:

• Missing Invoices and ITC Recovery: An invoice not uploaded by a supplier, but for which a recipient has claimed Input Tax Credit (ITC), is termed a 'missing invoice'. If the supplier fails to upload this missing invoice within the designated period, the ITC previously claimed by the recipient for that invoice becomes subject to recovery from the recipient.
• Invoice Locking Mechanism: An invoice becomes 'locked' once a recipient files their return for a particular tax period under specific circumstances:
  • The supplier has uploaded the invoice.
  • The invoice has been made available to the recipient.
  • The recipient has neither rejected nor flagged the invoice as pending.
• Inability to Amend Locked Invoices: A supplier cannot amend a locked invoice on which a recipient has already claimed credit. To rectify such a reported invoice, the supplier is required to issue a credit note or a debit note. If an invoice was locked incorrectly, the recipient can unlock it online, provided they reverse the ITC previously claimed and confirm the reversal electronically.