Understanding GSTR-3: Its Purpose, Filing Requirements, and Structure

Relying on GSTR-1 for sales details and GSTR-2 for purchase information, GSTR-3 compiles a monthly summary of both, alongside the calculated tax liability. This article explores the details of GSTR-3.

Latest Updates on GSTR-3

Key Changes from July 2022

Table 3.1.1 was incorporated to enable both e-commerce operators and sellers to declare sales and associated tax payable for the given tax period. This was enacted through CGST notification 14/2022 on July 5, 2022, introducing further modifications to Tables 3.2 and 4.

Updates from May 2022

The submission deadline for GSTR-3B for April 2022 was moved to May 24, 2022.

Budget 2022 Impact on GSTR-3B and ITC

February 1, 2022:

The revised deadline for making corrections or amendments in GSTR-3B and for claiming any missed Input Tax Credit (ITC) for a financial year is now November 30 of the subsequent year, or the date of filing the annual return, whichever comes earlier.
GST registration can be revoked under Section 29 if GSTR-3B is not filed for consecutive tax periods.

CGST Rule 36(4) Amendment (December 2021)

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

What is GSTR-3?

GSTR-3 is a monthly return form that presents a summarized account of sales, purchases, and the total GST liability for the month. This form automatically generates its content by drawing data from GSTR-1 and GSTR-2.

Why is GSTR-3 important?

GSTR-3 quantifies the Goods and Services Tax liability for the month. It is mandatory for taxpayers to remit the tax and submit this return promptly.

Consequences of Not Filing GSTR-3

Failure to file the GSTR-3 return will prevent the taxpayer from filing GSTR-1 for the subsequent month. This creates a cumulative negative effect, resulting in substantial fines and penalties due to delayed GST return submissions.

Consequences of Late Filing GSTR-3

If there is a delay in filing GSTR-3, taxpayers are subject to interest and late fees. Interest is assessed at 18% per annum, which the taxpayer must calculate on the outstanding tax amount. This period starts from the day following the due date (typically the 16th of the month) until the actual payment date. A late fee of INR 100 per day is applied for each Act (INR 100 under CGST and INR 100 under SGST), summing up to INR 200 per day, with a maximum cap of INR 5,000. No late fee is imposed for IGST.

Who Must File GSTR-3?

Every individual registered under GST is required to file GSTR-3, irrespective of whether they conducted any transactions during the month. However, the following registered entities are exempt from filing GSTR-3:

Input Service Distributors
Composition Dealers
Non-resident taxable persons
Individuals responsible for collecting TCS (Tax Collected at Source)
Individuals responsible for deducting TDS (Tax Deducted at Source)
Providers of online information and database access or retrieval services (OIDAR) who are required to pay tax directly (in accordance with Section 14 of the IGST Act).

How to Rectify Errors in GSTR-3

Once GSTR-3 has been submitted, it cannot be revised directly. Any errors found in the return must be rectified in the GSTR-1 and GSTR-2 returns of the subsequent month. Direct amendments to GSTR-3 are not possible because it is an auto-generated document without an editing function.

Reconciliation of GSTR-3 and GSTR-3B

GSTR-3B was a simplified return form introduced by the CBEC for the months of July and August 2017, for which GSTR-3 was also mandatory. Upon filing GSTR-3, if the actual tax liabilities differ from those reported in GSTR-3B, the system will automatically update the discrepancy. Should the actual liabilities in GSTR-3 be greater than those declared and paid with GSTR-3B, the taxpayer will be required to pay the additional tax amount along with applicable interest. It is important to note that GSTR-3 is considered valid only after the entire tax liability has been settled. If an invalid return was filed and a remaining liability needs to be paid later, Part B of GSTR-3 must be re-filed.

Detailed Sections of GSTR-3

The government has outlined 15 main headings for the GSTR-3 format. These are divided into two main parts: Part A, which is automatically populated, and Part B, which requires manual input from the taxpayer.

PART A (Automated Information)

Part A is entirely auto-populated with data derived from GSTR-1, GSTR-1A, and GSTR-2.

1. Goods and Services Tax Identification Number (GSTIN)

If a permanent GSTIN is not yet available, a provisional ID can be used.

