Understanding GSTR-3: A Comprehensive Guide to Monthly GST Return Filing

This article explores GSTR-3, a crucial monthly return that summarizes sales, purchases, and GST liabilities. We have previously covered GSTR-1, detailing all sales, and GSTR-2, which captures purchase specifics. GSTR-3 consolidates this information to present the total monthly tax obligations.

Recent Updates

July 5, 2022: A new Table 3.1.1 was added, enabling e-commerce operators and sellers to declare sales and corresponding tax liabilities for the reporting period. This was enacted through CGST notification 14/2022, dated July 5, 2022, alongside other revisions to Tables 3.2 and 4.

May 17, 2022: The deadline for filing GSTR-3B for April 2022 was extended to May 24, 2022.

February 1, 2022 (Budget 2022 Updates):

1. The revised deadline for making amendments or corrections in GSTR-3B and claiming any unutilized Input Tax Credit (ITC) for a financial year is now November 30 of the subsequent year, or the date of annual return filing, whichever comes earlier. Previously, this was linked to the September return due date.
2. GST registration may face cancellation under Section 29 if GSTR-3B is not filed for consecutive tax periods.

December 29, 2021: CGST Rule 36(4) was amended, removing the provision for an additional 5% ITC beyond what is reflected in GSTR-2B. Effective January 1, 2022, businesses can only avail ITC if it has been reported by the supplier in GSTR-1/IFF and appears in their GSTR-2B. This was formalized by Section 16(2)(aa) on December 21, 2021.

What is GSTR-3?

GSTR-3 is a monthly return that offers a summary of sales, purchases, and the total GST liability for the month. This return is automatically generated by compiling data from GSTR-1 and GSTR-2.

Why is GSTR-3 Important?

GSTR-3 is critical as it displays the total GST liability for a given month. Taxpayers are required to pay the calculated tax and then file this return.

What Happens if GSTR-3 is Not Filed?

Failure to file the GSTR-3 return prevents the filing of GSTR-1 for the subsequent month. This creates a chain reaction, where late GST return filing can lead to substantial penalties and fines.

What Happens if GSTR-3 is Filed Late?

Delayed filing incurs both interest and a late fee. Interest is charged at 18% per annum, calculated by the taxpayer on the outstanding tax amount from the day after the due date (16th of the month) until the payment date. A late fee of Rs. 100 per day is applied under the CGST Act and another Rs. 100 per day under the SGST Act, totaling Rs. 200 per day. The maximum late fee is capped at Rs. 5,000. No late fee is levied on IGST.

Who is Required to File GSTR-3?

Every registered person must file GSTR-3, even if there were no transactions during the month. However, certain registered individuals are exempt from filing GSTR-3, including:

• Input Service Distributors
• Composition Dealers
• Non-resident taxable persons
• Persons liable to collect TCS
• Persons liable to deduct TDS
• Suppliers of online information and database access or retrieval services (OIDAR) who are responsible for paying tax themselves (as per Section 14 of the IGST Act).

How to Revise GSTR-3?

Once GSTR-3 is filed, it cannot be revised. Any errors made in the return must be rectified in the GSTR-1 and GSTR-2 returns of the subsequent month. Direct revision within GSTR-3 is not possible because it is an auto-generated document with no editing provision.

Reconciliation of GSTR-3 and GSTR-3B

GSTR-3B is a simplified return introduced by the CBEC for July and August 2017. GSTR-3 also had to be filed for these months. When GSTR-3 is filed, if the actual liabilities differ from those declared in GSTR-3B, the system automatically updates the difference. If the actual liabilities in GSTR-3 are higher than what was declared and paid with GSTR-3B, the taxpayer must pay the additional tax along with interest on that extra amount.

Note: GSTR-3 must only be filed after the entire tax liability is paid; otherwise, it will be considered an invalid return. If an invalid return was filed and the taxpayer later wishes to pay the remaining liability, Part B of GSTR-3 must be filed again.

Details Required in GSTR-3

The government has outlined 15 headings for the GSTR-3 format. Each heading and the details to be reported are explained below.

1. Provide GSTIN

Taxpayers can use their provisional ID as the GSTIN if they have not yet received their permanent GSTIN.

