Understanding India's Proposed New GST Return System (Since Withdrawn)
This article outlines the key features and proposed changes of India's New GST Return System, which was intended to simplify tax filings through forms like GST RET-1, ANX-1, and ANX-2. It details differences from the existing system, the phased transition plan, and specific modifications regarding invoice uploads, input tax credit, and amendment returns. A critical update notes that this proposed system has since been withdrawn by GST authorities, meaning the GSTR-1 and GSTR-3B filing process remains current.
This article details key aspects taxpayers needed to grasp regarding the proposed New GST Return System. It explains the distinguishing terms and procedures of this system. A crucial update is that the GST authorities have since revoked the new GST return system; consequently, the existing GSTR-1 and GSTR-3B filing method remains in effect.
The New GST Return System Explained
During the 31st GST Council Meeting, a decision was made to introduce a New Return System under GST for taxpayers. This system aimed to simplify return forms, making the filing process easier for all GST-registered taxpayers. Under this new framework, there would be one primary return, GST RET-1, supplemented by two annexures: GST ANX-1 and GST ANX-2. This return was intended for monthly submission, though small taxpayers, defined as those with a turnover up to INR 5 crore in the preceding financial year, had the option to file quarterly.
Forms in the Proposed New GST Return System
The main return, GST RET-1, was designed to consolidate information on all supplies made, input tax credit (ITC) utilized, and tax payments, including any applicable interest. This return would be accompanied by two annexure forms: GST ANX-1 and GST ANX-2. GST ANX-1, the Annexure of Outward Supplies, required invoice-wise reporting of all outward supplies, inward supplies subject to reverse charge, and imports of goods and services (excluding B2C supplies) on a real-time basis. GST ANX-2, the Annexure of Inward Supplies, was to detail all inward supplies. Most of this data would be auto-populated from information uploaded by suppliers in their GST ANX-1. Recipients would then be able to act on these automatically generated documents in real-time.
Key Differences: Current vs. Proposed New GST Return Systems
The new system introduced several distinctions compared to the previous return filing process:
| Old Return-filing System | New Simplified Return System |
|---|---|
| Taxpayers were classified as small if turnover was up to INR 1.5 crore in the preceding financial year; otherwise, they were large taxpayers. | Taxpayers would be considered small if turnover was up to INR 5 crore in the preceding financial year; otherwise, they were large taxpayers. |
| Multiple return forms were required depending on the taxpayer category, such as GSTR-1, GSTR-4, GSTR-5, GSTR-6, and GSTR-7. | A single, simplified main return form, GST RET-1, with two annexures (GST ANX-1 and GST ANX-2), was to be filed by all taxpayer categories. |
| Revenue invoices could only be uploaded during the filing of outward supply returns. | A mechanism for continuous, real-time uploading of revenue invoices was planned. |
| Input tax credit could be claimed through self-declaration. | Input tax credit could be claimed based on invoices uploaded by the supplier. |
| Missing invoices and any amendments could only be addressed in the return of the subsequent tax period. | Missing invoices and amendments could be rectified by filing an Amendment Return. |
| Taxpayers had to file GST returns until their registration was officially cancelled, even after submitting a cancellation application. | Registration would be suspended when a taxpayer applied for cancellation, and returns would not be required during this period. |
Transition Plan for the New GST Return System
The New GST Return System was launched on a trial basis in July 2019, with a full rollout initially planned for April 2020 (previously October 2019). This transition plan was to be implemented in phases. The trial period aimed to help users become familiar with the annexure forms of the new return system. The previously announced transition schedule was as follows: From July to September, during the trial phase, taxpayers would continue filing GSTR-1 and GSTR-3B returns under the existing system. Starting October 2019, large taxpayers were to file GST ANX-1, which would replace GSTR-1. However, GSTR-3B filing would continue until November 2019. For small taxpayers, tax payments were to be made using PMT-08, substituting their GSTR-3B return. From December 2019, large taxpayers would begin filing GST RET-01, the main return of the new system. Small taxpayers were to file their first GST RET-01 for the quarter spanning October to December 2019.