2. Taxpayer Name and Period

This field automatically displays the taxpayer's legal and trade names. The taxpayer must specify the relevant month and year for which the GSTR-3 is being submitted.

3. Total Turnover

This section includes the aggregate turnover from all categories of supplies. The total turnover is further divided into:

Taxable Turnover (excluding zero-rated): This covers regular sales to both registered and unregistered recipients.
Zero-rated supply with tax payment: This refers to exports where IGST has been paid, which can later be reclaimed as a refund.
Zero-rated supply without tax payment: This includes exports executed under a bond or Letter of Undertaking (LUT) without immediate tax payment.
Deemed exports: These are supplies made to Special Economic Zones (SEZ) where goods do not physically leave the country.
Exempted: These are goods or services that are not subject to GST.
Nil Rated: These are goods or services that attract a 0% GST rate.
Non-GST supply: This category includes items like petrol and electricity, which fall outside the purview of GST.

4. Outward Supplies (Sales Summary)

This section provides a summary of all sales made during the month, with the information automatically retrieved from the taxpayer's GSTR-1 form.

4.1 Inter-State Supplies (Net)

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

A. Taxable supplies (excluding reverse charge and zero-rated supply) [Tax Rate Wise]: Represents total sales, excluding those subject to reverse charge and exports.
B. Supplies attracting reverse charge - tax payable by recipient of supply: Covers sales where the buyer is responsible for paying GST under the reverse charge mechanism.
C. Zero-rated supply made with payment of IGST: Refers to exports for which IGST has been paid, eligible for later refund.
D. Value of supplies made through an e-commerce operator attracting TCS (from point A) [Rate wise]: This specifies the portion of sales conducted via e-commerce platforms, including the GSTIN of the e-commerce operator. Note: Zero-rated supplies made without tax payment (e.g., exports through bond/LUT) and amendments to supplies originally made under reverse charge are not included here.

4.2 Intra-State Supplies (Net)

This section is analogous to the inter-state supplies heading but specifically contains details pertaining to intra-state sales.

4.3 Tax Impact of Outward Supply Amendments

This records any modifications made to sales invoices. Changes in amounts can affect the Input Tax Credit (ITC) claim and consequently the tax payable to the government, potentially resulting in excess or underpayment. This section helps track such amended invoices and their financial impact.

5. Inward Supplies Subject to Reverse Charge (Net of Advance Adjustments)

This section details purchases and received supplies for the month, automatically populated using data from the taxpayer's GSTR-2 records.

5A. Reverse Charge Inward Supplies

This includes purchases where the reverse charge mechanism applies, meaning the buyer (taxpayer) is responsible for paying GST. It covers both inter-state and intra-state transactions. The tax liability from reverse charge is presented net of invoices, debit/credit notes, advances paid, and advance adjustments.

5B. Tax Impact of Reverse Charge Supply Amendments

This section accounts for changes made to purchases subject to reverse charge. Alterations in amounts impact the ITC and the overall tax payable, potentially leading to excess or underpayment. It is crucial for monitoring amended invoices and their tax implications.

6. Input Tax Credit (ITC)

This heading summarizes the ITC available to the taxpayer during the month, including inward taxable supplies, imports, and ITC received from an Input Service Distributor (ISD), all adjusted for debit/credit notes.

Part I: ITC Availability

This part categorizes ITC separately for:

Inputs: Raw materials used in production.
Input Services: Services such as consulting fees.
Capital Goods: Assets like machinery or laptops.

ITC received from an Input Service Distributor (ISD) is also reported here, with all ITC figures adjusted for any debit or credit notes.

Part II: ITC Adjustments from Previous Periods

This section reflects any changes made to previous month's details and their subsequent effect on the ITC.