2. Name of the Taxpayer

This field automatically populates with the taxpayer's legal and trade name. The relevant month and year for which GSTR-3 is being filed must also be specified.

GSTR-3 consists of two parts: Part A, which is auto-populated from GSTR-1, GSTR-1A, and GSTR-2, and Part B, which requires manual completion.

PART A (Entirely Auto-Populated)

3. Turnover

This section includes the total turnover from all types of supplies, categorized as follows:

• Taxable Turnover [other than zero-rated]: This covers standard sales to both registered and unregistered buyers.
• Zero-rated supply on payment of tax: This includes exports where IGST is paid (which can later be reclaimed as a refund).
• Zero-rated supply without payment of tax: This refers to exports made under a bond or Letter of Undertaking (LUT).
• Deemed exports: These are sales to Special Economic Zones (SEZ), where goods do not physically leave the country.
• Exempted: Goods or services that do not incur GST.
• Nil Rated: Goods or services subject to 0% GST.
• Non-GST supply: Items like petrol and electricity, which fall outside the scope of GST.

4. Outward Supplies

This section provides a summary of all sales made during the month, with information automatically drawn from your GSTR-1.

4.1 Inter-State Supplies (Net Supply for the Month)

This heading details all inter-state sales, broken down into:

• A. Taxable supplies (other than reverse charge and zero-rated supply) [Tax Rate Wise]: Total sales, excluding those subject to reverse charge and exports.
• B. Supplies attracting reverse charge - tax payable by recipient of supply: Sales where the buyer is responsible for paying GST under the reverse charge mechanism.
• C. Zero-rated supply made with payment of IGST: Exports where IGST is paid, later reclaimable as a refund.
• D. Value of supplies made through an e-commerce operator attracting TCS - [Rate-wise]: This specifies the portion of sales made via e-commerce (the total of which is included in point A). The GSTIN of the e-commerce operator will also be displayed.

Note: Zero-rated supplies made without tax payment (e.g., exports with bond/LUT) are excluded. Also, amendments to supplies originally under reverse charge are not included in Table 4.

4.2 Intra-State Supplies (Net Supply for the Month)

Similar to the above, but specifically for intra-state sales.

4.3 Tax Effect of Amendments Made in Respect of Outward Supplies

This section tracks changes made to sales invoices. If an amount is altered, the corresponding ITC claim also changes, impacting the tax payable. This helps monitor invoices with modifications and their tax implications, which might result in over or underpayment.

Inward Supplies Attracting Reverse Charge Including Import of Services (Net of Advance Adjustments)

This heading covers purchases and received supplies for the month. The information is automatically populated from the data recorded in your GSTR-2.

5A. Inward supplies on which tax is payable on reverse charge basis:

This includes purchases where reverse charge applies (i.e., the buyer pays GST), encompassing both inter-state and intra-state transactions. The tax liability due to reverse charge is presented net of invoices, debit/credit notes, advance payments, and advance adjustments.

5B. Tax effect of amendments in respect of supplies attracting reverse charge:

This section details changes made to purchases subject to reverse charge. Alterations in amounts affect ITC, consequently changing the tax payable. This can lead to excess or underpayment. This information helps track invoices with changes and their impact on the tax amount.

6. Input Tax Credit

ITC on inward taxable supplies, including imports and ITC received from ISD [Net of debit notes/credit notes].

Part I

This segment summarizes the ITC available for the month, segregated for:

• Inputs: Raw materials.
• Input Services: Such as consulting fees.
• Capital Goods: Items like laptops.

ITC received from an Input Service Distributor (ISD) will also appear here. All ITC figures are adjusted for debit/credit notes.

Part II

This part reflects changes made to previous month's details and their impact on ITC.

7. Addition and Reduction of Amount in Output Tax for Mismatch and Other Reasons

This section records mismatches in ITC and tax liability between original returns and any changes filed during the current month. This data is sourced from GSTR-2.