Offline Demo Tool Prototype
The GST Network (GSTN) had unveiled an interactive web-based prototype of the Offline Tool for the new return system. This demo allowed taxpayers to explore various pages and functionalities, such as drop-down menus, invoice uploads, and the verification of purchases against system-generated inward supplies. Users could analyze the practical aspects of the simplified GST returns through this prototype and provide feedback or suggestions to the GSTN. Further details on preparing GST ANX-1 and acting on GST ANX-2 via the offline tool prototypes were also available.
Significant Changes Introduced in the New GST Return System
The new return system incorporated several notable changes:
- The Harmonized System of Nomenclature (HSN) code would be required for submitting details at a document level, based on turnover, instead of a separate HSN summary.
- Users would also receive HSN information through their GST ANX-2, if the supplier was obligated to declare the HSN code.
- B2B supplies subject to the reverse charge mechanism (RCM) did not need to be reported by the supplier in GST ANX-1; however, the aggregate figure was to be shown in GST RET-1.
- Inward supplies liable for RCM had to be declared in GST ANX-1 at the GSTIN level by the recipient.
- The concept of B2C-L was eliminated. The turnover threshold for quarterly filers (small taxpayers) was raised to INR 5 crore from the previous INR 1.5 crore limit.
- Recipients could report missing invoices at an invoice level (i.e., when a supplier failed to upload an invoice within the T+2 period).
Invoice Uploads Under the New GST Return System
The new return system introduced specific terminology for invoice uploads:
- Missing Invoices: When a supplier failed to upload an invoice or debit note, and a recipient claimed ITC, these were termed “missing invoices.” If ITC was claimed on such invoices and they were not uploaded by the supplier within the specified timeframe, the ITC claimed would be recovered from the recipient.
- Locking of Invoices: Recipients had the option to lock an invoice if they agreed with its reported details. For large volumes of invoices, individual locking might be impractical, in which case deemed locking would apply to invoices that were neither rejected nor kept pending by the recipient.
- Unlocking of Invoices: An invoice on which ITC had already been claimed by a recipient would be considered locked and impervious to amendments. Any necessary amendment would require the supplier to issue a debit or credit note. An incorrectly locked invoice could be unlocked online by the recipient, provided the ITC claim was reversed and confirmed online.
- Pending Invoices: An invoice uploaded by a supplier could be marked as pending by the recipient if:
- The recipient had not yet received the supply.
- The recipient believed the invoice required amendment.
- The recipient was undecided about claiming ITC at that moment. In such instances, no ITC would be claimed by the recipient on these pending invoices.
- Rejected Invoices: If the supplier entered an incorrect recipient’s GSTIN, the invoice would appear for a taxpayer who was not the actual receiver of the supplies. Since ITC would not be eligible on these invoices, the recipient would need to reject them. To streamline the rejection process, the matching IT tool would allow creation of a recipient/seller master list to identify the correct GSTIN.
Input Tax Credit (ITC) under the New GST Return System
ITC availability was contingent on suppliers uploading invoices or debit notes within the designated period. An invoice uploaded by a supplier by the 10th of the following month would be continuously visible to the recipient. The associated taxes, claimable as ITC, would be posted in the recipient’s ITC table before the 11th of the following month, becoming available for claiming in the recipient’s return. Invoices uploaded by the supplier after the 10th of the following month would be posted in the relevant field of the recipient’s return for the subsequent month, although continuous viewing remained an option.
Amendment Returns under the New GST Return System
Under the proposed system, taxpayers could file two amendment returns for each tax period. Payments could also be made via an amendment return, potentially reducing interest liability. If ITC was available in the taxpayer’s electronic credit ledger (ECL), it could be used to settle the liability in the amendment return. Amendments to a missing invoice, reported later by a supplier, could be made through an amendment return for the specific tax period to which the invoice belonged. However, if a recipient had acknowledged and locked an invoice, amendment of that invoice was not permitted. To modify a locked invoice’s value, the supplier would either need to issue a debit/credit note or request the recipient to unlock the invoice, enabling the supplier to make an amendment by filing an amendment return. GST invoice amendments were only allowed if the recipient had not yet claimed ITC.
Video on the New Return Filing System
To gain further insight into the benefits of the simplified GST return, additional resources were provided.
Note on the Status of the New GST Return System
It is important to reiterate that the New GST Return System has been withdrawn by the GST authorities. Therefore, the current system of GSTR-1 and GSTR-3B filing continues to apply for taxpayers in India.