7. Output Tax Adjustments for Mismatches and Other Reasons

This heading addresses discrepancies in ITC and tax liability between original returns and any adjustments filed in the current month, with information sourced from GSTR-2.

a. ITC claimed on mismatched or duplication of invoices or debit notes: If invoices are mismatched or duplicated, resulting in excess ITC claims, this excess ITC will be reversed and added to the tax liability.
b. Tax liability on mismatched credit notes: Incorrect credit notes issued by the taxpayer can lead to inaccurate ITC. Any extra ITC claimed due to such mismatches will be added to the tax liability.
c. Reclaim on rectification of mismatched invoices/Debit Notes (Reduce): This is the converse of point (a). If a mismatch previously resulted in a lower ITC claim, the additional rightful ITC will now reduce the output tax liability.
d. Reclaim on rectification of mismatch credit note (Reduce): Similar to (c), this applies when a credit note mismatch led to a lower ITC claim, allowing the additional ITC to be reclaimed.
e. Negative tax liability from previous tax periods: This refers to any excess tax paid in prior months, which 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 accounts for tax paid alongside advance payments in previous months for supplies received during the current tax period.
g. Input Tax credit reversal/reclaim: This covers any other instances where ITC is reversed or reclaimed for various reasons.

8. Overall Tax Liability

This is a critical section where the GST Portal computes the total tax liability under different tax heads: CGST, SGST, and IGST. It provides the following breakdown:

8A. On outward supplies: This represents the tax payable on standard sales, including inter-state transactions.
8B. On inward supplies under reverse charge: This is the tax owed on purchases that fall under the reverse charge mechanism.
8C. On account of ITC reversal or reclaim: This indicates any additional tax payable or reduction available due to ITC reversals or reclaims, with information flowing from Table 11 of GSTR-2.
8D. On account of mismatch/rectification/other reasons: This category includes tax liabilities arising from any other discrepancies or rectifications.

9. TDS and TCS Credits

This section contains the details of TDS (Tax Deducted at Source) and TCS (Tax Collected at Source) paid by the taxpayer. These amounts are deducted from the total tax liability to arrive at the net tax amount that must be paid.

10. Interest Liability

Interest is applied to delayed payments at a rate of 18% per annum. The taxpayer is responsible for calculating this interest on the outstanding tax amount. The period for calculation begins from the day after the filing due date (the 20th of the month) up to the actual date of payment. This section specifies the reasons for interest applicability and the corresponding amounts, broken down by CGST, SGST, IGST, and Cess. Reasons include:

Output liability on mismatch: An increase in tax liability resulting from changes in a sales invoice.
ITC claimed on mismatch invoice: An increase in tax liability due to changes in a purchase invoice for which ITC was claimed.
On account of other ITC reversals: Increased tax liability due to the reversal of previously claimed ITC.
Undue excess claims or excess reduction [refer sec 50(3)]: Situations where excess ITC has been claimed, necessitating interest payment.
The credit of interest on rectification of mismatch: When interest previously paid on a mismatch is reversed or credited back.
Interest liability carry forward: Any remaining unpaid interest liability that is carried forward.
Delay in payment of tax: Interest incurred due to late payment or late filing of returns.
Total interest liability: The aggregate interest payable across CGST, SGST, and IGST.

11. Late Fee Calculation

A late fee is imposed for delayed return filing, in addition to interest. This fee is INR 100 per day, with a maximum limit of INR 5,000. Note: There is no late fee applicable for IGST.

Part B (Manual Entry by Taxpayer)

This section of the GSTR-3 form must be completed manually by the taxpayer, in contrast to Part A which is automatically populated by the GST Portal.

12. Tax Payable and Paid

Taxpayers are required to accurately fill in the relevant columns with the corresponding amounts. For instance, if a tax liability is INR 30,000 and the available ITC is INR 10,000, the taxpayer would pay INR 20,000 in cash (entering this in column 3) and utilize INR 10,000 through ITC (entering this in the appropriate columns under 4, 5, 6). Adherence to ITC claim regulations is essential.

13. Interest, Late Fee, and Other Dues (Excluding Tax) Payable and Paid

Here, taxpayers must enter the amounts payable and subsequently paid for interest and late fees, itemized by tax heads. Note: IGST does not incur a late fee.

14. Refund Request from Electronic Cash Ledger

If it is determined that the tax paid exceeds the actual liability, the difference can be refunded to the taxpayer. Important: A refund from the cash ledger can only be claimed once all return-related liabilities for the month have been fully discharged. The amount claimed in Table 14 will result in a debit entry in the electronic cash ledger upon the valid filing of GSTR-3.

15. Debit Entries in Electronic Ledgers

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

Conclusion

Finally, the taxpayer must provide a declaration affirming that all information supplied is complete and accurate.

For additional information on various return types, deadlines, and filing frequencies, refer to articles on GST Returns.