• a. ITC claimed on mismatched or duplication of invoices or debit notes: In cases of invoice mismatch, duplicate ITC claims may occur. Any excess ITC claimed from duplicate purchase invoices will be reversed and added back to the tax liability.
• b. Tax liability on mismatched credit notes: Incorrect credit notes issued by the taxpayer can also result in incorrect ITC. Any extra ITC claimed due to mismatch will be added to the tax liability.
• c. Reclaim on rectification of mismatched invoices/Debit Notes: This is the inverse of point (a). If a mismatch led to a lower ITC claim, the taxpayer is entitled to more ITC, and this additional amount will be reduced from the output tax liability.
• d. Reclaim on rectification of mismatch credit note (Reduce): Similar to (c), this applies when a mismatch in a credit note led to a lower ITC claim, and the amount will be reduced from output tax liability.
• e. Negative tax liability from previous tax periods: This arises from excess tax paid in prior months and will be deducted from the current month's output tax liability.
• f. Tax paid on advance in earlier tax periods and adjusted with tax on supplies made in current tax period: This refers to tax paid with advance payments in previous months for supplies received in the current month.
• g. Input Tax Credit reversal/reclaim: This refers to ITC being reversed or reclaimed for any other reason.

8. Total Tax Liability

This crucial section, automatically calculated by the GST Portal, displays the total tax liability under CGST, SGST, and IGST, with the following breakdown:

• 8A. On outward supplies: Tax payable on normal sales, including inter-state sales.
• 8B. On inward supplies under reverse charge: Tax payable on purchases subject to reverse charge.
• 8C. On account of ITC reversal or reclaim: Additional tax payable or reduction available due to ITC reversal or reclaim. This information originates from Table 11 of GSTR-2.
• 8D. On account of mismatch/rectification/other reasons: Tax liability arising from any other reasons.

9. Credit of TDS and TCS

This heading includes details of TDS and TCS paid by the taxpayer. These amounts are deducted from the total liability to determine the net tax due.

10. Interest Liability (Interest as on ..)

Interest is applicable for delayed payments at 18% per annum. Taxpayers must calculate this on the outstanding tax amount, starting from the day after the due date (20th of the month) until the payment date. This section outlines the reasons and amount of applicable interest, bifurcated into CGST, SGST, IGST, and Cess.

• Output liability on mismatch: An increased tax liability due to a change in a sales invoice requires interest payment on the additional amount.
• ITC claimed on mismatch invoice: An increased tax liability due to a change in a purchase invoice where ITC was claimed necessitates interest payment on the increased amount.
• On account of other ITC reversals: If ITC claimed was reversed, leading to an increased tax liability, interest becomes payable.
• Undue excess claims or excess reduction [refer sec 50(3)]: If excess ITC was claimed, interest is now required.
• The credit of interest on rectification of mismatch: If interest was previously paid due to a mismatch and is now reversed or credited back.
• Interest liability carry forward: Any unpaid balance of an interest liability will be carried forward.
• Delay in payment of tax: This results from late tax payment or late filing of returns.
• Total interest liability: The final total interest payable under CGST, SGST, and IGST.

11. Late Fee

In addition to interest, a late fee applies for delayed return filing. This fee is Rs. 100 per day, with a maximum of Rs. 5,000.

Note: There is no late fee for IGST.

Part B

This part is completed manually by the taxpayer, while Part A is automatically populated by the GST Portal.

12. Tax Payable and Paid

Taxpayers fill in the relevant columns with the appropriate amounts. For example, if the tax liability is Rs. 30,000 and ITC is Rs. 10,000, the taxpayer can pay Rs. 20,000 in cash (Column 3) and Rs. 10,000 through ITC (relevant columns under 4, 5, 6). ITC claim rules must be adhered to.

13. Interest, Late Fee, and Any Other Amount (Other Than Tax) Payable and Paid

Here, the taxpayer enters the amounts payable and paid for interest and late fees, with a breakdown by tax head.

Note: There is no late fee for IGST.

14. Refund Claimed from Electronic Cash Ledger

If the tax paid is found to be higher than the actual amount due, the difference will be refunded. A refund from the cash ledger can only be claimed once all return-related liabilities for the month have been settled. A claim made in Table 14 will result in a debit entry in the electronic cash ledger upon filing a valid GSTR-3.

15. Debit Entries in Electronic Cash/Credit Ledger for Tax/Interest Payment [to be populated after payment of tax and submissions of return]

This section automatically populates once taxes are paid and returns are submitted.

Finally, a declaration must be signed, affirming the accuracy and completeness of all provided information.

To learn more about different return types, deadlines, and filing frequency, refer to our article on GST Returns.